When the Price is Right for Gene Therapy

    08/04/2018

    A lot of hype and pomp has been thrown around about the cost of gene therapy treatments recently. The current costs are truly staggering, ranging from over $300,000 up to $1 million for a one-time treatment. The truth of the matter is that every new technology that comes on the market will be expensive at first due to supply and demand as well as the costs for initial development. With time and with technology to improve manufacturing the costs will change (hopefully) for the better. When the automobile came on the market in 1900 the average cost was over $1000 while the average family earned $750 a year. Over the next 25 years prices declined by 11% per year until in 1924, the Ford Model-T car cost just $265.

    Cars through the ages:

    By the end of the century the price of a family car had fallen by 50%, when adjusted to inflation. In just a few dozen years, with the added enhancements in safety and technology, the drop in price meant that every family could have their own car. This vast reduction in cost was primarily because cars could be made on an assembly line and could be sold in a production cycle. In the same way, I am betting that costs of many gene therapy treatments will decline greatly over the next century, due to improved technologies and an economy of scale. This week I want to dissect some factors that determine how gene therapy is really priced.

    Firstly, the bad news: AAV and Lentiviral gene therapies currently have astronomical costs. Here are 5 most expensive gene therapy drugs that have been approved today and their eligible patient populations:

    Prices

    Glybera has already been discontinued due to a lack of market demand - only one person has ever been treated. Three other gene therapies have also been withdrawn in Europe since approval by the EMA due to unsustainable costs and tighter controls on drug pricing. In fact, all of the approved therapies currently face market difficulties because they treat rare or ultra-rare diseases.

    A rare disorder in the US, termed “Orphan disease” affects less than 200,000 people (620 patients per million) while an Ultra-Orphan disease can affect as little as 1 in 50,000 people (20 patients per million). Since there are so few patients, companies want to charge a higher price for their gene therapy. However, if we only allowed the free market to dictate drug prices all of these gene therapy treatments will have to be shelved. Yescarta, the treatment for B-cell lymphoma in adults, manufactured by Kite Pharma (now Gilead), could treat up to 7,500 people per year. This remains the largest treatable population so far by any marketed gene therapy product. Furthermore, the United States, unlike its European counterparts has traditionally allowed the free market to determine drug prices and this has led to short-term monopolies that jack up drug prices. In some ways this has been due to limited patent life and legislative blindspots (Just look at Gleevec).

    However, drug prices for gene therapies are not determined by supply and demand alone. The costs for society and for the patient factor in a great deal. An article in Science, in 2016, written by Stuart Orkin and Philip Reilly provides a great summary about this issue. Cystic fibrosis, as an example costs the average patient $25,000 per year in terms of general health support and lifetime costs range around $750,000. Hemophilia A, another more common genetic disease currently targeted for gene therapy trials, costs patients around $300,000 per year and up to $10 million over a lifetime. In fact, even though each individual Orphan disease affects a few people, aggregating all the rare diseases reflects the huge burden that the health care system faces today. If we were to add up current treatments for sickle cell disease for 70,000 patients in the US they would exceed $1 billion per year, not to mention the days lost from work and family burden. Thus, the high economic costs of rare diseases for society go some way towards justifying the high costs of gene therapy.

    Orkin and Reilly, Science, 2016, current costs for managing healthcare in genetic diseases:

    Orkin,Reilly

     

    The Price of Development and Production
    Several factors are involved in the determining the price for development and production of gene therapies.

    Since genetic disorder and the standard of care varies drastically between disease states, the procedures for each specific gene therapy will be different. For example, procedures for treating hemoglobin disorders and neurodegenerative diseases may involve extraction of patient hematopoietic stem cells, ex-vivo treatment with a lentiviral vector, treatment of the patient with immunosuppressive drugs and then readministration of the modified cells. On the other hand, treatment of a patient with retinal dystrophy may involve simply injection of AAV directly into the eyes. If multiple administrations are needed to maintain gene expression and quality of treatment the costs will naturally ascend over a patient’s lifetime. Therefore the mode of treatment directly affects the cost of the therapy.

    The costs of manufacturing different viral vectors will also vary widely depending on the target organ for treatment, quality control of viral vectors and the process by which viruses are synthesized at scale. For example, treatment of muscular dystrophy involves injection of virus into multiple muscle group whereas treatment for blindness involves injection just into the eye. Significantly higher vector quantities would be needed for the former treatment over the latter.

    Each gene therapy takes many decades to develop and possibly some failed clinical trials. In addition pharmaceutical and biotech companies often have several candidate treatments in the pipeline which may benefit more patients in future compared to its currently market-approved therapy. Furthermore, the costs for submitting an IND and BLA for FDA approval are substantial. The biotech industry has already invested over $10 billion in gene therapy over the last 20 years without taking back any revenue. At some stage biotech companies must decide on how to make up for sunk costs. This may well be through charging more for the currently approved product.

    For ultra-rare disorders such as Tay-Sachs disease affecting less than 1 in 250,000 people, market incentives alone do not encourage drug development. Joint efforts between the FDA, National Institutes of Health and the biotech/pharmaceutical companies will have to be initiated to come up with ways to treat such diseases.

    Finally, the most crucial factor that determines the price of gene therapies is the outcome of patients. For example, a child who is treated for bone marrow cancer and is able to live a meaningful life but with slightly compromised health will have a favored treatment compared to a child who is given only a few years left to live. That treatment must be significantly better than current therapies in order for it to be brought to approval. A good disease outcome may play a large part in charging high annuity payments, with an initial large lump sum followed by smaller payments later.

    New Models for Paying the Cost

    Solutions for paying for these large costs could come in a number of ways:

    - One way would be to pay for expensive gene therapies in a large up-front payment and have the drugmaker or its successor bear the burden of of the remaining reimbursements. Some companies, like Vertex, are already shifting towards this model. When Kalydeco was approved as a small molecule treatment for Cystic Fibrosis, its cost was $300,000 per year per patient. A look at the cystic fibrosis patient communities showed that when a person’s health insurance coverage is depleted, Vertex comes in to fill the gap. One patient paid $5000 up front for the first fill and then subsequently paid $50 as co-pay and $15 out of pocket per month. The Cystic Fibrosis Foundation dub the model “venture philanthropy” in which the foundation itself originally paid $3.3 billion to the then Aurora biotech company (which became Vertex) to develop Kalydeco.

    - Another way would be to find new regulatory processes at the FDA that would streamline the approval processes for ultra-rare disorders. Drug makers already rely on the Orphan Drug Act to cut costs since the act reimburses medical companies for developing treatments for rare disorders. This would reduce the pricing of copays. This is already being done since clinical trials for Orphan-designated diseases, such as spinal muscular atrophy and muscular dystrophy are shorter and less expensive. The FDA also has a variety of expedited pathways set up for breakthrough therapies that can show significant benefit for patients.

    - A third way would be for medicare to provide reimbursements. This week it was revealed that the government healthcare program will pay the $395,380 cost to hospitals for Yescarta as an outpatient treatment. However, patient hospital costs are currently capped at a deductible of $1340. Furthermore, Medicare will only pay up if Yescarta can be shown to significantly improve health outcomes of patients within the first month.

    However we pay for gene therapy in future, one thing is for certain, society must come to an agreement with the biotech industry about costs. This will boil down to a balance between funding drug companies to developing cures for more common disorders and enabling patients and caregivers to get access for desperately needed treatments. If Henry Ford could find a way to reduce the cost of an automobile to an affordable level in just 25 years then we in the medical and scientific community must surely find a way to reduce the cost of gene therapy treatments which, unlike a car, will be more vital for a patient’s survival.

     

    References

    Reilly P, Orkin SH, Paying for future success in gene therapy, Science, 2016: 352(6298) 1059-1061.

    https://www.statnews.com/pharmalot/2016/05/31/paying-for-gene-therapies/

    https://www.technologyreview.com/s/609890/gene-therapy-could-make-cancer-care-more-unequal-and-this-map-shows-why/

    https://www.technologyreview.com/s/609197/tracking-the-cost-of-gene-therapy/

    https://www.healthline.com/health-news/gene-therapy-drugs-in-2018#1

    https://www.forbes.com/sites/arleneweintraub/2017/12/01/gene-therapy-is-booming-but-how-will-we-manage-the-costs/#f455c51604df

    EU approved and withdrawn gene therapies

    https://labiotech.eu/atmp-cell-gene-therapy-ema/

    Gleevec, Cost Increase

    http://www.ascopost.com/issues/may-25-2016/the-arrival-of-generic-imatinib-into-the-us-market-an-educational-event/

    Plos blog, Kaledyco payment model

    http://blogs.plos.org/dnascience/2017/10/26/what-should-gene-therapy-cost/

    Medicare Reimbursement

    https://www.nasdaq.com/article/us-medicare-sets-outpatient-rate-for-yescarta-reimbursement-20180406-00718

    Bureau of Labor Statistics

    https://www.bls.gov/opub/mlr/2014/article/one-hundred-years-of-price-change-the-consumer-price-index-and-the-american-inflation-experience.htm

    The Economist, Price changes over the 20th C

    https://www.economist.com/node/457272

    Images

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    http://historycollection.co/today-history-ford-halts-model-t-production-1927/

    http://theoldmotor.com/?p=33451

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