Pricing Cures For Sickle Cell Disease: Sen. Cassidy Weighs In
Executive Summary
Price decisions based on straight calculation of medical costs avoided may overestimate value of a cure, Cassidy warns.
The considerations that manufacturers use in setting prices for curative treatments like gene therapy for sickle cell disease must go beyond a calculation of medical costs avoided and take into account factors such as existing co-morbidities, Sen. Bill Cassidy, R-La., advised at a policy conference in Washington DC Feb. 12.
Such an exercise would be crucial to establishing a “reasonable opening cost” for treatment, he told the conference, which was hosted by the MIT Center for Biomedical Innovation New Drug Development Paradigm (NEWDIGS) Initiative. The conference was part of the initiative’s financing and reimbursement of cures in the US (FoCUS) project.
Cassidy has become an influential voice in the drug pricing debate on Capitol Hill and sits on both Senate committees with key jurisdiction over the issue – the Finance and Health, Education, Labor and Pensions committees. His speech to the conference emphasized the importance of setting a reasonable opening cost.
But he also suggested that should be one part of a three-pronged approach to paying for cures (while ensuring access and rewarding innovation). The other two elements are value-based purchasing and “socializing” the costs of therapies.
He used gene therapy for sickle cell anemia as a case study for how to set an appropriate price for a cure. bluebird bio Inc.’s gene therapy Lentiglobin (lentiviral beta-globin gene transfer) is in late stage development for sickle cell disease and may be approved in the next 16 months.
The company has said Lentiglobin’s list price will be below $2.1m and that it is working on an installment-type payment model for the therapy. (Also see "J.P. Morgan Notebook Day 2: Biogen, GSK, Bluebird, Roche, Amgen, Biohaven, Lilly And FDA's Gottlieb" - Scrip, 9 Jan, 2019.)
For sickle cell disease, “we know the avoidable costs. We know somebody by age 45, it’s estimated, will consume about $1m worth of [medical] costs,” Cassidy said. “So should you charge $1m [for a cure]? Should you charge $2m? I think we need to go into that a little more deeply.”
The only way gene therapy would completely avoid the $1m in expected medical costs caused by sickle cell disease is “if you give it to the human being when they are either in utero or right after their birth,” Cassidy said.
Cassidy pointed out that the effects of sickle cell disease, which include congestive heart failure, joint disease and dementia, can be well underway by the time a patient is an adult. So if patients are treated after such co-morbidities have developed, the gene therapy might correct sickle cells but would not address the other serious problems caused by the condition.
“The only way” gene therapy would completely avoid the $1m in expected medical costs caused by sickle cell disease is “if you give it to the human being when they are either in utero or right after their birth,” Cassidy pointed out.
“If you give it to them when they are 45 years old, they already have multi-infarct dementia or congestive heart failure or the necrotizing bone disease. So you can make their cells no longer sickle. But they will die a month later from congestive heart failure because that is not what is currently reversible.”
You “can say this is theoretical. It is not,” he asserted. In setting prices, there “needs to be a robust understanding of the nuances of the disease.”
Cassidy agreed there is a balance to be struck between generating an adequate return on investment and finding a price that payers can manage. But the latter is particularly important for sickle cell disease because treatment is expected to be covered primarily by Medicaid and the exchange plans, he suggested.
“We do push to encourage risk taking” among drug developers and “reward that which is going to make people’s lives better,” he said. “But we also have to wonder whether society can really afford to treat the 100,000 [US sickle cell patients] times $1m, understanding that some of these patients will have irreversible disease related to the sequelae of sickle cell anemia because curing their sickle cell disease will not cure that sequelae.”
That understanding should also inform any value-based contracting between manufacturers and payers for high-cost curative therapies, Cassidy added.
“If we give this life-changing gene therapy to someone [with sickle cell disease] that already has necrosis of the hips because of infarcts to the joints, there should be some diminution of payment because we realize we’ve not really avoided the cost because now we have to replace his hips.”
Cassidy is a proponent of value-based pricing and recently introduced legislation that would facilitate their development by removing some of the regulatory obstacles to such agreements. (Also see " Value-Based Contracting Bill Aims For Bipartisan Political Support" - Pink Sheet, 3 Feb, 2019.)
‘Socializing’ Costs As Broadly As Possible
As to “socializing” costs, Cassidy said, “my bias is to socialize as broadly as possible.” However, he cautioned, “I’m going to tell you my thoughts, so you can see the inaccuracy thereof and you can bring your thoughts to me. Then I can ultimately translate them into the legislation that can affect change.”
He discussed several different approaches to spreading the burden of costs, including:
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Establishing a national fund to pay for high-cost treatments;
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Use of state based high-risk pools; and
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Carving out treatment of a particular condition and establishing a federal program to pay for it.
The national fund idea is inspired by the National Vaccine Injury Compensation Program, which is funded by an excise tax on vaccines, and can be tapped to pay for the medical care of adverse reactions to vaccinations.
“What if we put an excise tax on every prescription that would then go into a fund that would pay for every high cost treatment?” he asked. However, one drawback to this approach is that “this could set a ceiling on the amount available to pay for these high-cost treatments” and “that’s why we truly need to think through these paradigms.”
As to high risk pools, he noted the state of Maine has established a funding stream for treatment of certain predetermined high-cost conditions that can provide supplemental assistance to private insurance coverage.
“I like that because there’s still a little bit of skin in the game for insurance companies,” which can motivate them to ensure patients have access to “a center of excellence where they can get the treatment wherever you have the best possible benefit,” he pointed out.
A government reimbursement scheme for certain carved out conditions could mean “if you have sickle cell anemia, the taxpayer is going to pay for it,” Cassidy explained. One downside is that payments could end up being too small because of the “monopsony power of the government,” he acknowledged.
But on the other hand, there could be rules in place to ensure a level of payment and "we would end up paying for that which is of minimal benefit or paying too much for that which is of marginal benefit.”
Defer Payments, Increase Costs
No matter how cost is socialized, “I do think there will be a role for alternative financing mechanisms,” Cassidy stated. One example is the “Netflix” subscription model being implemented by the Louisiana Medicaid program, he noted. (Also see "Louisiana ‘Netflix’ Model For Hepatitis C Drugs Caps Spending At $35m Per Year" - Pink Sheet, 12 Jan, 2019.)
Cassidy endorsed the Netflix approach in a recent JAMA article co-authored with Memorial Sloan Kettering’s Peter Bach and NEWDIGS strategic director Mark Trushein. The state of Washington is seeking approval from the Centers for Medicare and Medicaid Services for a similar program.
The benefit of the approach is that cost can be amortized, Cassidy said. But the downside may be that “depending on the model, it may allow higher prices to be charged than otherwise would be charged and/or [it would] back load expenses, which really delays payment.”
The mortgage model, in which payments are spread out over a period of time, has “the same pros and cons,” he observed.
It may work with conditions such as cystic fibrosis, hepatitis C or sickle cell disease “where you have a lot of good historical data on what it would cost.” But “again it would defer payments, may inflate costs, and the unanswered question is the basis for calculating your savings” from future medical costs as a result of treatment.