A landmark gene therapy to treat a rare, inherited form of blindness will cost $850,000 — a price tag so daunting that its maker will offer health insurers partial rebates if the drug doesn’t work and is seeking to pilot an installment payment option.
The drug, called Luxturna, is the realization of a long-sought scientific dream: The one-time treatment corrects a faulty gene to improve vision, allowing patients to see the stars or their parents’ faces for the first time. Only 1,000 to 2,000 people in the United States are thought to have deteriorating vision caused by this errant gene, called RPE65, but Luxturna is widely expected to be the first in a wave of cutting-edge treatments that are targeted at fixing the causes of a wide range of genetic diseases — while also raising difficult questions about how to pay for them.
The drug made by Philadelphia-based Spark Therapeutics was approved by the government in December, but the company chose not to announce the price right away. Many analysts expected the drug might be priced at $1 million. Spark chief executive Jeffrey Marrazzo said his company chose a lower price — $425,000 per eye — because insurers indicated that pricing the drug higher would trigger restrictions on which patients could get access.
The cost dilemma presented by gene therapies stems from the fact they are one-time treatments. But at the moment, no one knows exactly how long Luxturna’s effects — which do not fully restore vision — will last. Clinical data shows that the drug works at up to four years in some patients, and there is anecdotal evidence that the effects could last longer.
The treatment challenges almost all the norms in the current drug distribution and payment system. Pharmaceutical companies typically can count on payments from a pill or injection that a patient might have to take repeatedly, sometimes over a lifetime. But Luxturna’s treatment happens just once. And insurers may balk over a huge one-time bill, especially when the patient treated may not even be their customer next year, as people in the United States frequently change employers and health plans.
Logistically, the price presents a barrier. Typically, hospitals buy the drugs they administer and mark up the prices. But instead of asking a hospital to make the outlay — and then count on insurers to pay a potentially significant markup on the drug price, Spark is assuming transit, storage and handling risks and is being paid directly by the insurer.
"Here’s what I can tell you is unique about this: It is the first gene therapy to come to market, so not only have they innovated with the science, but working with us, we’ve innovated in the payment models," said Steve Miller, chief medical officer at Express Scripts Holding, which handles prescription drug benefits for employers and insurers and owns the specialty pharmacy that will handle the drug.
The treatment cost is staggering; drugs for rare diseases typically carry large premiums because of the small patient populations — and Luxturna is a one-time therapy. Spinraza, a treatment for spinal muscular atrophy, costs $750,000 for its first year and $375,000 for subsequent years.
Luxturna’s success will ultimately depend on insurers agreeing to pay for it, and Spark has laid a plan to help smooth its drug launch. As part of the price announcement, the company announced a rebate offer — a partial refund if the drug does not work in the first three months — with another possibility for a rebate at 2½ years out.
Harvard Pilgrim, a Massachusetts-based insurer with 1.2 million members, has agreed to cover the drug under those terms, and Marrazzo said Spark is in discussions with multiple other insurers.
Michael Sherman, Harvard Pilgrim’s chief medical officer, said that the back-and-forth with Spark over the arrangement has been going on for six months. It was important to Harvard Pilgrim that it avoid paying a large markup to a hospital and that the drug company share some of the risk if the drug doesn’t work. Sherman said it was important to have the longer-term component of the rebate agreement, because the value of the drug is tied in large part to the idea that its effects will be long-lasting.
Spark has submitted a proposal to the Centers for Medicare and Medicaid Services that would allow the company to set up an installment payment plan or to offer deeper rebates. Because of how government drug price reporting works, the company cannot currently offer a true money-back guarantee or installment plan without being forced to sell the drug to Medicaid at an unsustainably low price, Marrazzo said.
The company will offer financial assistance to patients, including travel support to help them and their caregivers reach treatment centers and other out-of-pocket costs. The company said that means commercially insured patients should pay nothing for the treatment, despite its $850,000 cost.
"It’s not you paying for it," Sherman said. "It’s the insurance company, which means everyone."
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