The first gene therapy approved in the United States will cost $850,000, its developer Spark Therapeutics (NASDAQ: ONCE) announced today. Spark hopes to reduce the sticker shock by offering refunds and other creative pricing ideas, but those carve-outs, at best, are limited, and some are unlikely to come to fruition, according to healthcare economists.
The one-time treatment, voretigene neparvovec (Luxturna), is meant for a tiny group of people with a genetic mutation, known as RPE65, which leads to vision loss, even blindness, and often starts in childhood. Between 1,000 and 2,000 people in the U.S. have RPE65 mutations, according to the FDA. The agency approved voretigene neparvovec last month.
High prices have dogged the new era of genetic medicine. Two cancer treatments that use genetic modification, engineering the DNA of a patient’s cells outside the body, were approved in 2017. Known as CAR-T therapies, they are priced at $373,000 and $475,000, with the massive upfront cost and other complications blunting the early uptake of one of the treatments, according to Bloomberg.
Two gene therapies for rare diseases, more akin to voretigene neparvovec, have been approved in Europe; one, from UniQure (NASDAQ: QURE), was priced at $1 million and eventually withdrawn from the market, the other, from GlaxoSmithKline (NYSE: GSK), has floundered with a $665,000 price tag, even with a money-back guarantee.
The single dose of voretigene neparvovec—one injection into each eye—is supposed to be a cure. But the product hasn’t been around long enough to prove itself. The best evidence Philadelphia-based Spark can offer at this point are data showing the treatment has been effective for at least four years in a handful of patients.
The sticker, to some extent, is not a total shock. Spark CEO Jeff Marrazzo had floated the possibility of a $1 million price tag on a recent earnings call. In an interview late Tuesday, Marrazzo said restoring vision to kids and adults has a tremendous value to society that includes a patient’s quality of life and the productivity gains of caregivers returning to work. Spark has accumulated data from multiple sources and run its own analysis of voretigene neparvovec’s costs and benefits, he said. He estimated between half and three-quarters of people with the RPE65 mutation will be eligible for treatment.
In a draft report last fall, analysts at the Institute for Clinical and Economic Review, which often draws industry ire for suggesting drugs aren’t providing enough value to justify their prices, said voretigene neparvovec at $1 million “would require large discounts to reach commonly used thresholds of cost-effectiveness.”
One healthcare economist has broader objections to arguments that society’s savings and value from a drug should flow inordinately to the drug’s maker. “The guy doing my smog check isn’t charging me based on the economic benefit of my ability to access my car for two years,” says Adams Dudley, director of the Center for Healthcare Value at the University of California, San Francisco. “He’s charging $35. Only in healthcare do they have the audacity to say, ‘We should get all the value.'”
ONE INSURER READY FOR THE RISK
Despite the risks that the effects of Spark’s treatment might fade over time, at least one insurer so far will pay full freight if voretigene neparvovec works as intended. Patients will be tested within the first 90 days, then again after 30 months. If at either point they don’t hit a certain mark in a test for light sensitivity, Spark will issue partial rebates. Large New England insurer Harvard Pilgrim Health Care is the first to agree to those terms. The full details of the rebates are confidential, but Spark’s Marrazzo said that because of federal regulations, known as “best price” rules, the maximum cannot exceed 23 percent—the same that Spark is required to offer federal insurance programs.
Spark has asked the Centers for Medicare and Medicaid Services for flexibility so it can accept payment on installment plans and give private insurers deeper rebates if the drug fails. “Our proposal is in front of them,” Marrazzo said. “I’m encouraged by the discussions.” (Marrazzo added that Spark has met personally with CMS director Seema Verma.)
Beyond allowing a demonstration project, however, CMS does not have authority to waive best-price rules, says Dudley. Congress would need to change the law, but “Congress will be very suspicious. CMS can’t make up any arrangements they want.”
Asked why his organization settled on 30 months as the threshold for voretigene neparvovec’s durability, Harvard Pilgrim chief medical officer Michael Sherman calls it a “quasi-scientific” compromise. He acknowledges the risk: Spark’s gene therapy could wear off after the 30-month mark, leaving the insurer with the full tab. But the risk is worth taking for a few reasons, according to Sherman:
—The number of patients under its plans eligible for voretigene neparvovec is small, initially “in the single digits.”
—Spark has agreed to sell the therapy directly to Harvard Pilgrim, not the medical center doing the procedure, which avoids potential price markups. (Hospitals and clinics typically buy the drugs they administer in-house, then bill insurers—potentially with a markup that can reach double digits.) Spark hopes to replicate the same direct sales model with Express Scripts (NYSE: ESRX), the nation’s largest drug-contract negotiator that represents insurers and large employers.
—There is only one medical center authorized in Harvard Pilgrim’s coverage area, Massachusetts Eye and Ear Infirmary in Boston. The insurer already has an in-network agreement with Eye and Ear for the surgical procedure that accompanies voretigene neparvovec administration. “We just need to amend the agreement” for the extra work associated with voretigene neparvovec and storing the drug, says Sherman. “We’ve agreed to pay them a fair amount.”
—Spark has also agreed that Harvard Pilgrim will be eligible for refunds even if a patient has moved to a different insurer when his or her treatment wears off.
Harvard Pilgrim has also agreed not to deny coverage to patients who … Next Page »