How to Avoid a Disastrous Gene-Therapy Price Battle

Single-use drugs that could cure diseases are valuable -- but wildly expensive.

Drugs that modify human genes have the potential to cure intractable diseases with just one treatment. Few could disagree that's a good thing. But if these same drugs cost $1 million or more a pop, then the disagreements begin. 

Philadelphia gene-therapy maker Spark Therapeutics Inc. -- whose eye-disease drug is likely to be the first such medicine approved for use in the U.S. -- generated backlash recently for suggesting such a high price may be justified. As more of these medicines hit the market, conflict will likely grow between those who make them and those who must pay for them.

It's not going well so far for drugmakers. Dutch firm UniQure NV developed a gene therapy for an extremely rare disease that was approved for use in Europe in 2012. The price tag was around $1 million, and a single person has been treated with the drug commercially. The company pulled it off the market in April to devote more funds to other work. 

The argument for gene therapies is easier to make in some cases. For example, BioMarin Pharmaceutical Inc., Spark and other drugmakers are working on gene therapies for hemophilia. Existing treatments for the disease are hugely expensive and must be taken for years. A Roche Holding AG medicine approved in the U.S. on Thursday will cost in excess of $400,000 a year. And that's cheaper than some current options. 

Given the prices of existing medicines, drugmakers will argue that a one-time hemophilia treatment -- even at a very high cost -- will rapidly pay for itself.

But such arguments still may not convince payers. Gene therapies may not always deliver lasting cures. There's also an unfortunate dynamic unique to the U.S. health-care market and private insurance that makes this type of medicine especially problematic. People swap jobs and insurers all the time. It's easy to imagine a gene-therapy case where one company is saddled with a million-dollar insurance bill and another reaps the long-term benefits of a cured employee.

When it comes to Spark's eye drug, the calculus gets especially tricky. What price can you put on helping a child see? The drug isn't a complete cure for patients whose retinal cells have already died, but it has produced marked eyesight improvements. The quality-of-life gains for patients and their families can be enormous. 

There is room for compromise here, but it will require sacrifices from both drugmakers and payers.

The industry needs to migrate toward pay-for-performance pricing, in which drugmakers get fully paid only if their medicines work and save money over the long run. Drugmakers need to accept that they won't get traditional profit margins on these products and bear some of the risk for drug failures. Payers need to learn to think long-term, to become more flexible, and to acknowledge and pay for value when it's delivered.

The current trajectory, toward extreme price tags and extreme resistance to them, will only hurt patients.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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