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The Ripple Effects of High-Priced Drugs


How will payers, providers, and patients respond when a $2 million drug drops into the market?

Money in pill

How much would you pay for a cure? How much should one pay for a cure?

Given the ongoing discussion of skyrocketing drug prices across the country, these are valid questions being discussed by patient, providers, and payer organizations alike. And now, with the upcoming release of a new gene therapy with an expected $2 million price tag, the discussions are growing more intense.

Spinal Muscular Atrophy (SMA) is a rare genetic neuromuscular disorder diagnosed in about 20,000 infants each year. It is a debilitating disease, laying waste to motor neurons in the spinal cord, ultimately resulting in the kind of muscular degeneration that interferes with walking, swallowing, and breathing. Sadly, most babies who are diagnosed with SMA perish before their second birthday. Those with less severe forms of the disorder will require extensive medical care for the rest of their lives.

Given the severity of this disorder, parents of children with SMA, much like individuals affected by other rare diseases, have been clamoring for effective therapies. When Novartis announced that their new SMA gene therapy, Zolgensma, which could potentially cure the disorder, is expected to hit the market shortly, many cheered. Until, that is, they saw its associated price tag of $2 million.

Yet, Dean Erhardt, MBA, president and CEO of D2, a life sciences consulting firm, says, put in perspective, $2 million may not be as outrageous as it first seems.

“If you have a patient who will require a high level of expensive care-they’ll be in a wheelchair, need a ventilator, or have other high costs for several years-then $2 million may actually be reasonable if you can offset those other costs. You have to look closely at the true cost-benefit ratio is over time,” he says. “People are going to have to do their own kind of health economic review of patient costs and figure out what makes the most sense.”

But with the FDA fast-tracking several new gene therapies for approval, Novartis’ intention to charge $2 million raises more than a few concerns. As reported in the Wall Street Journal, America’s Health Insurance Plans (AHIP) said, “a therapy is useless if no one can afford it.” And patient groups and providers are already sounding the alarm, worried that average American health plan will be unwilling to cover such high prices, even for life-saving drugs.

Related: Understanding Both Sides of the Copay Accumulator Debate

Erhardt believes as more gene therapies are released, drug manufacturers and payer organizations are going to have to engage in evolving discussions about what costs can be borne, especially in value-based or risk-sharing agreements.

“There’s no question that we’re going to see more therapies like this coming down the path. But there’s going to have to be some give and take when it comes to costs,” he says. “Payers, providers, and drug manufacturers-and the FDA needs to be involved, too-all of the players are going to have to come to the table to discuss what society can bear from a cost perspective.”

Erhardt said that there are many questions that will have to be answered. Currently, with very expensive medical conditions, patients who reach a lifetime cap on insurance plans are often rolled into government assistance programs. With such expensive drugs, CMS might not be able to bear the costs of such roll-overs. He also said that it’s possible insurance companies might offer drug manufacturers some kind of sliding scale on pricing-this much for an improvement in symptoms and the full asking price if a patient is fully cured. He could even imagine the FDA and CMS negotiating with drug manufacturers in the future, trading more time on the life of a drug patent if drug manufacturers are willing to come to market with a reasonable price tag.

There is a lot of uncertainty-which is why, Erhardt says, it’s so important that all stakeholders come to the table now to start thinking about how the industry will handle high drug prices in the future. The industry needs to foster the development of new therapies, but do so without making these drugs so unaffordable that patients can’t benefit from them.

“Working together, we should be able to come to a solution that is rational,” he says. “Because, eventually, if we have 20, 30, or 50 products on the market with million-dollar price tags in the near future, insurance, and society as a whole, just can’t afford to support that. There’s got to be a better solution.”

Kayt Sukel is a science and health writer based outside Houston.

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