Drugs that cost as much as a house are on the way to treat rare and devastating diseases. The US is scrambling to figure out how to pay for them.

Jessica Rinaldi/The Boston Globe via Getty ImagesCarolyn Barrett, who was born with the rare disease spinal muscular atrophy, and her service dog Shadow head down to the Boston Common in February of 2017. A new gene therapy for spinal muscular atrophy could be approved this year, and may cost up to $US5 million for a one-time treatment.
  • New medications that treat disease at the genetic level, called gene therapies, are incredibly promising. They could also come with million-dollar price tags.
  • Many more gene therapies are expected to become available in the coming years, but experts say the US health system isn’t prepared.
  • New gene therapies could present a tremendous financial strain on private health insurers and government programs and inhibit access for patients, especially as products for more common conditions, like hemophilia, start getting approval.
  • “We as a society better be prepared” as we approach 2021, Dr. Steve Miller, the chief clinical officer of the $US66 billion health insurer Cigna, told Business Insider.

A new medical treatment with tremendous potential to treat babies born with a rare disease called spinal muscular atrophy could be coming this year.

Spinal muscular atrophy is a genetic disorder marked by severe muscle weakness, affecting the ability to breathe, speak, and move. Most babies born with a common form of it die by age 2.

Right now, there is no cure and only one treatment for the disease, which affects an estimated 10,000 to 25,000 people in the US.

There’s just one problem with the new drug: The one-time treatment, called Zolgensma, could cost up to $US4 million or $US5 million, according to the Swiss drugmaker that owns it, leaving the US scrambling to figure out how to pay for it.

When Dr. Michael Sherman, the chief medical officer of the nonprofit health insurer Harvard Pilgrim, started running the numbers on Zolgensma with his team, they had two reactions: “Oh my God” and “Wow.” The insurer monitors its financials closely, and the calculation suggested an expensive surprise was coming.

It turns out the drug is likely to be given only to newborns at first, resulting in very few people being treated with it. Still, experts say that the US healthcare system could soon well be having its own “Oh my God” moment, with up to 30 similar million-dollar drugs expected to launch in the next five years.

The US has the highest drug prices in the world, but unlike in other countries, the government has little control over the matter. That has fed into an ongoing debate about who is to blame and how things can change. In Europe, where drug prices are closely regulated, the first gene therapy was a commercial failure, at least in part because of its high price tag.

“It’s not a problem if you’ve only got a few of these,” Sherman said. “It is a problem if you’ve got a lot of these, and it is a problem if they’re charging a high price.”

Drugs like Zolgensma are called gene therapies, which make changes at the genetic level to treat disease so that the effect lasts longer than a typical drug would, potentially years. The drug companies working on gene therapies say their seven-figure price tags are justified by their value to patients: They could cure devastating rare diseases. And they say that caring for these people would otherwise be costly too.

But experts say the cost of new gene therapies will put an enormous financial strain on the US health system. As the products become available to treat more common diseases – like hemophilia, an inherited bleeding disorder that affects an estimated 20,000 people in the US – affording them could turn into a crisis.

“When we start getting into 2021, you could have hemophilia products out there,” Dr. Steve Miller, the chief clinical officer of the $US66 billion health insurer Cigna, told Business Insider. “We as a society better be prepared.”

Pharma giants are pouring billions into the promising space. In the past week alone, the Swiss drug giant Roche spent nearly $US5 billion to acquire Spark Therapeutics, a biotech selling a gene therapy that cures a type of blindness and researching others, including treatments for hemophilia; the rare-disease biotech Sarepta Therapeutics bought a gene-therapy startup called Myonexus Therapeutics for $US165 million; and the biopharma Biogen bought a gene-therapy biotech, Nightstar Therapeutics, for about $US800 million.

Read more:
A revolutionary drug that could treat a rare and devastating disease is prohibitively expensive. But one state has a plan to pay for its potential $US5 million price tag.

Million-dollar drugs

In late 2017, the Food and Drug Administration gave the go-ahead to a trailblazing new medicine.

Luxturna, made by Spark, was the first gene therapy approved for an inherited disease in the US, specifically for a rare form of blindness.

The one-time treatment, designed to significantly improve a patient’s eyesight, has been available in the US for about a year. It also comes with a high price tag: $US425,000 per eye, or $US850,000 total.

Despite its cost, Luxturna hasn’t challenged the US health system, because only about 1,000 to 2,000 people in the country are likely eligible for the treatment.

Gene therapyYutong Yuan/Business Insider

Spark is now working on developing gene therapies for hemophilia.

Hemophilia comes up a lot when you talk about the US’s ability to afford new gene therapies, because it’s relatively common. So does sickle cell disease, a group of inherited rare blood disorders that affect about 100,000 Americans and for which gene therapies are also being developed.

There are also gene therapies in the works for even more common conditions, like age-related macular degeneration, an eye disorder tied to ageing that is expected to affect nearly 3 million Americans in 2020.

The FDA expects to be approving 10 to 20 new gene therapies each year by 2025, a surge in new products that the regulator attributes to new innovations in the field.

What a crisis looks like

Individual patients won’t pay for these costly medicines by themselves; government programs and private health insurance plans are set to shoulder the burden. Those costs will ultimately be borne by every person in the US, because we pay for those health plans through our insurance premiums and taxes.

Yet very few people in the healthcare industry are thinking particularly proactively about these massive costs and how to handle them, Harvard Pilgrim’s Sherman and Cigna’s Miller said.

“The problem is it’s been said that rare diseases are rare,” Sherman said. “Collectively, they’re not all that rare. So when you start to put them all together, you end up with significant expenses.”

This isn’t just a theoretical issue – the cost of a new medical advance has overwhelmed the US health system before. When the first effective cure for hepatitis C, Sovaldi, was approved in 2013, health insurers and government programs restricted access to the treatment, which had a list price of $US84,000.

That could happen again with gene therapies, especially if health insurers and government programs aren’t prepared.

When health insurers consider what to cover, “the more expensive it is, the more likely it might get limited to those patients who are sickest,” Leora Schiff, a principal at Altius Strategy Consulting, which works with biopharmaceutical and other healthcare companies, told Business Insider.

She added that health insurers were “scarred by their experience with Sovaldi.”

In gene therapy, a delay in care could mean that the treatment doesn’t work as well or that it becomes unavailable to patients. Zolgensma, the treatment for spinal muscular atrophy, may be approved only to be given to newborns, for example.

New financial models

To prevent treatment delays, one effort out of Massachusetts wants to get the state’s health insurers on board to cover Zolgensma before it’s approved.

Part of that is figuring out a big question about gene therapies: how payment should work.

When you get prescribed a drug today, you and your health insurer pay for a set amount – say, 30 days’ worth of pills. If it isn’t working you stop taking it, and thus stop paying.

Gene therapies can’t work that way because they’re one-time treatments. Though gene therapies are being compared to a cure – and priced like one – no one knows whether that’s entirely true. Their effects might fade over time, and it’s also not clear whether they will work for every person.

That’s given rise to the idea of using a payment plan like one for a car or a house, with at least some of the payment contingent on how well a gene therapy works.

A biotech is proposing a plan to pay for its pricey rare-disease treatment the same way you’d buy a TV or dishwasher

In the US health system, that’s very new – and challenging. It’s “just not how the healthcare system has operated in the past,” Dr. Greg Daniel, the deputy director of the Duke-Margolis Center for Health Policy, told Business Insider.

To hash out the problems, groups like a consortium organised by Duke-Margolis and, in Massachusetts, the Newdigs program from the MIT Center for Biomedical Innovation have sought to bring together all the relevant players.

Miller has been an active participant in the Duke-Margolis consortium, first while working at the pharmacy-benefit manager Express Scripts and then at Cigna, after the health insurer acquired Express Scripts in late 2018.

Progress has been made over the years, but no conclusion has been reached, he said.

“The clock is really ticking,” he said. More products that challenge the system are likely to come this year, and “we’ve got to do this while the market is still small.”

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