Gene therapy — The price is right?

October 2, 2015 at 4:32 PM 1 comment


2015 10 02 gene therapyGene therapies are here. The first gene therapy, Glybera, was launched late in 2014. It’s price, which is in excess of $1 million  per dose, presents a challenge to payers. How do they pay for a costly therapy when one dose costs so much but is expected to provide a lifetime of benefit?

Glybera fights lipoprotein lipase deficiency (LLD), a group of rare genetic disorders in which a person lacks a protein needed to break down fat molecules. The disorder causes a large amount of fat to build up in the blood. The disorder affects about 1 out of 1,000,000 people, or slightly more than 300 people in the United States. The condition is usually first seen during infancy or childhood.

Payers will struggle with two issues when developing a pricing and reimbursement policy for gene therapies:

  • What is the most appropriate pricing benchmark?
  • Over what timeframe should gene therapies be reimbursed ?

How payers cover and reimburse Glybera and other gene therapies is important for the the companies offering high-cost protein replacement therapies, such as those for hepatitis C. The policies that payers adopt for gene therapies may affect their policies for protein replacement therapies.  Gene therapies may push payers to the point where they realize they need new policies to also address the high cost of protein replacement therapy and rapidly rising costs of select generic drugs.

Pricing Benchmark

Payers can select from a number of potential price benchmarks that reflect the long-term benefit of successful gene therapy. These range from multiple years of protein replacement therapies, organ transplants or medical devices.

2015 10 02 pricing benchmarksA recent payer survey shows that, most often, they view organ transplant procedures as the most appropriate price comparator. Organ transplants and gene therapy provide comparable patient value. Transplants replace a nonfunctional or diseased organ, whereas gene therapies restore function to a diseased organ.

Each dose of a protein replacement therapy is less costly than gene therapy but the protein replacement therapies are administered on a regular basis for long periods of time and for more prevalent indications than most gene-based indications. Unlike gene therapy, protein therapies can be switched if the patient becomes tolerant or fail therapy or less costly or more effective therapies come to market.

Artificial organs are less acceptable comparators as the device is only a fraction of the overall cost of therapy and often result in limited restoration of organ functions. Economic models are based on assumptions that often are perceived as favoring the manufacturer’s high price.

Reimbursement Methodology

Most payers prefer to make a lump-sum payment for gene therapies. Some payers prefer to associate the lump payment with a risk-sharing arrangement with the therapy manufacturer. However, risk-sharing arrangements have proven challenging to define and to accurately measure results in a way that is acceptable to both parties. For example, patients may be lost to the payer, adjunctive therapies may enhance or extend the benefit of the gene therapy or quality-of-life metrics  are subjective.

As gene therapy provides long-term benefit, arguments can be made that reimbursement should take place over a number of years. However, annuities are difficult to manage. If members shift employers, the new health plan or self-funded employer might not accept the annuity. This could prevent the member from working and, possibly, lead to a discrimination law suit. Like many governments are experiencing with pensions, funding growing liabilities that cannot be predicted exactly can be challenging.

Conclusion

Pharmaceutical manufacturers should monitor payer response to gene therapies. Current approaches to influencing therapy choices and population cost management may change beyond the realm of gene therapies. At an extreme, governments may form risk pools for high-cost patients that yield purchasing power with drug companies. TIme, and not much of it, will tell.

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Entry filed under: benefit design, biologics, coverage, gene therapy, Payer Reimbursement, Pricing Study, protein replacement therapy, rare diseases. Tags: , , , , , .

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