As new cell and gene therapies hit the market, their life-saving potential is clear – but who pays for them is less obvious. A recent survey of pharma experts revealed divided opinions on the subject. Abi Millar explores why today’s pricing and reimbursement models will not suffice in tomorrow’s market.
“When you have precision medicine, you have fewer and fewer patients to treat, because the disease is well characterised and you know exactly what works for each patient,” explains Walter Colasante, vice president in the Life Sciences Practice at Charles River Associates (CRA). “This is great, because you don’t have wastage, but at the same time the volume is tiny. If you cannot increase the volume, the only lever you have to increase your turnover is by increasing price.”
Historically, the pharma industry has been driven by the search for blockbuster drugs. If your drug has a huge potential market – boosted by glowing physician reviews – then the R&D investment will pay off without needing to charge too much.
“With these new therapies, you can’t do that, so the existing business model doesn’t work,” says Colasante. “The model will need to change in terms of production, distribution, marketing and pricing, and it’s not clear what we do next.”
The vast majority of respondents (93%) agreed that traditional pricing models can’t be applied to many new gene/cell therapies, and that the industry will need to develop new models quickly. Beyond that, however, there was little consensus about the best approach to take.
“Our questions were triggered through discussions with clients and payers, and through reading different publications – all have different views,” says Colasante. “We are in a chaotic situation, as we are far from agreement on the ‘right’ price of innovative medicine.”
The issue, in essence, is how the market can set a fair price for drugs, which addresses both the sustainability of the research industry and the needs of healthcare systems and patients. Too high a price, and healthcare systems will simply be unable to afford a drug, in turn denying patients access to life-saving medicines. Too low a price, however, and the research industry will flounder.
“In the short term, industry would survive, but over the long term people won’t invest anymore, and 20 years down the line people will ask why we don’t have innovative gene therarapies,” says Colasante. “I would not be happy to be a PhD student who has a great idea to solve a disease, but who knows they will not get funding or will struggle to make it to market.”
Of the survey respondents, 57% agreed that selling drugs at a low price, therefore maximising access to all patients, would put the long-term viability of gene therapy at risk. Just 30% felt that EU health systems could cope with gene/cell therapy pricing, even if funds were reassigned and contracts negotiated.
“It’s all about who pays for healthcare and who gets the treatment,” says Colasante. “Volume medicine is over – generics and biosimilar are taking these markets – and everyone expects innovation for cheap, but this is a short-term view. Everything we’re facing now is because people come up with simple answers to complicated problems.”
Pitting patients against big pharma
According a group called the Campaign for Sustainable Rx Pricing: “While science behind Kymriah is revolutionary, the business decision to price it at nearly half a million dollars per treatment is not. Kymriah’s price tag is simply a continuation of the pattern of sky-high launch prices that spins further out of control each year.”
It’s an emotive issue, as pricing a drug like Kymriah essentially asks us to place a price on the value of life.
“There’s a belief that there’s a linear relationship between price and value,” says Colasante. “What we’ve seen with many new drugs is that they’ve been denied access by many countries, and therefore the paradigm has been shifting so that price and value aren’t connected.”
He adds that, while governments want to save money, they also want to privilege access to medicine. And while they want to invest in R&D, they can’t always afford to do so. This creates a world marked by winners and losers, in which big pharma is pitted against patients.
“You have such a diversity of opinions on the subject, and people think the answer is simple,” he says. “But, when you look back you say, I didn’t think of that. As a consultant I can see different sides because I deal with health professionals, payers and patients, and while each of them are correct, the system won’t let us find an answer that works for all of them.”
With regard what might actually work, 83% of the Bio-Europe attendees felt that engaging third parties (e.g. charities, insurers and financial institutions) could solve the funding issues hampering access. Colasante too recommends something of this kind. He feels that pursuing partnerships with third parties pre-launch could drive a holistic approach to pricing new medicines.
He also thinks that an international fund might be one way forward. This would be similar to the Cancer Drugs Fund initiated by David Cameron, albeit on a bigger scale and better thought through.
“This would be an international fund where different organisations ranging from charities, to national systems to pharma industries can contribute, giving the fund sufficient money to deal with some of the costs of gene therapy. If you have a few people with good intentions it’s not impossible,” he says.
Broadly, though, he is concerned about the lack of foresight being shown on these issues. He feels there is a tendency to seek knee-jerk answers to one part of the problem, rather than addressing the system as a whole. This could lead to ill-advised new models being implemented, long before a true analysis of their impacts can be completed.
“A sustainable approach would require stakeholders to come up with new options beyond the simple fix, dealing with the complexity of this situation,” he says.
This article appears in the July 2018 edition of Pharma Technology Focus