Is this $2 million gene therapy drug priced “fairly”?

June 5th, 2019

The approval of a new gene therapy to treat spinal muscular atrophy has created a hot debate in the health policy world about whether or not the drug’s $2.1 million price tag — the highest for any drug yet — is a fair price. 

Spinal muscular atrophy (SMA) is a rare genetic disease that is often fatal. The new Novartis drug, Zolgensma, is a gene therapy that targets the cause of SMA in children under age 2 and appears to permanently cure the disease. Given that this is the first cure for SMA and can save the lives of many children, many patient advocates have no doubt that Zolgensma is worth the high price. 

“To me, you cannot put a price on your child’s life,” said Tina Anderson, parent of a child with SMA.

This is the same logic that has been used for Kymriah, a recently-approved CAR-T therapy for aggressive childhood leukemia. As pharma advocate John LaMattina, director at Ligand Pharmaceuticals, wrote in Forbes, the price of $475,000 is fair because a child’s value to society and future economic contributions would be much, much more.  

“Kymriah restores the life of a child or teenager, which is invaluable to his or her parents and family. In addition, the contributions that a person makes to society over the course of a lifetime are quite meaningful. How do we value that? In the U.K., using a calculation called “Quality-Adjusted Life Years” (QALY), they use a value of $50,000 per QALY. Using this methodology, one could argue that a drug that restores the life of a child could be worth $50,000/year for the rest of that patient’s life… Against this backdrop, Novartis’ price of $475,000 doesn’t seem unreasonable.”

The Institute for Clinical and Economic Review, which conducts cost-effectiveness analyses on medications, concurred that Zolgensma is cost-effective when calculating quality-adjusted life years gained. 

Value to patients is arguably the most important criterium when determining a price for a drug — but it’s not the only thing we should be considering. If we use the logic of “life-saving value,” then we should be pricing all life-sustaining or life-saving medications at $50,000 a year. Why not raise the price of insulin from $300 to $960 per vial? Why not raise the price of penicillin or other antibiotics from $15 to $450,000? If someone with severe dehydration needs an IV, that should cost $1 million too! Isn’t someone’s life worth that much?

We can’t only take into consideration the value of drugs to patients, but also how much the drug cost to develop, how much it costs to manufacture, and how much patients can feasibly be asked to pay. For Zolegensma, these other criteria do not reflect a multi-million dollar value.

As Dr. Peter Bach, director of the Drug Pricing Lab at Memorial Sloan Kettering Cancer Center in New York City, writes in STAT, “Manufacturing a dose of Zolgensma may cost a lot but it doesn’t cost millions. Its research costs tally to a few hundred million at most, money Novartis will earn back in a handful of months as peak sales should reach $2.6 billion a year.”

So where does the $2.1 million price come from? It’s the price the market will bear, based on previous highly-priced SMA therapies and priming from industry. One dose of Zolgensma may be “cheap” compared to multiple doses of existing SMA drug Spinraza, making it seem cost-effective. But drugs like Spinraza have not proven to be cost-effective themselves based on value to patients. What results is an upward spiral of pricing new drugs based on their “cost-effectiveness” compared to already over-priced drugs.

As Bach writes, Novartis has also made Zolgensma seem like a bargain by “priming” the health policy space with estimates of much higher prices. One-time gene therapies like Zolgensma have no real equivalent from which to base prices, so by mentioning the idea of multi-million dollar therapies, industry leaders have “anchored” our thinking to that level. “We all got anchored, then we got a discount, and now there actually is a gene therapy on the market with a multimillion-dollar price tag,” writes Bach. 

Even neutral analysts like ICER president Steven Pearce were swayed by this ploy. “Insurers were going to cover Zolgensma no matter the price, and Novartis has spoken publicly about considering prices that approached $5 million. It is a positive outcome for patients and the entire health system that Novartis instead chose to price Zolgensma at a level that more fairly aligns with the benefits for these children and their families,” said Pearce in a press release

Zolgensma may be a godsend for patients with SMA and their families, but what does the price mean for the health care system overall? The $2 million price sets the stage for other gene therapies to be priced at a similar or higher level. While relatively few patients are buying these drugs, the total cost gets passed down to everyone, through higher insurance premiums and greater health care spending. For example, increases in prescription drug spending due to new expensive therapies has led to growing Medicaid spending, which states must pay for by either raising taxes or cutting other sources of spending. With multi-million dollar drugs as the new normal, our health care spending will soon reach a breaking point — and all of us will pay that price.