Novartis has a gene replacement treatment in the pipeline for type 1 spinal muscular atrophy, a fatal inherited disease with an incidence of around one in 10,000 babies. A single dose of the therapy appears to prevent the disease if given shortly after birth. The treatment has not yet been approved. However, Novartis has hinted at what its price would be at launch, a staggering $ 4 million.
As prices of a number of high-profile orphan drugs have increased over the last two decades, manufacturers have pushed the limits of what was thought at each point in time to be an imaginary ceiling of sorts: From $ 50,000 to $ 100,000 in the early 2000s, from $ 100,000 to $ 500,000 in the late 2000s, from $ 500,000 to $ 1 million between 2011 and 2015, and from $ 1 million to potentially $ 4 million in the near future. Familiar arguments have been repeated in industry circles which purportedly justify high prices by pointing to the fact that many orphan drugs address unmet need in areas in which prior to their approval there were no treatment alternatives available. They also cite the small patient populations targeted by orphan drugs and the need to recoup the high costs of R&D.
Interestingly, in support of the eye-popping $ 4 million figure, Novartis has added a line of defense, suggesting the gene replacement therapy would be cost-effective. The company did not elaborate on what that meant. Usually, a technology’s cost-effectiveness is considered in relation to the existing standard of care. One would calculate the incremental benefits and costs to come up with a cost-effectiveness figure. In lieu of this, one could advance a value of life argument. Back in 2004, Harvard University professor David Cutler put a price tag on an additional year’s worth of healthful life: $ 100,000. If one were to adopt this figure and apply it to Novartis’s gene therapy, an extension of life of at least 40 years would make the $ 4 million worth it. Here, a caveat is in order as in the course of a person’s lifetime there would be other healthcare costs unrelated to type 1 spinal muscular atrophy that would have to factor into the calculation.
It’s important to note that other orphan drugs that are not as expensive are not one-time cures. Soliris (eculizumab), for example, is a drug indicated for the bone marrow failure disorder paroxysmal nocturnal hemoglobinuria. At approximately $ 500,000 per year per patient, the drug needs to be taken for the rest of a person’s life. If the person lives for more than 8 years, the total cost will be over $ 4 million.
A key question for Novartis’s gene therapy is whether payers will pay $ 4 million upfront? Will the price necessitate implementation of new payment methods, such as installment plans, mortgage-like payments (amortizing over the course of a number of years), or risk-sharing arrangements as is already seen in the case of CAR-T therapies? In light of enrollee churn (periodic changing of insurers), payers will want to spread the costs of gene therapy over a number of years. Indeed, it would appear unreasonable to have payers foot the entire bill upfront while only seeing a fraction of the associated benefits.