Drug Projected at $1 Million Has Spark Mulling Installment Plan

Drugmaker Spark Therapeutics Inc. is considering installment payments for a promising gene therapy for blindness that analysts are projecting will come with a hefty price tag.

The company is in discussions with health insurers and drug benefits managers about staggered-payment alternatives including pay-for-performance models that would spread costs over an extended period based on effectiveness, Chief Executive Officer Jeff Marrazzo said in an interview.

Although the Spark drug, called SPK-RPE65, is still in testing and not approved, at least two analysts are making sales projections for it based on a $1 million price, which would make it the first drug in the U.S. with a seven-figure cost. Marrazzo said no price has been set.

Referring to discussions about new payment approaches in a conference call with analysts on Wednesday, the CEO said there were going to be different models across the globe.

High prices are causing payers to restrict access to certain drugs, which may be forcing consideration of different payment methods. If approved, Spark’s SPK-RPE65 stands to become the first U.S. gene therapy, or treatment that uses genes as medicine.

“Payers are the gatekeepers,” said Phil Nadeau, an analyst with Cowen & Co., whose sales model for the drug presumes a $1 million payment for both eyes. “They’re trying to work with the payers to see what would be most amenable.”

Elemer Piros, an analyst at Roth Capital Partners LLC, also models a $1 million price spread across 10 annual installments.

No Longer Blind

SPK-RPE65 streams genes directly into the eye to fight rare forms of progressive vision loss, with final-stage trial results expected by the end of the year.

Spark’s therapy improved vision in 12 patients suffering from Leber congenital amaurosis, which typically causes severe sight loss progressing to blindness by adulthood. Six of the patients are no longer considered legally blind, according to Children’s Hospital of Philadelphia, which ran the trial.

Spark isn’t alone in pondering how insurers will pay for drugs based on new technology. UniQure NV, which has the first gene therapy approved in Europe, and Bluebird Bio Inc., of Cambridge, Massachusetts, also say they’re talking to payers about alternative reimbursement ideas.

One-Shot Cures

Installments would allow insurers to avoid a one-time price shock. Marrazzo said he hopes Spark can catalyze a change in a U.S. payment system that rewards repeated treatments instead of innovative one-shot cures. SPK-RPE65 would ideally need to be used only once, with curative effects.

“The opportunity here is that we can have a dialogue that’s saying we’re willing to take value over multiple years,” he said in an interview.

Marrazzo, who previously worked on health-care costs in Pennsylvania state government, said he knows about problems from the payer’s side and wants to fix the system. He said he hopes to have an innovative payment model in place before Spark’s drug is approved. That could be as early as 2016.

Paying for expensive drugs all at once poses a special problem to U.S. employer-based insurance plans. American workers hold an average of 11.7 jobs from age 18 to 48, so the insurer that pays for an expensive, one-time therapy may not be the one that enjoys lower costs for an employee’s care after being cured.

“Now is the time to figure this out before we actually have a crisis with the first product coming to marketplace,” said Steven Miller, chief medical officer of Express Scripts Holding Co., the biggest manager of prescription benefits in the U.S. He declined to identify any drugmakers the company is talking to.

Treatment Costs

The potential price of gene-based drugs for hemophilia B, under development at Spark, UniQure and other companies, could climb well into seven figures. A drug that cures the excessive-bleeding condition in a single dose would be priced at $4 million to $6 million if the manufacturer pegged it to the lifetime costs of current treatments, according to Troyen Brennan, chief medical officer of CVS Health Corp.

In an article he co-authored in the journal Nature Biotechnology last year, Brennan proposed a model in which payments would be made over time only if effectiveness was sustained.

Express Scripts’ Miller doubts all insurers would buy into that idea. And unless everyone agreed, when a patient switches plans, the new insurer could stop paying.

Drugmakers also wonder who would guarantee payments if patients don’t return to hospitals or doctors regularly to monitor effectiveness, said Nick Leschly, CEO of Bluebird, which has shown promising results in early gene-therapy trials for sickle cell disease and beta thalassemia, another blood disorder.

HealthCoins

UniQure’s Glybera, approved in Europe to treat a dangerous genetic inability to process fat, has a list price of about 830,000 euros ($906,000), according to its marketing partner Chiesi Farmaceutici SpA.

Although UniQure hasn’t suggested pay-for-performance for Glybera, that model is being discussed for its developing hemophilia therapy, whose performance can be more easily measured, CEO Joern Aldag said in an interview.

Anirban Basu, a professor at the University of Washington, has proposed that the U.S. Medicare program for the elderly should subsidize gene-therapy treatments. Under this system, when a private health insurer paid for a gene therapy they would be given a bond, dubbed a “HealthCoin” by Basu, that could be passed from one insurer to another and sold to Medicare once the patient turns 65.

“At the end of the day, all patients would transition into Medicare, and Medicare would reap the benefits of having healthy patients,” Basu said.

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