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In Developing Payment Mechanisms for Gene Therapies, the US Has a Long Road Ahead

Kelly Davio
Even if gene therapies do prove to be cost-effective in providing patients with much-needed treatments for genetic diseases, the question of how to pay for these therapies remains largely unanswered. 
High-cost drug therapies have long strained the US healthcare budget, and the advent of gene therapies is poised to increase that cost burden substantially. 

To date, only 1 gene therapy has been approved in the United States—Luxturna, a treatment for inherited retinal disease that carries a list price of $850,000—but according to EvaluatePharma, the US healthcare system could see an influx of such therapies in the coming years, with combined sales forecasts of $16 billion in 2024. 

Recently making headlines is Novartis’ proposed gene therapy, AVXS-101, a single-dose treatment therapy for spinal muscular atrophy. According to Novartis, the eventual treatment could be priced as high $4 million to $5 million per patient, a price that Dave Lennon, president of AveXis (the drug developer responsible for AVXS-101 that was acquired by Novartis) said could be cost-effective because it would administered only once, and could obviate lifelong, costly medical interventions while providing an added 13.3 quality-adjusted life years. 

However, even if such drugs do prove to be cost-effective in providing patients with much-needed treatments for genetic diseases, the question of how to pay for these therapies remains largely unanswered. 

In a recent paper published in JAMA, Anna Kaltenboeck, MA, of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York, along with coauthor Peter B. Bach, MD, described a variety of value-based approaches that are being considered for paying for gene therapies, from value-based pricing (which may rely on benchmarks set by the Institute for Clinical and Economic Review, or ICER), indication-based pricing, outcomes-based contracting, mortgage pricing (under which a high-cost therapy is paid for over a period of years), and value-based insurance design.1

In an interview with The American Journal of Managed Care® (AJMC®), Kaltenboeck said that, we're haven't yet arrived at an effective payment mechanism to handle gene therapies. Among existing approaches, “I think the greatest potential is in value-based pricing,” she said, because such a method sends a stronger signal to the marketplace about how to appropriately price products. 

While bundled payment approaches and competition-based approaches have served purposes under some circumstances, she added, they have also been used throughout a period of sustained price increases for drugs. 

Kaltenboeck also takes issue with mortgage pricing, saying that she does not view it as an appropriate solution to the problem of high costs. At the time at which the JAMA paper was published, there were no known instances of mortgage pricing, but Kaltenboeck noted to AJMC® that there are rumored to be some mortgage-based offerings in the market today. However, she pointed out, it is not clear why such a mechanism would be used for a one-time treatment when payers have found effective ways for pay for high-cost one-time events, such as surgeries.  



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