Gene Therapy: Significant Therapeutic Value with Significant Cost
Gene therapy continues to show incredible promise for the “cure” or elimination of disease rather than control. However, along with this promising therapeutic advancement comes the challenge of how to pay for this entirely new class of therapy. The most recent addition to the gene therapy armamentarium, Zolgensma (onasemnogene) from AveXis, a Novartis subsidiary, presents an interesting model for study.
Zolgensma is indicated for Type 1 Spinal Muscular Atrophy (SMA). This condition affects approximately 500 babies each year and currently, 80 percent of these babies would be candidates for gene therapy with Zolgensma. The drug is given as a single infusion with a price of $2.125M. Considering early pharmacoeconomic modeling comparing the curative Zolgensma approach with an annuity payment model to the current non-curative therapy represented by Spinraza which is priced at $750K/year 1 and $375/year thereafter, at year 10 the curative/annuity approach represents a several million-dollar cost advantage.
Considering the cost of Zolgensma in total from a cash flow perspective, a $2.125M upfront cost presents a dilemma for many small payers, state Medicaid providers, or self-insured employer plans or even for larger health plans that might experience multiple SMA patients.
Harvard Pilgrim in conjunction with the New Drug Development Paradigms (NEWDIG) collaborative at MIT has been working on an innovative performance based annuity payment plan for Zolgensma. This payment model is based on three key elements:
- A 5-year payment plan with a significant initial payment for the therapy (20% suggested)
- Subsequent payments are based on continued performance of the drug. If performance degrades, payments would be reduced accordingly.
- Mobility versus Portability for patient movement. Under the mobility plan payers would negotiate with AveXis to establish their payment rates. If a patient switches plans, the new plan would pick up payments at their negotiated rates.
While this pay for performance annuity model is innovative, it runs afoul of current Medicaid best price legislation. Medicaid “best price” was a policy solution enacted over twenty-five years ago to address high drug costs and make Medicaid drug spending more manageable for states. Under the best price legislation, a drug manufacturer must offer state Medicaid programs the best price given to any other purchaser (with a few exceptions) with a mandatory rebate percent off the list price. Under the proposed pay for performance annuity model, if a patient had degraded results and a deeply discounted price went into effect this could trigger a new “best price” for everyone and no manufacturer would be willing to run this risk.
Senators Cassidy (R) and Warner (D) to address this issue and create a pathway for a pay-for-performance approach has introduced legislation under the Patient Affordability, Value and Efficiency Act. However, given the current issues being addressed by Congress, the likelihood of this bill moving forward in a timely fashion would seem to be questionable at best.
As gene therapy continues to advance with exciting new therapeutic modalities on the horizon, equally innovative payment models must be created to ensure affordability and access to these new treatments.