No One Really Knows How We’ll Pay for Gene Therapies

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Gene therapies are here and they have the potential to be miraculous. And extremely expensive.

The science behind these therapies are truly the realization of a sci-fi promise — that science can alter genes in a cell to eliminate a disease. The price tags — upwards of $2 million per patient — feel like something out of a dystopian future.

So how will these therapies be paid for? In short, there is currently no good answer to that question. Below are some of the ideas currently in use or being discussed. But first, why is the price so high?

What’s out there?

Despite the common thought that there are many more gene therapies available, only two gene therapies have been approved by the FDA. These agents work by replacing a mutated or nonworking gene by editing a specific DNA sequence with a repaired working gene.

The cost of a breakthrough

Most gene therapies target fairly rare conditions. As a result, the cost of research and development is borne by a relatively small population as compared to conditions treated by the drugs you see advertised on TV.

In addition, creating and administering gene therapies is an elaborate process. Treatments such as Luxturna that work inside the body, treat certain types of blindness, use a lab-created “viral envelope” to deliver the therapy. Therapies that are administered outside the living body, such as those that treat previously incurable forms of lymphoma and leukemia, require a month-long hospital stay to extract stem cells from the patient, alter them, and reintroduce them.

While there is logic involved in these determinations, the costs are far beyond anything we’ve ever seen, even in an industry that has become notorious for exorbitant pricing.

Regular health insurance

Under the current system, without another method of payment in place, a patient’s insurer at the time of the treatment must pay the entire cost of the gene therapy.

If the patient stays with the insurer, this may be a good deal in the long run for the payer because the gene therapy likely will eliminate the need for future care. But the patient can go to another plan or employer and take those savings elsewhere.

As a result, health plans are very reluctant to cover gene therapies, which could limit their potential to improve health outcomes in our society. According to a CVS report, “Even if we assumed just 5,000 individuals were to be treated by gene therapy each year […] it would add $10 billion per year to the nation’s health care bill — an additional $50 per year of health care costs for every insured American.”

Installments

Along with gene therapies, drug manufacturers are creating financial products to spread the cost over time. This is sometimes called “the Netflix model,” but the payments look more like a mortgage.

This approach works best when combined with “value-based contracting” in which the therapy must achieve certain metrics of improving the patient’s health to justify billing. Since we don’t know how durable the effects of these new therapies will be over time, this system shares the risk. It also prevents seven-figure expenditures for a therapy that was ultimately ineffective.

While this solution is intuitive, there is some regulatory red tape such as CMS potentially needing to waive its lowest cost requirement. In addition, the median US home price is just shy of $270,000, a mere fraction of the cost of gene therapies. Even with payments spread out over time, the amounts are likely outside the reach of individuals and would break the budgets of all but the largest groups and health plans.

Private and government game changers

There’s a major opportunity here for a private-sector company that can figure out how to make this work. One approach is to create a risk pool at the PBM level that payers can buy into to defer these costs. It’s almost like another layer of insurance. So far, it hasn’t widely caught on.

Another line of thinking is that the government should step in and solve this problem. This could be extremely hands-on, such as isolating the category and having the government pay for gene therapies, or moving patients in need of gene therapies to Medicare or Medicaid.

The approach could also be more hands-off, such as deregulation to lower the cost of trials and FDA approval. Or the focus could be pricing, with the creation of a national committee that has oversight on how the manufacturer prices gene therapies. It could set payment by analyzing the evidence on the effectiveness and value of drugs and other medical services for the diagnosis, or create a yearly payment on a set negotiated price with money back if the therapy is not effective.

Perhaps the solution is not yet apparent because gene therapies are being dropped into an already broken system. With drug prices rising unsustainably — people in this country are increasingly forced to choose between medicine and food — $2 million gene therapies may simply be a magnifying glass through which we get a clearer view of the inefficiency and inequity of our current system.

If we are first able to provide a fair cost of care for traditional drugs, we might have a chance of sorting out the issue of gene therapies. We must not allow the cruelty of creating these cures only to price out those who need them.

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