Is $3.5 Million a Fair Price for a Lifesaving Gene Therapy?

Feb. 15, 2023 — Gene therapies have the power to cure serious, even fatal, diseases. Yet what captures public attention is often not the transformative effects but the enormous price tags. 

At $3.5 million, Hemgenix, the new gene therapy for hemophilia B, has recently been named the most expensive drug on the planet, unseating another gene therapy, Skysona.

“I didn’t believe the prices we’re seeing now would ever happen,” says Colin Young, PhD, director of drug development pipeline research at Tufts Medical Center. “I’m continually amazed every time a new price comes out.”

Hemgenix is record-setting, but hardly an anomaly. Skysona, a treatment for a rare neurological disorder, launched at $3 million in September 2022. Zynteglo, a gene therapy for a genetic blood disorder, debuted just one month earlier at $2.8 million. In 2019, Zolgensma was priced at $2.1 million as a treatment for spinal muscular atrophy, a fatal genetic disease affecting infants and young children. Several other treatments land in the hundreds of thousands. 

Yet the remarkable results lead some to call gene therapy a relative bargain. These drugs have the potential — in some cases, the proven ability — to cure illness with a single dose. This liberates patients from the physical, emotional, and financial burden of living with a serious disease, often one requiring highly expensive treatments. 

“It’s a big paradigm shift,” says Sarah Emond, chief operating officer of the Institute for Clinical and Economic Review (ICER), a nonprofit that independently evaluates the cost of medical treatments. “Up until now, most drugs have been something that you take for chronic conditions forever.” 

That’s because gene therapy does not treat symptoms. It targets the cause, the genetic defect behind a disease, swapping out faulty code or even inserting a gene that’s missing. Sometimes, this happens in a petri dish, and the healthy cells are transferred to the patient. Other times a vector, usually a virus, delivers the genetic material to the patient’s cells. 

Treatment is currently confined to monogenic diseases — those caused by a single gene mutation — and the conditions are typically rare, with patient populations in the hundreds or low thousands. But treatments for more common conditions, like sickle cell disease, are on the very near horizon. 

“This wasn’t even in my wildest imagination 20 years ago,” says Stephan Grupp, MD, PhD, medical director of the Cell and Gene Therapy Laboratory at the Children’s Hospital of Philadelphia. 

In 2017, Kymriah — a cell-based gene therapy Grupp helped develop for a type of pediatric leukemia — was the first to be approved by the FDA. The clinical trial showed astonishing promise, with 90% of patients going into remission. 

“There were almost 20 years of trials when nothing seemed to be working,” Grupp recalls. “And then, boom, it went from doing nothing to doing everything.” 

One of the clinical trial patients, Emily Whitehead — now a well-known name in gene therapy — had been close to hospice. Twenty-three days after her infusion, her leukemia was gone. 

“Some combination of disbelief and ecstasy” is how Grupp describes his reaction at the time. “We had no idea this was possible. We did mouse experiments in the lab, but that’s not guaranteed to translate into anything.” 

Over a decade later, Emily, now 17, is still healthy. Gene therapy cured her cancer. 

The Financial Picture

For every successful treatment like Emily’s, dozens more fail. 

“[Drug companies] are really lucky if 1% of their ideas actually make it to the clinic,” says Young. “Then they’re pretty lucky if 1% of those actually make it to a product. There’s a very, very high attrition rate.” 

The few treatments that make the cut can cost up to $1 billion dollars to develop, yet they may ultimately benefit fewer than 100 patients a year.

“Most of the companies eventually go bankrupt or get bought, even the ones that are successful,” Young says. “These things cost a hell of a lot to develop.” 

Bluebird Bio, the company that makes Skysona and Zynteglo, is “very close to running out of money,” he says. This could threaten the launch of its sickle cell therapy regardless of the drug’s promise.

Research and development is only one part of the financial picture. Manufacturing costs are also steep. 

Take the viral vectors, the most common delivery system for gene therapies. Inside production facilities you’ll find towering steel vats resembling the kind you might see on a brewery tour. “They go up to the ceiling — they’re enormous,” says Nicole Paulk, PhD, a University of California San Francisco researcher who studies technologies that could make gene therapy cheaper. 

These vats are the bioreactors where viral vectors are produced. Despite their size, each one might yield only enough vector for a few patients, “‘like single digit,” says Paulk. Its a super labor-intensive process.” 

During purification, much of the virus — up to 80%  — is lost; a battery of FDA safety tests further depletes each batch.

This is just one step in a highly complex manufacturing process — the single biggest driver of gene therapy’s cost, according to Paulk. “Every step is just very expensive. These prices sound astronomical to people. But they are justified at the moment.” 

Production is still mostly done by humans, with drug companies relying on the same methods developed in academic labs. This inefficiency spikes costs — and creates batch-to-batch variability. Even something as small as the way a technician holds a tube could affect the end product. Automation will improve quality control and bring production costs down, enabling more drugs to enter the market. 

Some labs are also developing “off-the-shelf” cells for certain products, like the CAR T therapies for leukemia and blood cancer. This could yield multiple treatments per batch versus the current “bespoke” method, a weeks-long process where “you have to make a fully qualified lot of drug for every single patient,” says Grupp. 

‘What’s the Value of a Life?’

Even if efficiency and competition improve, not everyone is confident that will translate to lower price tags. “We haven’t seen that for any other drug,” says Young, who points out that as more CAR T products enter the market, “they come out at the same price.”

That’s because pricing isn’t solely linked to manufacturing costs. “These companies believe the price should match the clinical benefit,” says Emond. 

When gene therapies prove to be life-transforming — even lifesaving — that leads to a very high dollar amount. “You’re sort of deciding, ‘What’s the value of a life?’” says Young. 

When calculating target prices, ICER incorporates a range of factors, including the economic burden the health care system can sustain without a spike in premiums. Perhaps its most critical consideration, however, is clinical benefit.

The magnitude of change — how much better a patient feels on the drug — comes directly from the patients in the clinical trial,” says Emond. This data is converted into “quality-adjusted life years,” or QALYs, which aims to capture both quality and quantity of life before and after treatment. The analysis includes the cost savings of treatments no longer needed.

The latest ICER report suggests Hemgenix should be priced at around $2.9 million — some $600,000 less than its market price. A big reason for the still seven-figure price tag is the IV infusions of clotting factor that Hemgenix could eliminate. If the gene therapy is sufficiently durable,” that is, if it works as intended,— “then it doesn’t take too many years to write off the cost of the alternative,” says Young, since earlier therapies can cost upwards of $750,000 a year. 

Yet ICER refuses to take this number as a given, calling those other therapies “extremely overpriced.”  

If drugs were priced strictly according to efficacy, those that confer life-changing benefits, like gene therapies, could cost seven figures without straining the system, says Emond. “We shouldn’t overpaying for drugs that bring marginal clinical benefit,” she insists. 

The U.S. Health Care System

Understanding the problem of pricing requires a wider view of our country’s fragmented health care system, a capitalistic model where drug prices are the highest in the world and insurers are mostly price takers. 

Red tape notwithstanding, insurance generally covers gene therapy, leaving most people responsible for only the deductible. Still, because “there really isnt any [payer] approaching monopoly power,” says Young, the market renders insurers essentially impotent when it comes to negotiation. 

Drug manufacturers try to figure out what the market will bear and just set that price. And its typically going to be accepted,” Young says. “You basically can’t persuade the payers in European countries to pay that much,” since there’s often a government agency deciding which drugs will be reimbursed at what price. In 2021, Bluebird Bio pulled Zynteglo from Europe after withdrawing it from Germany, where health officials rejected its target price of $1.8 million.

But the U.S. landscape may be changing: The new Inflation Reduction Act permits Medicare, for the first time, to negotiate the prices of certain high-cost drugs that lack competition. This will go into effect in 2026, though the eligible drugs haven’t yet been announced. 

Right now, the most urgent question is one of access. “Realistically, were stuck with the sort of prices were looking at,” says Young. “We just have to find payment mechanisms,” especially as gene therapies for more prevalent conditions advance in the development pipeline. 

“Imagine if these therapies work for more common cancers — lung cancer, breast cancer,” Grupp says. “That would be a whole new day in therapy. But how are we going to pay for this?” 

With an influx of eligible patients, the health care system could be seriously strained. 

Take sickle cell disease, the most common genetic disease in the U.S., affecting one out of every 500 Black Americans. This year, the FDA is expected to approve two gene therapies for the disease. Generally, “this population has lower rates of commercial insurance than other populations that have gotten [gene therapies] until now,” says Grupp. “We’re going to have to deal with the impact of these prices on Medicaid.” 

Moving Forward

One possible solution is outcomes-based pricing. This refunds some or all of the treatment’s cost if results don’t last.

If youre going to price these very expensive therapies for their curative potential, then if they stop working later, we have to get some of that value back,” says Grupp. An outcome-based agreement might, for example, refund a patient with hemophilia who must return to prophylaxis after receiving Hemgenix.

This type of guarantee is already being implemented for other gene therapies. 

If patients with leukemia aren’t in remission 30 days after receiving Kymriah, the hospital treating them isn’t billed. The maker of Luxturna, a gene therapy for a rare form of blindness, offers rebates based on light-sensitivity tests taken shortly after treatment and 2 1/2 years later. Bluebird Bio, the maker of Zynteglo, promises a refund of up to 80% if patients require red blood cell transfusions within 2 years.

Innovative payment plans could be another answer. Bluebird Bio offers an installment option, reducing the upfront cost of gene therapy for insurers. AveXis, maker of Zolgensma, also has a pay-over-time structure, with payments spread out for as long as 5 years. Some insurers are allowing patients to pay their deductible over time rather than all at once, to reduce the impact on patients. 

The high-risk pool model, where small insurers combine their resources and share the cost of gene therapies, could also improve patient access. 

“If you’re a self-insured company and somebody needs a $3 million therapy, it basically kills your health plan,” says Young. Programs like Cigna’s Embarc, which allows companies to pay a flat fee per employee to guarantee coverage of gene therapy, could help solve this problem. 

It’s this type of creative thinking that may be the key to propelling the industry forward. 

“I totally get the gut reaction, like a million dollars is insane. That number seems fanciful to people,” says Emond. But gene therapies themselves are fanciful, offering the kinds of results researchers couldn’t fathom even 2 decades ago. 

We could be on the precipice of transforming the way we think about and treat disease. … We have to reward swing-for-the-fences innovation with high prices,” Emond says, then tempers her position with a blunt reminder. “Remember that price is a conscious choice.” Drugmakers choose what they charge — and how they choose could determine the future of gene therapy.

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