Payment-by-installment to tackle the skyrocketing costs of drugs has long been deliberated in health policy circles, but is now gaining traction on the manufacturer side in the field of gene therapy, as backlash to $1 million-plus prices of these one-shot treatments whose long-term durability has not been established forces drugmakers to seek creative solutions to ensure reimbursement.
Bluebird bio $BLUE CEO Nick Leschly floated such a model in an interview with the Wall Street Journal on Tuesday at the JP Morgan Healthcare conference, in relation to its gene-replacement therapy LentiGlobin for beta thalassemia — a rare, inherited blood disorder — which is expected to win EU approval this year, and US approval in 2020. Patients with the disorder usually require lifelong treatment with blood transfusions and medication.
The total price of the company’s gene therapy has not been announced, but is expected to be in the seven-figure range, albeit below $2.1 million — which the company believes is the “intrinsic value” of the treatment — the WSJ report said. The company’s pricing plan involves an upfront 20% of the cost of the treatment, while the rest is expected to come in 20% installments per year via the insurer if the drug does indeed work as intended.
Leerink analysts said they had modeled the launch price of LentiGlobin as $1.2 million in the US and $0.9 million in the EU.
“However, 80% of the cost of gene therapy would be at risk, and while the data for LentiGlobin has been promising in our view, long-term durability is still an unknown and lower than expected durability could erode the assumed price,” they wrote in a note on Tuesday.
Bluebird’s plan — akin to a mortgage — involves an upfront cost, followed by installments of payment. Except unlike a mortgage, the individual (or in this case a patient) seldom enjoys the freedom of treatment choice, and payments are based on outcomes. Before he became FDA commissioner, Scott Gottlieb, in a report for the Washington-based public policy think tank AEI Research in 2014, wrote that medical advancements tantamount to cures necessitated payment models that can spread the high upfront costs over time during which the public health and economic benefits can be realized.
In healthcare for example the cost of a robotic tool for performing surgery is typically spread out (or amortized) over the seven years during which the device is presumed to be useful, he noted. In terms of medical treatment, amortization is a more operative concept. “Instead of spreading out the costs over the useful life of a piece of capital equipment, amortization in this context would allow a payer to spread out the costs over the period during which it would accrue the benefits of the reduced downstream costs from disease averted,” he wrote.
More recently, an ICER report published in 2017 debated the merits of the amortization model for gene therapies, suggesting that although the idea was commendable it may actually contribute to increased overall prices for already expensive treatments. Meanwhile, there are also other challenges to implementing such a scheme — for instance, in the United States, where insurance is often tied to employment, drugmakers will be on the hook if patients change jobs or insurance carriers.
The furor surrounding drug price gouging has spawned other ideas such as value-based payments, in which insurers are eligible to receive retroactive rebates if drugs don’t work as intended. For instance, Spark Therapeutics'$ONCE has deployed a similar plan by agreeing to rebate certain insurers if its $850,000-gene therapy for inherited vision loss Luxturna doesn’t work as promised. Traditionally, insurers pay for a drug — regardless of whether it works or not.
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