Novartis recently announced what is now the most expensive medicine in history: Zolgensma, a newly-approved gene therapy to treat a devastating disease called Somatic Muscular Atrophy, or SMA, will have a price tag of $2.1 million. This isn’t the only gene therapy that has resulted in some sticker shock. The first, approved just about 18 months ago, was listed at $850,000 ($425,000 per eye) to correct the faulty gene that causes a rare form of congenital blindness.
Why are the prices for these therapies so high? For one, the cost of any therapy needs to be balanced against the benefit it provides. Children afflicted with SMA have difficulty walking, eating, even breathing — and typically succumb to the disease very early in life. By correcting the faulty gene that causes SMA, Zolgensma has the potential to give these children five, maybe even ten years (and ideally, a lifetime) of benefit from a single dose. Gene therapies like these aim not to ameliorate symptoms associated with chronic conditions, but to dramatically impact and even cure disease, giving their patients years of health (or sight) they would not otherwise have had. So it’s a bit misleading to think of the cost of this medicine as being $2.1 million per dose. By saving these children from an early death, arguably these medicines should be measured using a different metric: $2.1m per life.
By saving these children from an early death, arguably these medicines should be measured using a different metric: $2.1m per life.
In addition to the benefit to each individual patient, one of the core arguments in support of these price tags is that better medicines avoid downstream, catastrophic expenses to the healthcare system. Let’s look at one of the most expensive conditions: treating hemophilia can cost anywhere from an average of $270,000 per year to as high as $1m per year. Hemophilia is also a condition that might be curable with a corrected gene, and there are therapies already in development now to do so. If you can save the system $270,000-$1m per year over decades of health, the price tags being discussed — around $1.5m — start to sound like a bargain.
Bringing novel medicines like these to patients also requires enormous effort and resources. By some industry estimates, it can take $2.5bn and 10 years to bring a new drug to market. Manufacturing cell and gene therapies is cutting edge science, and remains an incredibly complex and expensive process—for what is usually a small population of patients. Part of why rare disease therapies are expensive is precisely because these patient populations are (thankfully) small; in other words, the price has to be high enough to generate sufficient profit to justify the R&D investment. Payors could also historically manage paying high prices for these treatments for the same reason: because the diseases they treated were rare, the risk of any single payor having to cover many of these patients and blowing through a plan’s budget was relatively low.
Individually, rare diseases represent relatively small patient populations; but collectively… nearly 1 in 10 Americans (30 million people) suffer from a rare disease.
And finally, it’s also the case that, given the historical productivity of drug R&D, new treatments for these rare diseases came along just as rarely. But that may be changing with these new living medicines: when a gene therapy works in one scenario, it’s possible to engineer similar components to deliver different genes to different cells to treat different diseases. So, while there will undoubtedly be challenges and disappointments along the way, there’s a tidal wave on the horizon of new gene therapies going after ever more rare diseases. Individually, rare diseases represent relatively small patient populations; but collectively, with over 7,000 known rare diseases, nearly 1 in 10 Americans (30 million people) suffer from a rare disease. Former FDA head Scott Gottlieb predicted that by 2025 the FDA will approve 10 to 20 gene and cell therapy products every year. Paying millions of dollars for any single medicine is a lot of money. This coming deluge of new treatments for a broad range of diseases will be profoundly impactful for patients—but imagine the price tags on each of those, adding up, and fast. How can the healthcare system possibly bear the cost? Who should pay, and how?
When it comes to drug pricing, we need to shift our collective mindset from thinking about doses, to thinking about patient outcomes. But we also need new models for how to think about this huge financial burden on the patient, on the insurer, on the system. Payment plans of some form will become the new norm. Novartis, for their part, is offering an installment plan for Zolgensma to insurers to spread the burden over five $425,000 annual payments, with the potential for refunds if the therapy doesn’t perform as expected.
Renowned MIT economist Andrew Lo has suggested that we might want to think of payments for drugs like this the way you would think of a mortgage for buying a house. You’ll live in that house, and benefit from it, for years; that is why we have a unique financial instrument—the mortgage—to help us pay for its cost over that time. If you are cured of a disease, Lo said in this recent a16z podcast, you are buying many years of future health, as opposed to “renting health one pill at a time.” So, similarly, perhaps we should pay with a “mortgage” that effectively securitizes the cost of expensive medicines with long-term benefits — ideally where the timing of payments is matched to the benefit of the therapy.
On the other hand, what happens when you can’t pay your gene mortgage?
On the other hand, what happens when you can’t pay your gene mortgage? We certainly can’t foreclose on or repossess this particular asset in case of default. If the recipient of a gene therapy changes jobs or insurance plans, away from the insurer that first “bought” the medicine, what obligation should a new employer and insurer have to continue to make those payments? If payment stops, who owns that “debt”? What is the legal mechanism to enable a drug manufacturer to enforceably transfer the obligation for installment payments from one insurance plan to another without making the patient liable?
One answer, ironically enough, is to legislatively treat these lifetime cures as we do chronic diseases. The Affordable Care Act (ACA) enacted protections against discrimination for pre-existing conditions that have long-term cost liabilities associated with them, like diabetes. In that same vein, one could imagine your “pre-existing condition” to be the shiny new therapeutic gene your cells are now using to manufacture your cure. The ACA statute could interpret a “pre-existing condition” not just as an expensive disease, but also as a cure with similar long-term cost liabilities. In other words, you switch plans, your payment plan switches too… and the next plan would be obligated to take on the installment expense of your cure, with no basis for discrimination.
The ACA language as originally drafted prohibits insurers from making “pre-existing condition” exclusions if “the condition was present before the effective date of coverage…whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that day. A pre-existing condition exclusion includes any limitation or exclusion of benefits…applicable to an individual as a result of information relating to an individual’s health status before the individual’s effective date of coverage.” Condition; health status. These terms can connote health or disease. Perhaps it’s not so far-fetched to assume that a therapeutic gene, living and working in an individual’s cells, would be considered a condition or part of that individual’s “health status”? In which case, insurers would be prohibited from any limitation or exclusion of benefits—which could include any remaining or outstanding payments for said therapeutic gene.
Condition; health status. These terms can connote health or disease.
We are entering a brave new world of curative, permanent, and record-breakingly expensive therapies. The good news is these medicines are coming and will improve the lives of millions of patients. The bad news is, their cost will create an enormous burden on our current system. We need to figure out how insurers, employers, the government, and families of children with diseases like SMA can pay millions for those medicines. Wouldn’t it be something if the ACA’s protections could ensure that if you like your cure, you can keep it?