Who’s Going to Pay for Gene Therapy?

While gene therapy has the potential to save countless people from genetic disorders, only a select few will be able to take advantage of the technology without a price reduction. The cheapest gene therapy treatment on the market today is Yescarta, which ranges from two to four hundred thousand dollars. On the high end, Glybera comes in a whopping $1 million for a single treatment. In terms of eligible patients, Yescarta has approximately 7,500 whereas Glybera has fewer than 10. In an article published by MIT Technology Review, they examined the relationship between the cost of the treatment and the number of eligible patients. In summary, the fewer number of potential patients, the higher the cost of the treatment. This math makes sense because if the R&D is roughly equal for two drugs, but one drug can only be sold to half as many people, the pharmaceutical company needs to get more revenue from each patient. The unfortunate truth is that economics makes no concessions for patients in need of treatment.

Gene therapy treatments are expensive for several reasons, one of which is the age of the technology. In any market, the first products are always the most expensive. When the newest iPhone comes out, they never lower the price. In the pharmaceutical industry especially, the first products to market are often the most expensive to produce. While a new iPhone might have a new screen or a better camera, new medicine is the product of countless hours of research and development, which can be quite costly. FDA regulations also add to the time and cost associated with developing a new medicine or treatment, this is for good reason, but expensive nonetheless.

Sure, the first to market can command high prices, but one of the largest factors affecting the price of new medicines and treatments is the deregulation of the pharmaceutical industry. Pharmaceutical companies are given a lot of liberty in terms of pricing new drugs and they tend to charge immense premiums. In most markets, the supply is somewhat proportionate to the demand, however in specific medical treatments, the target markets are very small, meaning small demand. Companies often depend on wide customer bases to distribute the cost of development. However, the market for Glybera, the most expensive gene therapy treatment to date, consists only of patients with lipoprotein lipase deficiency, limiting the target market to less than 10 people. Since the entire cost of developing Glybera is borne by only 10 people, the price tag is astronomical. In fact, it is probably safe to assume that the developer of Glybera still lost money charging $1 million per treatment.

One of the most outspoken defenders of deregulated pricing in the pharmaceutical industry is Martin Shkreli. Infamous for buying a one of one Wu-Tang album and his smug face, Shkreli perfectly exemplifies the dangers of deregulation. In most industries, absurdly high prices simply means that customers will find cheaper alternatives, but in the pharmaceutical industry, options are limited, giving all of the power to the select few companies that produce a certain drug. Martin Shkreli took advantage of this power when he raised the price of Daraprim, a life-saving immune-system drug used to treat parasitic infection as well as AIDS and Cancer patients, by 5,000%. He raised the price of the drug from $13.50 $750 for a single pill, leaving those who depended on the drug and many others outraged. His defense for the price increase was to fund future drugs that will better help the patients. He explained that the pharmaceutical company was not profitable at $13.50 a pill and that in order to grow the company, they had to become profitable to fund research and development. His defense makes sense from a business perspective, but there are many more factors to consider when determining the cost of a life saving medicine. If pharmaceutical companies are still loosing money charging $750 a pill and $1 million per treatment while countless people can’t afford the treatments they need, how can gene therapy and the pharmaceutical industry move forward and who will pay for it?

 

Dr. Mark McClellan, former FDA commissioner and current leader of the Duke-Margolis Center for Health Policy, organized a consortium at Duke to analyze gene therapy treatments and to brainstorm ways to help patients pay for treatments. Through their research, the consortium concluded that the healthcare system is far behind the medical industry and the advances it has made. Generally speaking, there are three parties involved in gene therapy, the patients seeking treatment, the companies developing and pricing the treatments, and insurance companies. It is in the patient’s best interest to pay as little as possible for medicine, it is in the company’s best interest to charge the patient enough to be profitable and to pay off the development of the drug, and it is the insurance company’s job to make sure they don’t pay for any of it. Since the three major parties involved have mutually exclusive interests, it is impossible for everyone to win. Another factor to consider is the fact that patients respond differently to the treatment, meaning there is a chance that a $1 million treatment is completely ineffective. McClellan explained what is essentially a refund policy for gene therapy treatments in which patients that do not experience any relief or remission of their disease within one month are entitled to a refund. That leaves many things open to interpretation such as the definition of relief or progress, and it still does not account for the possibility of a relapse outside of the refund-window. This makes things infinitely more challenging for not only the companies administering the treatments and the patients receiving them, but it also complicates the pricing structure for insurance companies. If a patient needs coverage for a $1 million dollar one-time treatment, they have to pay out an enormous sum all at once, the one thing that keeps insurance agents up at night.

With all of the factors working against the success of gene therapy, it is hard to predict what a successful implementation will look like on a grand scale. There are countless industries that are light-years ahead of their respective regulating entities. In medicine, that disconnect prevents patients from receiving what could be a life-altering, even life-saving procedures.

Despite the current odds, Nick Leschly, CEO of Bluebird Bio, re-assures us that he’s “confident we can figure it out because if someone has a very serious disease, and we can cure it, the system will find a way to reward that.”

 

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