STRATEGY
Issue Statement
Background
In 2013, the FDA approved Sovaldi, a groundbreaking cure for the once incurable disease, chronic hepatitis C. Sovaldi’s launch broke blockbuster drug barriers, bringing in $2.27 billion in 2013 Q1 sales alone.1 However, despite its heralding as a massive shift in the treatment paradigm of hepatitis C, by early 2015, the drug’s manufacturer, Gilead, was facing massive public backlash over its $1,000 a pill price tag – total treatment cost of $84,000.2 This outrage quickly made Gilead the face of unsustainable drug pricing, inviting increased scrutiny from policymakers, payers, and advocacy groups alike. Despite its potential curative and societal benefits, payers responded to its high upfront costs by effectively rationing care through the use of strict eligibility criteria. Even as other competitive drugs entered the marketplace and prices fell, Sovaldi still remained cost prohibitive to many, particularly to public payers. For instance, in 2018, the cost to treat all of Louisiana’s Medicaid chronic hepatitis C patients would have been $166 million.3
When its price was compared to the federal government’s $10 million value of a statistical life or the lifetime costs of chronic hepatitis C, the then onetime $84,000 cost seemed like a bargain.4,5 Unfortunately, despite its potential cost-effectiveness and savings, the large upfront costs were unpalatable and could quickly consume a health plan’s budget. An important factor in cost-effectiveness is the time horizon – or when a treatment become cost-effective. For Sovaldi, its time horizon was decades. Sovaldi’s ultimate savings for payers came largely from avoiding the treatment costs of advanced liver disease and transplants. Unfortunately, because these savings may not be immediately realized, a beneficiary would have to remain on a plan for decades before any savings were captured. This financial predicament isn’t unique to Sovaldi and has now become an even bigger crisis for the newer and more costly emerging drug cures. Unfortunately, the question of “Who pays for the cure?” is only further complicated by how most Americans get their insurance.
Where Americans get their healthcare
Around 155 million Americans have employer-sponsored health insurance.6 Coupled with the rising number of self-insured employers (91% of employers over 5,000 employees), means employers are becoming increasingly interested in who’s paying for these cures.7 The astronomical costs of newer cures in the form of cell and gene therapies (CGT) have been of particular concern. Spark Therapeutics’ Luxturna, a treatment for a rare genetic form of vision loss, was recently priced at $850,000. This was shortly followed by Novartis’s latest CRISPR gene therapy, Zolgensma, which costs over $2 million.8 And finally, not to be outdone, Bluebird Bio’s FDA approved treatment for cerebral adrenoleukodystrophy claimed the title (for now) of, “world’s most expensive drug” at $3 million.9
A single CGT treatment could therefore wipe out an employer’s heal plan’s budget. Like the large payers, self-insured employers are unlikely to see the cost savings of expensive curative treatments, especially when the median tenure of US workers is only 4.1 years.10 With over a dozen currently approved CGTs and many more to come, it is clear that the traditional fee for service payment model just will not work.11 So far, employers and payers have attempted to stave off the crisis by restricting who can receive the drug, causing potentially lifesaving and changing curative treatments to remain barred behind walls of eligibility criteria. The responsible biotechnology companies are for their part aware of these market concerns and are open to new payment methods that would increase access.12 In response to suggestions of new subscription payment methods, a spokesperson for Novartis’s subsidiary AveXis, that developed Zolgensma, said they recognize that “innovative therapies like Zolgensma require innovative solutions for access.” Spark Therapeutics’ spokesperson offered a similar response, in that they are continuously searching for “new ways to enhance patient access.”12 So, while the headline worthiness has faded with each subsequent crowning of the “world’s most expensive drug,” payers, drugmakers, and patients are all scrambling to decide who will foot the bill.13
Breaking the budget
CGTs are not limited to rare diseases. There are currently two approved CGTs for sickle cell anemia, with an estimated 58,000 eligible US patient candidates.14 At $1.85 million per treatment, administering the treatment to just 7% of eligible patients would result in an average one-year budget impact of $30 million for every state Medicaid program.15,9 While individuals with chronic diseases may be less likely to be working, with 1 in 10 Americans with a rare disease and 1 in 3 Americans with at least 1 chronic disease, there remains a significant exposure to employers for potential future CGTs.16,17
As budgets and financial forecasts have kept payers and drugmakers preoccupied, chronic disease patients are still searching for a way to access these life changing treatments. Rare disease and CGT access is an important health equity concern for all and is a considerable factor in any healthcare company’s social performance. As evidenced by the issue statement, patients are not the only stakeholder in need. Drugmakers and payers alike are also in need of an innovative answer to the question, “Who pays for the cure?” This need represents a propitious strategic opportunity for innovative payment platforms and strategies to replace the incompatible fee-for-service model.
References
[1] Staton T. It’s official: Gilead’s Sovaldi zooms past previous records with fastest-ever drug launch. Fiercepharma.com. Published April 22, 2014. Accessed February 26, 2023. https://www.fiercepharma.com/marketing/it-s-official-gilead-s-sovaldi-zooms-past-previous-records-fastest-ever-drug-launch
[2] Fegraus L, Ross M. Sovaldi, Harvoni, And Why It’s Different This Time. Health Affairs. Published online November 21, 2014. doi:10.1377
[3] Dangi-Garimella S. Louisiana Gets Creative to Improve Patient Access to Costly Hepatitis C Treatment. Ajmc.com. Published July 18, 2018. Accessed February 26, 2023. https://www.ajmc.com/view/louisiana-gets-creative-to-improve-patient-access-to-costly-hepatitis-c-treatment
[4] Linas BP, Nolen S. A Guide to the Economics of Hepatitis C Virus Cure in 2017. Infect Dis Clin North Am. 2018;32(2):447-459. doi:10.1016/j.idc.2018.02.013
[5] Colmer J. What is the meaning of (statistical) life? Benefit–cost analysis in the time of COVID-19. Oxford Review of Economic Policy. 2020;graa022. Published 2020 Aug 29. doi:10.1093/oxrep/graa022
[6] Kaiser Family Foundation. 2021 Employer Health Benefits Survey. Kff.org. Published November 10, 2021. Accessed February 26, 2023. https://www.kff.org/report-section/ehbs-2021-summary-of-findings/
[7] Department of Labor. 2019, January 7. Report to Congress – Annual Report on self-insured Group Health Plans – dol. DOL. Retrieved February 26, 2023, from https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-report-on-self-insured-group-health-plans-2022.pdf
[8] Irvine A. Paying for CRISPR Cures: The Economics of Genetic Therapies. Innovativegenomics.org. Published December 11, 2019. Accessed February 26, 2023. https://innovativegenomics.org/news/paying-for-crispr-cures/
[9] Owens C. Multimillion-dollar gene therapies offer hope to patients, but huge cost concerns. Axios. https://www.axios.com/2022/09/26/gene-therapies-drug-prices-cures. Published September 26, 2022. Accessed April 8, 2023.
[10] Bureau of Labor Statistics. Employee tenure in 2022 . Bureau of Labor Statistics. https://www.bls.gov/news.release/pdf/tenure.pdf. Published 2022. Accessed April 9, 2023.
[11] Cousin M. Multi-million-dollar therapies may alter payment models. Deloitte United States. https://www2.deloitte.com/us/en/blog/health-care-blog/2022/multi-million-dollar-therapies-may-alter-payment-models.html. Published October 4, 2022. Accessed April 8, 2023.
[12] West B. Insurers pitch new ways to pay for million-dollar therapies. The Wall Street Journal. https://www.wsj.com/articles/insurers-pitch-new-ways-to-pay-for-million-dollar-therapies-11567677600. Published September 5, 2019. Accessed April 8, 2023.
[13] Parrish M. Multimillion-dollar therapies are changing how payers foot the bill. PharmaVoice. https://www.pharmavoice.com/news/gene-therapy-cost-payment-OHE/643659/. Published February 28, 2023. Accessed April 8, 2023.
[14] CVS. Gene therapy pipeline 3Q 2022–1Q 2027 – CVS Health payor solutions. CVS Health Payer Solutions. https://payorsolutions.cvshealth.com/sites/default/files/q3-2022-gene-therapy-treatments-approval-timelines.pdf. Published 2022. Accessed April 11, 2023.
[15] DeMartino P, Haag MB, Hersh AR, Caughey AB, Roth JA. A Budget Impact Analysis of Gene Therapy for Sickle Cell Disease: The Medicaid Perspective. JAMA Pediatr. 2021;175(6):617–623. doi:10.1001/jamapediatrics.2020.7140
[16] George Washington Health Policy Institute. Workers affected by chronic conditions: How can workplace policies and programs help? George Washington. https://hpi.georgetown.edu/workplace/. Published February 13, 2019. Accessed April 11, 2023.
[17] Rare Diseases. Rare disease day: Frequently asked questions. Rare Diseases.org. https://rarediseases.org/wp-content/uploads/2019/01/RDD-FAQ-2019.pdf. Published 2019. Accessed April 11, 2023.
