Subscribe to Newsletter
Business & Regulation Advanced Medicine

Let’s Meet in the Middle

As part of the International Society for Cellular Therapy’s (ISCT) Commercialization Committee, we’ve developed a business model for cell and gene therapies. We envisaged three key variables: willingness to pay, benefit of the product, and cost. We found that there’s an ideal reimbursement market adoption zone where these three factors overlap to create conditions whereby payers will be willing to adopt a cell or gene therapy. Companies are spending a lot of money developing these therapies, with little to no return on investment until around phase II, where companies can partner. This, combined with the fact that the cell and gene therapies we’ve seen so far are only able to treat a small number of patients, resulting in high production costs, is prompting manufacturers to price their products very highly. But payers on the whole have quite low willingness to pay these high prices; and this is pushing these therapies outside the ideal market adoption zone.

The question for the industry is how do we modify price or willingness to pay to ensure patients have access to these therapies? One method is pharma economics – convincing the world that these therapies are actually worth it. We’ve seen from Dan Ollendorf (ICER) – and Nick Crabb also touches on this – that these therapies may be worth the high upfront costs based on standard measures of value – both to patients and to healthcare systems – used by health economists. And we mustn’t forget the intangible benefits that a cure provides: you’re literally changing someone’s life, as well as the lives of their family and friends. This is perhaps especially true for pediatric patients. Some of these therapies are given to young children, who otherwise might not have lived to their teens, the chance to live a full life. And that is both incredible and valuable.

Assuming the industry wins these arguments, the question becomes, can payers afford the upfront cost? There are many people out there who would love to buy a house – they can afford the mortgage and they would save money in the long run over renting – but none of that matters if you can’t afford the deposit. In the end, it comes down to affordability and this is where we’ve seen challenges with some of the earlier gene therapies with high price tags. Payers simply did not have the budget. This is where new pricing and reimbursement models will come into play.

Pay for benefits

In terms of reimbursement and pricing, the pay for benefits model – as discussed by Dan Ollendorf – could become key. In other words, payment depends on the success of the therapy. There will be some interesting discussions on the two major reimbursement zones: those with privatized healthcare like the US and Switzerland, and those with more socialized healthcare systems, like the UK or Canada. For the former, it’s a case of getting insurance companies to do the number crunching and see if the affordability is there. In the latter, countries are working with annual budgets that are allocated to drugs.

Which system will cope best? Insurance companies do tend to find solutions when it comes to affording innovative, higher cost drugs because they have the ability to increase premiums and offset costs. For example, if they have 1,000 consumers, everyone might pay eight percent more on their premiums so that one percent can benefit from a cure. In socialized systems there’s a similar mechanism, but their tool is tax – which can be trickier to raise.

Assuming the industry wins these arguments, the question becomes, can payers afford the upfront cost?

A good example of flexibility on the manufacturer side is Gilead and their curative Hepatitis C drugs. When first launched, Sovaldi and Harvoni cost over $80,000, but 90 percent of patients who took these combination therapies for three months were cured. In developed nations and those with privatized healthcare, patients started getting treatment relatively early. But Gilead collaborated with healthcare stakeholders in developing nations to come up with a range of pricing, reimbursement and licensing solutions to significantly improve global patient access. And recently the company decided to launch authorized generic versions of sofosbuvir/velpatasvir (Epclusa) and ledipasvir/sofosbuvir (Harvoni) in the US through a newly created subsidiary, Asegua Therapeutics. The authorized generics will launch at a list price of $24,000 for the most common course of therapy.

These are very interesting and unusual strategies to take from the seller side, but promising from a global-patient access perspective. The dynamics for cell and gene therapies could be similar.

The key to lower cost

Although there are a number of variables feeding the question of affordability, there is a great deal of scope to reduce the price of these therapies by finding ways to reduce manufacturing costs. For example, autologous CAR-T cell therapies are inherently expensive to manufacture. To manufacture a single dose, several highly skilled and well-paid technicians are involved in the T cell isolation, activation, viral transduction for genetic modification, expansion, formulation, cryogenic freezing, and so on. The process is inherently expensive in its current form and introducing alternate transduction approaches,  automation and closed processing will help to reduce manufacturing costs and, in theory, price. Perhaps future therapies will have a single universal donor that provides the cells and allows companies to manufacture thousands of doses per manufacturing run. These are the kinds of strategies we will see in play over the next few years as more breakthrough treatments advance to market.

It’s a tremendous problem to have: how to maximize access to these amazing life-saving therapies. And it’s incredible to think that we only mapped the human genome in 2000, and here in 2018 we’ve got genetically modified T cells that are delivering real cures for some cancers. I sincerely believe that we can evolve further and figure out how to make CGT therapies affordable for the broader population.

For manufacturers, once they have come up with a breakthrough therapy, they must either justify the price, find creative payment models, or go back to the drawing board and find a cheaper way to produce the product, achieving the ideal market adoption zone. I’m optimistic that manufactures see the need to be flexible with payment plans, and to find ways of reducing costs. And I’m also optimistic that payers see the value of potentially curative treatments. I do, therefore, believe that we will see cell and gene therapies treating broad populations of patients in need across the globe in the near future.

Receive content, products, events as well as relevant industry updates from The Medicine Maker and its sponsors.
Stay up to date with our other newsletters and sponsors information, tailored specifically to the fields you are interested in

When you click “Subscribe” we will email you a link, which you must click to verify the email address above and activate your subscription. If you do not receive this email, please contact us at [email protected].
If you wish to unsubscribe, you can update your preferences at any point.

About the Author
Bill Milligan

SVP Corporate and Business Development, Steminent Biotherapeutics Inc.; and Chair, ISCT Business Models & COGs Committee.

Register to The Medicine Maker

Register to access our FREE online portfolio, request the magazine in print and manage your preferences.

You will benefit from:
  • Unlimited access to ALL articles
  • News, interviews & opinions from leading industry experts
  • Receive print (and PDF) copies of The Medicine Maker magazine