ANALYSIS | Life-saving Innovation At Alarming Prices

We do scientific innovation very well. New therapies — from anesthesia in 1850, antibiotics in 1928, organ transplants in 1960, to COVID vaccines now — are improving our lives and extending life expectancy. However, healthcare costs now consume 20% of our economy, and we aren’t getting our money’s worth. Complicating the issue, Pharma’s extreme drug prices are a main driver of those rising costs. Despite the cost, we found a way to pay for new therapies in the past. But that is going to be getting harder now.

The newest innovations are gene therapies that can modify a malfunctioning gene in the body to cure, not just treat, genetic diseases. The FDA predicts they’ll be approving 10 to 20 gene therapies each year by 2025. But they come at a very high cost and it’s unclear how we are going to afford them.

The latest gene therapy approved by the FDA, Hemgenix, at $3.5 million for a one-time treatment, is now the most expensive drug in the world. Hemgenix delivers a corrected gene for blood clotting factor IX directly to liver cells in Hemophilia B patients reducing painful, dangerous bleeding, and reducing or eliminating the need for frequent factor IX injections. While Hemgenix is costly, it could be cost-effective over a lifetime, as those injections cost $700,000 to $800,000 per year. ICER, the nation’s leader on comparative effectiveness research, says that based on current data, a fair value-based price for Hemgenix is just under $3 million.

Gene therapies that have been approved so far treat relatively rare conditions. There are fewer than 5,000 Hemophilia B patients in the US. Even so, payers — especially self-funded plans — may be swamped by even a few patients.

But drugs for more common diseases are in the works. Two drugs for sickle cell disease, potentially helping 58,000 Americans with the disease, could be on the market next year. Saying “no” will be very difficult, even immoral. Premiums will skyrocket, causing more pain for consumers, employers, and taxpayers. Most sickle cell patients are covered by Medicaid because the condition makes it hard to work. It is critical that substantial taxpayer investments in the development of these drugs be reflected in the price.

Insurers, Medicare, and Medicaid need to plan now for how they will cover these drugs. There is a fairness issue for payers covering the initial cost. As people move between payers, employers, and programs, the savings will go to other payers. In our fragmented, private healthcare system, that needs to be fixed.

Innovative payment models are being tested. Several drug companies are offering “warranties,” promising rebates if the treatment doesn’t improve patients’ health and lower costs. The federal government has made it easier for Medicaid to cover these treatments. Cigna added per-member fees that employers can add to premiums to cover gene therapies, spreading the cost across all members.

We have a moral obligation to work this out fairly, as we always have for life-saving innovations. It’s critical both to the patients who will benefit, but also to all of us who pay the bills for inaction.