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Can We Afford to Be Cured? A Conversation With ICER’s Steve Pearson

Xconomy Boston — 

[Corrected, 4/23/19, 7:10 p.m. See below.] New cell and gene therapies bring the possibility of cures once hardly imaginable. But the potential cures could also cost millions of dollars, like Novartis (NYSE: NVS), the owner of the gene therapy Zolgensma, has suggested in advance of an imminent FDA approval decision.

As public backlash against high drug prices shows no signs of waning, a private nonprofit in Boston, the Institute for Clinical Economic Review (ICER), has emerged as the country’s top drug-pricing watchdog. With most of its funding from philanthropists, ICER’s reports often undercut drug companies with detailed, complicated cases for lower—sometimes much lower—prices.

ICER took issue with the price set by Spark Therapeutics (NASDAQ: ONCE) after the FDA made Luxturna, Spark’s treatment for a rare blindness, the first approved gene therapy in the US.

ICER isn’t necessarily contentious. The group has begun working with drug and insurance companies, and taking patient input, too, to come up with its assessments. But ICER’s downward pressure will be even more important in the new age of very expensive gene and cell therapies.

Drug makers often justify high prices for such therapies because of the promise of long-term benefits, but so early into the era, there’s yet scant evidence that these cutting-edge medicines will stave off cancer or a rare genetic disease for a patient’s lifetime. Pricing them exorbitantly, as if they de facto will save society boatloads of money, is fraught, at best.

Xconomy recently caught up with ICER president and founder Steven Pearson to talk about both the hope and caution around cell and gene therapies, how the healthcare system might pay for them, and more. The following conversation has been edited and condensed.

Xconomy: By 2025, the FDA is expecting to approve 10 to 20 cell and gene therapy products a year. Do you agree? And will there be improvements in accessibility and affordability?

Steven Pearson: First, it’s hard to predict in any area of drug development how many drugs make it through clinical trials and the FDA. Based on the numbers in the pipeline, it could be a lot. The science is definitely exciting. The greater the numbers, the more it raises financial concerns. A lot of them will come through, but perhaps not in such a concentrated form that the healthcare system reels in its ability to manage. That said, it may only take one in a more prevalent condition, like sickle cell anemia. If the treatment is successful and desired by a lot of patients all at once, it will create a hepatitis-C-like perfect storm: a lot of pent-up demand, patients who don’t want to wait, and a healthcare system that will struggle to afford it even if it’s a good long-term value.

X: A huge unknown for potentially curative therapies, like gene therapy, is whether they’ll actually provide cures. Hematologists say you have to wait a few years after a bone marrow transplant for, say, leukemia, before you can start talking about a patient being “cured.” Do you see a threshold like that for gene therapy?

SP: It’s still early days. So much is uncertain based on how long the effects will last. And maybe there will be unknown side effects. Somehow, companies and payers and society will have to share that risk. We have a year-long project to explore how best to understand the uncertainty and communicate it to decision makers, then how to link that to payment mechanisms that are stretched out over time and linked to whether patients continue to benefit from the treatment. We have to figure out this structural change quickly to make sure there’s a pathway for assessing and paying for these treatments.

X: There’s a lot of talk about mandating pricing transparency from drug companies. Will we see inside the black box anytime soon and understand why they price drugs a certain way?

SP: I wouldn’t get your hopes up on that. There will be a public basis for discussion around value and pricing, and there will be market aspects of that decision-making that companies won’t want to put on the table. I don’t think anyone expects every factor in their thinking will be written out in black and white. But we’re likely to have a much stronger basis for public policy if we have an established roadmap through which companies work with independent assessors and others.

X: Is it inevitable that we’ll have performance-based pricing; that is, payments not all upfront but tied to specific health milestones or benefits from the drug?

SP: I think so. There won’t be for every cell and gene therapy. If there’s a small enough patient population and budget impact, perhaps some high-priced treatments should be paid for on the spot. And that’s ok. But we have to come up with a decision-making process for when to stretch out payments, how to link to patient outcomes, and how much future uncertainty should be built into the price at the front end.

To their credit, Novartis with CAR-T [cell therapy] and Spark [with gene therapy] have said they’re eager to talk to payers about this. In the short term they’ve taken baby steps. No one assumes we can use today’s system to pay for the pipeline of cell and gene therapies coming over the next three to five years.

X: Hemophilia could be one of those big indications where gene therapy could be coming soon and there’s pent-up demand for the new treatment.

SP: Hemophilia will be an important test case in several ways. From the payer perspective, it’s both good and bad. The good side is short term. They can see the healthcare expenses that might go away if the patient is successfully treated. However, if we decide the fair price for a hemophilia cure should concentrate all those downstream cost savings in a one-time price, it makes it worse.

X: In recent years, payers have successfully pushed back against high prices for next-generation cholesterol drugs called PCSK9 inhibitors, in part because cheap generic standards of care—statins—were already available. Could payers do the same with a high-priced hemophilia gene therapy because less expensive hemophilia treatments have been around a long time?

SP: I don’t know if it’s easy to compare. There were potentially millions of patients who could have used PCSK9s under the original label. But some of these gene therapies will have much smaller populations and more dramatic clinical effects, we hope.

It’ll be tricky if we have gene therapies that provide only modest benefit. We shouldn’t assume that every single cell and gene therapy is going to be a cure. It will force us to think hard about fair pricing in that context, to make sure we have resources to pay a lot for treatments that make tremendous improvements in patient outcomes.

One interesting feature about hemophilia: It has one of the most organized and sophisticated patient groups, and they’ve spent a lot of time thinking about quality of life and how to create comprehensive measures of outcomes for patients. These patient groups will help fill in the gaps [in our assessments].

X: You recently published an evaluation of two treatments for spinal muscular atrophy. The first, Spinraza, approved in 2016, is not a gene therapy and costs $750,000 the first year, then $375,000 in subsequent years. The second, Zolgensma, is a gene therapy from Novartis that could be approved any day now. What were some of the difficulties in modeling the drugs’ cost-effectiveness?

SP: If patients can barely move a finger—but it allows them to operate a joystick on a wheelchair or use an iPad to communicate—it can have big effects on their lives. But that movement could be … Next Page »

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