A Search For New Ways To Pay For Drugs That Cost A Mint

Researchers expect that three dozen new drugs will come on the market over the next few years with astronomical prices — some likely topping a million dollars per patient.

The drugmaker Novartis has told investors it might be able to charge $4 million to $5 million for one of its potential products, a treatment for a rare disease called spinal muscular atrophy.

Hundreds more ultra-expensive therapies are under development. They could drive up the cost of medicine and health insurance for everyone. So researchers have started to develop strategies to address that coming price shock.

These new treatments include gene therapies, which target certain cancers and rare diseases. Take, for example, hemophilia, an inherited disorder that prevents a person's blood from clotting properly.

"When I was born, treatment did not exist for hemophilia," says Mark Skinner, one of about 20,000 Americans with the condition. "Within my lifetime — I'm 58 years old — there have been remarkable advances."

Skinner, an attorney in Washington, D.C., who is past-president of the World Federation of Hemophilia, now gives himself injections of expensive medication most days to prevent the painful and potentially dangerous bleeding episodes.

He says eight or nine companies are now working on gene therapies, which could potentially cure his underlying condition. "I think we could see a gene therapy within the clinics, and available to patients, within a couple of years," he says.

One infusion of this therapy might be enough to correct the genetic flaw and give him many years, maybe even a lifetime, free from bleeding episodes and daily medication.

Current hemophilia drugs cost many hundreds of thousands of dollars a year. Skinner's treatment, in particular, can cost $800,000 a year, "so a gene therapy that costs $1 million, or even $2 million — you could see it becoming economically viable over a couple of years," he says. It could actually save money for his health insurer.

But the new kind of treatment could also be a big shock to the health care system. Gene therapy for every American with hemophilia could cost tens of billions of dollars. One response might be to ration the treatment. That's essentially what happened when expensive new drugs that could cure hepatitis C came on the market in 2013. Would that happen for hemophilia?

"If a gene therapy came through and was reasonably expensive, it would be terrible if we could only treat a thousand patients a year, and it took us 10 or 15 years to treat all those people," says Mark Trusheim at MIT's NEWDIGS program.

That program is trying to dream up better ways to pay for gene therapies for hemophilia as well as dozens of other diseases where long-term treatments are in the works. (NEWDIGS stands for the "New Drug Development ParadIGmS Initiative.")

Under the current paradigm, we typically pay as we go for drugs, with monthly bills for monthly pills. Trusheim says it's like paying rent on an apartment.

"But now with these new gene therapies, we get to take the treatment once and it can last for years," he says. They may even last a lifetime. He says it makes more sense, then, to think of these drugs in terms of paying a mortgage over time – think of a condo, rather than a rental apartment.

That approach could spread out the payments, reducing the potential shock of a new treatment. "Plus we have the option here not just to turn it into a mortgage payment," he says, "but make that mortgage payment contingent on whether the apartment is really a good apartment or not. If the roof begins to leak, maybe we won't pay so much on the future payments."

This strategy has already been put to use to pay for one gene therapy – Luxturna — that treats an inherited form of blindness at the cost of $850,000 per patient. The company that produces the therapy, Spark Therapeutics, has agreed to give payers a refund if a patient's vision hasn't improved sufficiently after 2 1/2 years.

New therapies may not work at all, or their effects may wear off over time. There should be some way to reflect the actual long-term value to a patient in the price of treatment, says Trusheim.

He is eager to get funding schemes like this instituted now, because he expects to see another three dozen new expensive therapies coming to the market in just the next four years. Those include immune-system treatments called CAR-T for cancer, which may extend a person's life but may not be curative. It also includes gene therapies for diseases that up until now have had no treatment at all.

"It could be really exciting," he says, "but it could also be really expensive as we're treating conditions we never used to be able to treat."

Many of these treatments are for rare diseases. There are about 7,000 rare diseases, so there could eventually be many products on the market. And because there aren't many patients who would benefit from any given therapy, the costs of developing each novel treatment have to be recouped from a small number of patients. That drives up the price.

One biopharmaceutical company, Alnylam, prices its drugs for rare diseases in the range of $250,000 to $650,000, says Yvonne Greenstreet, the company's chief operating officer. Speaking at a recent meeting organized by the Milken Institute, she said the company has raised about $4 billion to develop the technology behind these medications.

Her company focuses on a method called RNA interference that can block genetic messages. Unlike other forms of gene therapy, RNAi treatments typically need to be given periodically. Among other projects, the company has a novel hemophilia treatment in development.

"I think it's important to remember that when you are focused on coming up with true innovation, it's a very capital-intensive, high-risk endeavor," she says.

Yet in the United States, where drug companies set their prices based on whatever they believe the market can bear, this can potentially be overwhelming.

"If we get a cure for Alzheimer's priced at $100,000 or $1 million a pop, we're toast!" said Joe Grogan from the White House Office of Management and Budget, speaking at the Milken meeting. The costs for this one condition could run into the trillions of dollars.

Even if governments and insurers can rein in the price of drugs, therapies are still likely to cost a lot at the outset, and the health care system will need creative ways to manage that.

"At the pace at which gene therapy is coming, I think we have no choice," says advocate Skinner. "I don't think the public would tolerate cures sitting on the shelf that people don't have access to."

A solution will require not only new ways of thinking, but new rules and regulations that govern how insurance companies and government programs pay for medical care. MIT's Trusheim says, for example, that refunds for poorly performing drugs can fall afoul of current laws designed to prevent kickbacks.

Skinner says these conversations should also involve patients early on, to make sure that new treatments actually address the health concerns of the patients themselves. Value shouldn't be measured simply in terms of drug company profits, he says.

"Achieving an early alignment between patients, the drug developers and the payers in how value is going to be measured is going to be an important approach as we go forward," he says.

You can reach Richard Harris at rharris@npr.org.

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