That Drug Costs What?


New high-cost gene therapies are pushing health care providers to explore new methods to help the US health care system to fund specialty drugs.

On November 5, 2018, I opened up my email and began to read the subject line of the messages that have come in over the past few hours. I catch a headline that reads: “Novartis says SMA gene therapy is cost-effective at $4-5 million per patient.”

The articles states that Novartis’ therapy, called AVXS-101 at the time, is intended to be a one-time gene therapy treatment for spinal muscular atrophy (SMA), a genetic disease that affects part of the nervous system that controls voluntary muscle movement, such as walking, eating, and breathing.

As I sit at my desk, I begin to wonder: what is gene therapy? What makes it so different from current medications? What types of disease states are being targeted by gene therapy and, finally, if these medications are truly cost effective at a price point of $4 million, how will the US health care system afford it?

What is Gene Therapy?

Gene therapy is a technique that restores an individual’s abnormal or mutated gene to treat or cure a disease. It works by replacing a disease-causing gene with a healthy copy, deactivating a disease-causing gene that is not functioning properly, or introducing a new or modified gene that helps treat a disease. According to the FDA, there are a variety of gene therapy products, including plasmid DNA, viral vectors, bacterial vectors, human gene-editing technology, and patient-derived cellular gene therapy products.

Plasmid DNA are molecules that can be genetically engineered to carry therapeutic genes into human cells, while viral vectors are viruses that have been modified and are being used as vehicles to deliver healthy genetic material into cells. Similarly, bacterial vectors are modified so that they do not cause disease and are used to carry therapeutic genes into human tissues.

Human gene-editing technology focuses on disrupting diseased genes or repairing mutated genes while patient-derived cellular therapy focuses on removing cells from the patient, which are genetically modified prior to being returned to the patient in an effort to produce a desired effect.

These mechanisms can be completed both inside and outside of the body. For example, a vector carrying a gene can be injected directly into the part of the body that carries the defective cells. On the other hand, a patient’s blood, bone marrow or tissue can be removed from their body and a vector can be introduced to the cells. The cells can then multiply in a laboratory before being injected back into the patient to produce the desired clinical outcome.

Although this may seem like science fiction, 3 gene therapies have already been approved in the United States and several more are in the pipeline. These therapies are intended to treat monogenic diseases, which are disease states caused by 1 missing or faulty gene or gene pair. Monogenic diseases include conditions such as cystic fibrosis, Duchenne muscular dystrophy, amyotrophic lateral sclerosis (ALS), hemophilia, Rett syndrome, and SMA. Ultimately, gene therapies attempt to treat the underlying cause of the disease a with working gene that hopefully halts its progression.

Gene Therapy Launches

To date, there have been 3 gene therapies approved by the FDA—Kymriah, Yescarta, and Luxturna. Kymriah, manufactured by Novartis, was the first approved in August 2017. It is indicated for pediatric and young adults with acute lymphoblastic leukemia that is refractory or in second or later relapse.

It is also indicated for adults with relapsed or refractory non-Hodgkin lymphoma (NHL). From a very simplistic perspective, the medication works by collecting a patient’s T-cells from their blood and attaching a receptor known as a chimeric antigen receptor (CAR) to the T-cell. This ultimately gives the patient’s cells the ability to attack cancer cells after being injected back into the body. The estimated price of Kymriah is $475,000 per course.

Yescarta, a CAR-T therapy manufactured by Kite, a Gilead company, was approved in October 2017. It is indicated for adults with NHL who relapsed or are refractory to at least 2 other kinds of treatment. The price of Yescarta is approximately $373,000 per course.

Finally, the FDA approved Luxturna, manufactured by Spark Therapeutics, in December 2017. It is indicated for the treatment of confirmed biallelic RPE65-mediated retinal dystrophy, an inherited genetic disorder that progressively leads to blindness.

It is the first gene therapy in the United States to be administered directly to the site, delivering a normal copy of the RPE65 gene into the retinal cells. The treatment, which is associated with significant improvements in functional vision, costs $425,000 per eye, or $850,000 for both eyes.

Gene Therapy Pipeline

Although only 3 gene therapies have been made available in the United States, approximately 40 are projected to be approved by 2022, according to a report in Managed Healthcare Executive. There are currently more than 900 therapies in the pipeline.

Although many of these therapies are for the treatment of various cancers, others are for disease states such as Tay-Sachs, sickle cell, HIV and AIDS, ALS, and Batten disease, which are all disease states in which there are limited treatment options or ongoing treatment required. Gene therapies that are in late-stage development include those indicated for hemophilia, childhood cerebral adrenoleukodystrophy, heart failure, and Leber hereditary optic neuropathy, according to according to Managed Healthcare Executive.

How will the US Health Care System Support the Cost of These Medications?

As the price tags quoted above suggest, these therapies are highly expensive begging the question, how will payers and/or patients begin to afford these potentially life-altering therapies? Three models have been discussed, including an annuity model, expanded risk pools, and payments based on outcomes.

The annuity model allows payments for a curative therapy to be made over a set timeline instead of a large, upfront payment. The advantages of this model include spreading these payments out and ensuring the patient meets the intended clinical outcomes. However, the disadvantages include the payer having to complete these payments even if the patient has transitioned to another insurance plan.

Additionally, at upwards of a $1 million for Luxturna, even if these costs are spread out over time, it would still represent an economic strain on payers, particularly those with a limited pool of patients. Others have thrown out the idea of expanded risk pools in which public and private funding keep premiums and cost sharing at a somewhat manageable level.

Essentially, payers, employers, and governments are responsible for allocating a certain portion of health care budgets to a dedicated fund that would be used if the cost of therapy exceeds a predetermined threshold. These types of arrangements are available for certain conditions, such as kidney dialysis.

However, with the limited data available for these newer therapies, many suggest that it will be difficult to determine those cost estimates.

Finally, another model that has been discussed bases payments on outcomes. Specific clinical outcomes would have to be achieved within a certain timeframe in order for manufacturers to receive reimbursement from payers. This approach was utilized with the roll out of Luxturna, whereby the manufacturer felt it was their responsibility to help find innovative ways to secure accessibility to their new gene therapy, according to a report in Cell & Gene.

They formed an agreement with Harvard Pilgrim, a leading not-for-profit health services company with health plans in New England, in which they agreed to pay rebates if a patient failed to meet certain clinical thresholds in both the short-term (30 to 90 days) and the long-term (30 months). The short-term and long-term measures were based on test scores for full-field light sensitivity threshold FST at a baseline established for eligible patients prior to administration.

Aside from value-based contracts, the manufacturer has looked for other innovative ways to help decrease the financial burden of their new gene therapy. This includes entering into agreements with commercial payers in which the payer’s specialty pharmacy purchases the drug rather than the treatment center where the drug is administered. This innovative model avoids some of the mark-up on the product that can be seen in other “buy and bill” scenarios.


Although the price tags of gene therapies may seem shocking, continued research and development in this area has the ability to transform medicine and create opportunities for patients living with many of these rare, sometimes incurable disease states. That being said, additional efforts will need to be focused on how to fund these types of treatments in order to ensure accessibility to those impacted by these disease states.

About the Author

Lauren Meyer earned her Doctor of Pharmacy degree from the Duquesne University School of Pharmacy and her Master of Science in Pharmacy Business Administration (MSPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines. She has spent the past several years working as a clinical advisor assisting employers with their pharmacy benefit management strategy but recently started a new role where she will play a key role integrating pipeline, disease state prevalence and clinical practice guidelines to support pricing new business. Prior to these experiences, she completed a PGY-1 managed care residency.

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