A landmark gene therapy to treat a rare, inherited form of blindness will cost $850,000 — a price tag so daunting that its maker will offer health insurers partial rebates if the drug doesn't work and is seeking to pilot an installment payment option.
The idea that drugs can be made to correct the defective genes that lie at the root of inherited diseases has long tantalized medicine. Nearly three decades ago, gene therapy was first tested in a patient in the U.S., but after a teenager named Jesse Gelsinger died in a clinical trial in 1999, the field screeched to a halt. As the technology has improved, the science has moved forward more cautiously, with therapies being developed for hemophilia, sickle cell disease and muscular dystrophy. A $700,000 gene therapy for “bubble baby syndrome,” a rare form of immune deficiency, received final approval by the U.K. health authority on Wednesday.
The drug made by Philadelphia-based Spark Therapeutics was approved in December, the first gene therapy for an inherited disease to be approved by U.S. regulators. Many analysts expected Spark's drug might be priced at $1 million — and Spark's chief executive, Jeffrey Marrazzo, said in an earnings call last year that the drug could support a value in excess of that sum.
In an interview, Marrazzo said his company chose a lower price: $425,000 per eye, because insurers indicated that pricing the drug higher would trigger restrictions on which patients could get access.
“A more affordable, pragmatic solution wouldn't be that we took all the value, but took a reasonable amount of it. We thought there was a middle ground between addressing the affordability concerns of payers with the value of the treatment,” he said.
The cost dilemma presented by gene therapies stems from the fact they are one-time treatments. Instead of addressing symptoms, they replace or restore the malfunctioning gene at the root of disease. The hope is that such treatments could be cures, but at the moment, no one knows exactly how long Luxturna's effects — which do not fully restore vision — will last. Clinical data shows that the drug works at up to four years in some patients, and there is anecdotal evidence that the effects could last longer.
Steven Pearson, president of the Institute for Clinical and Economic Review, a nonprofit organization that analyzes drug prices said that his group's draft analysis of Luxturna suggests $850,000 is too high compared to the benefits it brings. The group will release its recommendation for a price later this month.
“It appears one common strategy being used by drug companies is to get people talking about a high price target that the company then undershoots, thereby gaining some psychological credit for the price being less than expected,” Pearson wrote in an email.
The treatment — and its price tag — challenge almost all the norms in the current drug distribution and payment system.
Pharmaceutical companies typically can count on payments from a pill or injection that a patient might have to take repeatedly, sometimes over a lifetime. But Luxturna's treatment happens just once. And insurers may balk over a huge one-time bill, especially when the patient treated may not even be their customer next year, as people in the United States frequently change employers and health plans.
And logistically, the price presents a barrier. Typically, hospitals buy the drugs they administer and mark up the prices. But instead of asking a hospital to make the outlay — and then count on insurers to pay a potentially significant markup on the drug price, Spark is assuming transit, storage and handling risks and is being paid directly by the insurer.
“Here’s what I can tell you is unique about this: It is the first gene therapy to come to market, so not only have they innovated with the science, but working with us, we’ve innovated in the payment models,” said Steve Miller, chief medical officer at Express Scripts Holding, which handles prescription drug benefits for employers and insurers and owns the specialty pharmacy that will handle the drug.
Although the treatment price is staggering, drugs for rare diseases typically carry large premiums because of the small patient populations — and Luxturna is a one-time therapy. Spinraza, a treatment for spinal muscular atrophy, costs $750,000 for its first year and $375,000 for subsequent years. The average annual cost of a controversial therapy for Duchenne muscular dystrophy is $300,000. These list prices for drugs do not take into account discounts negotiated on behalf of insurers.
Luxturna's success will ultimately depend on insurers agreeing to pay for it, and Spark has laid a plan to help smooth its drug launch. As part of the price announcement, the company announced a rebate offer — a partial refund if the drug does not work in the first three months — with another possibility for a rebate at 2½ years out.
Harvard Pilgrim, a Massachusetts-based insurer with 1.2 million members, has agreed to cover the drug under those terms, and Marrazzo said Spark is in discussions with multiple other insurers.
Michael Sherman, Harvard Pilgrim's chief medical officer, said that the back-and-forth with Spark over the arrangement has been going on for six months. It was important to Harvard Pilgrim that it avoid paying a large markup to a hospital and that the drug company share some of the risk — what economists call “skin in the game” — if the drug doesn't work.
“I started to challenge them. I said, 'These are going to be really expensive, and we can debate the price, but the higher — the more you charge — for these complex drugs and gene therapies, the harder it is to justify anything close to that when they're not effective,' " Sherman said.
Spark has also submitted a proposal to the Centers for Medicare and Medicaid Services that would allow the company to set up an installment payment plan or to offer deeper rebates. Because of how government drug price reporting works, the company cannot currently offer a true money-back guarantee or installment plan without being forced to sell the drug to Medicaid at an unsustainably low price, Marrazzo said.
The company will offer financial assistance to patients, including travel support to help them and their caregivers reach treatment centers and other out-of-pocket costs. The company said that means commercially insured patients should pay nothing for the treatment, despite its $850,000 price tag.
“It's not you paying for it; it's the insurance company, which means everyone,” Sherman said.