Science, success and paying for it

The New England Journal of Medicine just published a paper on gene therapy for hemophilia-B. The results look promising:

This was a safety trial and not a full phase 3 trial so there is still a long period between promising early results which these are and a treatment going on the market.

Hemophilia is an expensive disease. We’ve talked about it before. Maintenance medications can easily run six figures and a bad bleed can be a million dollar event without too much going wrong.

If the treatment eventually goes through FDA approval, it looks like it will be a game changer for individuals with at least some types of hemophilia. And that leads to the question of pricing. A cure should be worth more than the average year of treatment. The key questions is how much more? Is a cure worth 2 years of normal treatment? Is it worth 20 years of normal treatment costs?

Whatever number that the payers actually pay (let’s ignore list price as that is a fantasy only slightly richer than the letters section of Huster…), it is going to be a big number.

Insurers and other payers will need to figure out how to finance and pay for a really costly but socially cost efficient cure. It is a complex challenge as the current regime of paying for treatments creates two decision flows. The first is the simple one. If any individual is projected to cost the particular insurer more than the cost of the cure in a reasonably short time frame, paying for the cure is, to the payer, the easy thing to do. So people who are highly likely to not churn and who are highly likely to be a costly outlier will get approved.

People who are either likely to churn to another insurer or have low annual costs are far less likely to be readily approved on a pure cost effectiveness ground. Hurdles will be thrown up, pre-authorizations will be required and the pathway to approval will be a random and idiosyncratic obstacle course. Insurers will fear that if they pay for a cure then the patient gets all the benefit as soon as they change insurers. Insurers will also restrict their networks to avoid including the providers and hospitals where these types of treatments can be offered. It will be a race to the bottom to avoid a large expenditure that can not be recaptured by lower future claims.

Some very smart people at Duke-Margolis are thinking about this problem:

vA range of approaches has been proposed to alleviate the short-term budgetary pressures created by one-time payments for curative therapies, as noted by the ICER’s White Paper: Gene Therapy, Tapestry Network’s series of discussions with health care stakeholders, IMS Health’s White Paper on Cell and Gene Therapies and Alliance for Regenerative Medicine’s new payment and financing models for curative regenerative medicines. Models include new financing arrangements, such as providing a loan mechanism for certain payers (for example, states and smaller insurance companies) or providing a contractual annuitization mechanism to commit payers to make payments over time. These financing arrangements could be encouraged and augmented by government funding, such as government bonds or subsidies (for example, reinsurance), and publicly supported efforts to promote risk pooling across payers that face uncertainty from high costs of gene therapy treatments.

These financing arrangements are potentially helpful in addressing budgetary pressures.

I like the concept of residual bonds where future insurers pay an annual fee back to the insurer that paid for the cure. But this is a challenge. The science looks promising and now the delivery and financing system needs to be worked on.

16 replies
  1. 1
    MomSense says:

    This is interesting. I wonder if they are working something similar for VWD – type 2 and 3 anyway.

  2. 2
  3. 3

    So insurance companies won’t pay for it because … because their customers might, having been cured, adopt less expensive insurance.

    David, do you have any idea how this will look to the general public?

  4. 4
    justawriter says:

    Of course pricing it at the cost of production with reasonable allowances for profits and future research is soshulism.

  5. 5
    daveNYC says:

    @Raven Onthill: Depends on how cute the patient is.

  6. 6
    John Harrold says:

    @Raven Onthill: welcome to my world David. I’ll old enough to remember when pharmaceutical companies wouldn’t cure things because of similar ridiculous reasoning.

  7. 7
    Capri says:

    . I’m familiar with cystic fibrosis, another extremely costly disease. Most if not all states have programs outside the normal insurance channels. Perhaps hemophilia and other gene therapies can be lumped in. Particularly since once it is proven safe and effective it will be used when the condition is diagnosed, which will be in early childhood.

  8. 8
    Beth in VA says:

    I don’t see why this has to be up to normal market principles. If we pay billions to kill terrorists and make unused nukes, we can pay for this. It’s an immoral system, and debating the cost seems so gross to me.

  9. 9
    WaterGirl says:

    @MomSense: If they are not already, surely they will after these results. Crossing my fingers.

  10. 10
    cer says:

    This would not be a problem if we had a single payer system, obviously. The full social cost would pertain to the single payer, and the decision would be straightforward and fair for everyone.

  11. 11
    But her emails!!! says:

    The solution is pretty easy. If some entity, oh let’s say the US government, funded a basic level of healthcare that included treatment for hemophilia, then the issue of getting cured and picking up cheaper insurance would no longer be an issue.

  12. 12
    Mark says:

    Medical tourism. Make the treatment expensive enough, somebody in another country will beat your price. Maybe someone who doesn’t care about your patent laws. North Korea can build nukes; this technology might be more profitable for them.

  13. 13
    gvg says:

    @Raven Onthill: I was thinking, patient having been cured, dad’s job say change states which means change insurers which means original insurer won’t get the cost savings that they should have. it is possible that such a childs family will just choose a cheaper insurance but I have to doubt it. I think it would take awhile for them to think the cure was totally safe plus less exspensive and fewer bleeds doesn’t seem to add up to no bleeds and cheap. I can tell you I did not like my employer dropping avmed because they were totally ok while I had chemo but it wasn’t up to me and I have no idea why the state did it. It could even have been Avmed choosing to leave the market.
    The idea of insurers getting reimbursed for cures seems like a good idea. fair.

  14. 14
    Minstrel Michael says:

    I think I remember something about the original renal disease legislation. Apparently when they wrote the appropriation part, they calculated something like X dollars will pay for each patient’s dialysis for a year, and Y people die of kidney failure every year, so they funded the program for X times Y. And of course the program ran out of money in the middle of the second year, because Congress forgot that the people whose lives were saved in the first year would still need (and qualify for) treatment in the out-years. Kidney transplants help some, but there’s never enough kidneys to go around, and a donated kidney seldom lasts more than ten years, and major surgery’s expensive too. And it occurs to me I have no idea how ACA impacted any of this. But it seems to me the social utility of an actual cure is significant, and there should definitely be incentives for it.

  15. 15
    stinger says:

    Informative and thought-provoking, David.

  16. 16
    Snoopt says:

    Or, you know, we could have universal health care.

    Naw…I don’t want to pay for people whose poor decisions gave them haemophilia…

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