Who Will Pay For Gene Therapy — and How?


Gene therapies are incredibly expensive and tend to benefit small numbers of people, a combination that presents myriad financing challenges for patients, providers, payers and producers. A new study explored some of the options.

For patients with rare and often devastating genetic diseases that have no cure, the promise of gene therapy is huge: Scientists engineer a gene that can replace or repair the defective original and direct a harmless virus to deliver it to the right place in the body, where cells take it up. If it works, the modified gene will produce the proteins whose absence caused the disease, or perhaps edit a DNA error in order to restore proper protein function.

The FDA has approved about a dozen gene therapy products, starting in 2017. Among the success stories are cures for blindness caused by certain retinal diseases. Two gene therapy treatments for sickle cell disease were approved by the FDA in December 2023. Clinical trials of gene therapies for certain cancers have shown promise.

Gene therapy is expected to eventually revolutionize disease treatment and the pharmaceuticals market, one of the biggest hurdles is how to pay for it. Academic institutions and drug companies have taken big risks financing the development of extremely costly treatments.

Because most of the therapies target ultra-rare diseases, manufacturers can profit only by charging high prices. Researchers also have a hard time finding enough patients for studies that will yield meaningful results. Around the world, healthcare systems are struggling to find a sustainable way to provide gene therapy while covering costs that run into the millions of dollars per treatment. To solve the problem are experimenting with various financing strategies.

A study published in late June 2024 in the Orphanet Journal of Rare Diseases reviewed the literature and settled on 10 previously published studies that primarily described three financing schemes that have been used mainly in the United States and Western Europe.

Senior author Manuel Antonio Espinoza, a medical doctor and economist who is an associate professor of health economics at Pontificia Universidad Católica de Chile in Santiago, Chile, and four colleagues offer relatively short discussions of the pluses and minuses of subscription-based payment models, outcome-based payment models, and amortization.

  • Subscription schemes, sometimes called “Netflix-like models,” were described in two papers. One defined them as “a model based on the payment of a lump sum by the health system to the manufacturers in exchange for unlimited access for patients during a defined period.” It was unclear, however, how payment for the therapies would be implanted in practice, as a lot would depend on the amount of the fee, the uncertainty of expected results, and the duration of the subscription. These models have been used in the U.S. and Australia to fund expensive treatments for hepatitis C, resulting in significant cost savings and increased access to treatment.

    Another paper suggested a potential strategy for implementing a subscription-based strategy in state Medicaid programs: States could join together to better negotiate long-term contracts with manufacturers, which would enable patients who meet selection criteria to receive medications at a fixed price.
  • Outcome-based payment models were identified in seven papers. They conditioned coverage on the generation of evidence, discounts based on the therapies’ results, payment in annuities, and personalized reimbursement systems based on performance, among other things. Either one-year or multiyear contracts would be funded with advance payments or installments based on agreed-upon milestones. These types of agreements, which have been used in Europe, reduce payers’ financial risk in case of treatment failure or poor performance by effectively sharing the costs with producers in the form of reduced payment if efficacy goals are met.

    But multiple barriers were identified in the literature, including computer systems that could not adequately collect the necessary data to measure clinical outcomes, the need to define therapies’ “success” or “failure” in order to determine what will or will not be reimbursed, laws that impede adoption of these strategies, administrative costs and the lack of readily accessible clinical endpoints.
  • Amortization is a financing strategy that depends on a key accounting principle: spreading the cost of an intangible asset (in this case, gene therapies) over periods in which a commercial organization or entity receives the benefit of the asset. It was described by two studies. One assessment saw amortization as a promising method to finance new health technologies, but said budget sustainability, health technologies eligibility, and financial regulations were potential barriers. The other identified attributes that might make certain gene therapies better candidates for amortization than others. Amortization is best suited for gene therapies that are a single treatment or have a short-term curative clinical impact, have a durability of clinical benefit that is well-characterized or can be controlled through an outcome-based mechanism, and a fairly large group of people who are likely to benefit from the treatment.
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