Who’s Paying for Million-Dollar Gene Therapies?
12 Jun 2024
Gene Therapy
Hands passing money/Taylor Tieden for BioSpace
When Orchard Therapeutics announced the $4.25 million price tag in March for its newly approved rare disease gene therapy Lenmeldy, it became the most expensive on the market. But since 2019, the FDA has approved five others that cost more than $2 million. Some insurers, even when legally required, are not having it when it comes to paying out the cost of a treatment.
A November 2023 ProPublica investigation found that insurance provider Priority Health quietly nixed coverage of gene therapies as a cancer treatment, even though under Michigan state law the payer was required to cover clinically effective cancer drugs. The gene therapy in question, CAR-T, was the last hope for patient Forrest VanPatten to recover from an aggressive case of lymphoma. According to ProPublica, his CAR-T treatment was estimated to cost $475,000. VanPatten died while waiting for the results of his third request for coverage.
Globally, many healthcare systems are choosing not to cover gene therapies at all. Even though every health regulatory body reviews the same scientific and trial information, Canada and countries across Europe have completely different gene therapy coverage models than the U.S., according to a December 2021 study in Health Policy.
“The primary underlying reasons for access restrictions in all regions appear to be scientific uncertainty at the time of approval, limited evidence, and the high cost of these therapies,” the study authors wrote.
But even with the high price tag and what some call questionable evidence that a treatment will provide a lifetime benefit, private American payers are already shelling out for gene therapy treatments, said Graig Suvannavejh, the managing director of biopharma and biotech at Mizuho Securities. However, debate remains over what conditions warrant six-figure prices and how payers can recoup that money if a gene therapy fails.
“This will continue to be an evolving dynamic over the next 10 to 20 years,” Suvannavejh said.
How Do Insurers Pay Biopharma Firms for Gene Therapy?
At this juncture, both public and private payers can pay for gene therapies either upfront or in annual installments over a handful of years. Both types of agreements can, and largely do, build in a caveat that if a patient does not see a significant benefit over time, the payer can receive a rebate of part of the gene therapy's cost. These are known as outcome- or value-based agreements.
“Gene therapy [means] that you’re given it one time [and] you’re stuck with it, good and bad,” Suvannavejh told Biospace. “The issue then is if it is meant to be given as a one-time treatment, are you actually getting the benefits for the duration of your life?”
Suvannavejh said that other factors, such as existing therapeutic options beyond gene therapy and the disease’s fatality rate, are part of the coverage discussion. If a condition has a high fatality rate and few other options, there may be greater willingness to agree to a high price tag. Right now, he added, gene therapy payments tend to be upfront in a lump sum.
Bob Lojewski, senior vice president and general manager of CSL Behring North America, said that private payers have been largely receptive to the $3.5 million price tag of the company’s HEMGENIX, a gene therapy treatment for hemophilia B.
Currently, payers are covering “the vast majority of the U.S. population” who may need HEMGENIX, he said. “To date, every patient referred for HEMGENIX has been covered through insurance, and we expect access for eligible people interested in this one-time treatment will continue,” he said.
Lojewski added that the CSL team has seen an “accelerating rate” of patients referred for treatment in the past six months, potentially due to the agreements in place to cover the therapy. He did not say whether insurers were paying by lump sum or in installments.
Internal CSL figures estimate that between annual bleed rates and required therapies to address hemophilia B, a patient with the disease can cost an insurer $20 million over the course of their life. That puts the expenditure of $3.5 million for a gene therapy to reverse or cure the condition into perspective. When that is extrapolated out, HEMGENIX could save the U.S. healthcare ecosystem tens of billions of dollars over the next 20 years, Lojewski said.
However, saving all of that money in the long run comes with tens of millions of dollars in upfront costs to private companies or the federal government, while it may take decades to realize the cost savings from that investment.
According to the Alliance for Regenerative Medicine, an analysis by NEWDIGS at Tufts University estimates that gene therapy expenditure in the U.S. will reach $7.5 billion by 2030. In context, that’s approximately 0.1% of national projected healthcare spending for that year.
Public Payers Negotiate Costs for Gene Therapies
Medicare and Medicaid both cover many patients affected by conditions addressed by new gene therapies. Medicaid covers two-thirds of patients with sickle cell disease, which bluebird bio’s Lyfgenia and Vertex Pharmaceuticals’ and CRISPR Therapeutics' Casgevy, listed at $3.1 and $2.2 million respectively, are designed to treat. Furthermore, Medicaid provides healthcare coverage for over half of children with spinal muscular atrophy, some cases of which can be treated with Novartis’ $2.1 million Zolgensma treatment.
But public payers may be negotiating discounts on those list prices down year over year, while it’s unclear whether private payers are negotiating regularly for treatments to be significantly less than their list prices.
Take Zolgensma. With a $2.1 million listing price, public insurers paid $1.89 million per claim in 2019, and by 2022, that figure dropped to $1.36 million, nearly a 40% discount from its list price, according to the Centers for Medicare & Medicaid Services (CMS). In 2022, CMS spent roughly $87.25 million on some 63 Zolgensma treatments.
Like private insurers, public payers are setting up rebate programs in case these therapies do not deliver on their promises, although this strategy isn’t commonly used just yet.
“Supplemental rebates only accounted for 9% of all Medicaid drug prices in fiscal year 2022,” an Alliance for Regenerative Medicine representative told Biospace.
Karen Fischer is a freelance science writer based in New Mexico. Reach her at kfischerwrites.com.
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