Joseph Walker, The Wall Street Journal
A Boston-area biotech says it may have a found a way to handle the expected seven-figure cost of its experimental gene therapy: paying on installment.
Bluebird Bio Inc. BLUE -0.28% is developing plans to sell its first gene-replacement therapy, for a rare inherited blood disease, on a five-year installment plan, with each annual payment contingent on its treatment’s continued effectiveness.
Bluebird, based in Cambridge, Mass., won’t say how much it plans to charge for the therapy, called LentiGlobin. But the price will be lower than $2.1 million, the amount that Bluebird estimates is the drug’s “intrinsic value” to patients, including improvements in quality and length of life, Bluebird Chief Executive Nick Leschly said in an interview.
“Whether it’s just below or considerably below [$2.1 million] is something we need to sort through,” Mr. Leschly said. The $2.1 million figure excludes other metrics like reductions in patients’ overall medical costs, the company says.
Several drug companies and health insurers have been eyeing such an approach as a solution to the high prices of emerging treatments, which could cost $1 million or more. Bluebird could be among the first to put payment by installment into effect. Typically health plans pay for a drug whether or not it helps the patient.
Mr. Leschly revealed Bluebird’s pricing strategy to investors Tuesday afternoon in a presentation at the J.P. Morgan Healthcare Conference in San Francisco.
LentiGlobin could go on sale in the European Union later this year if regulators there approve it. In the U.S., it could be cleared for sale as soon as 2020.
The therapy aims to treat beta thalassemia, a disease caused by a defective gene that hinders production of hemoglobin, which carries oxygen through the blood, and can cause severe anemia, fatigue and organ damage. In very severe cases, patients can die before the age of 30.
The disease is estimated to affect 300,000 people around the world and 1,000 in the U.S.
Today, treatment requires regular blood transfusions, which come with their own side effects that can be fatal over time. Bone-marrow transplants can also effectively cure the disease, but many patients are unable to find suitable donors. Bluebird estimates that the current standard of care in the U.S. costs about $130,000 annually, and in Europe, about €30,000 to €40,000 a year.
Bluebird’s therapy is designed to replace the defective genes with one infusion. In small studies, the drug has helped keep many patients free from blood transfusions entirely, and significantly reduced their frequency in others. But the treatment’s long-term durability is unknown.
Under Bluebird’s pricing plan, it would receive as little as 20% of the product’s total cost upfront, and put the remaining 80% “at risk” of nonpayment. Each year afterward, the insurer would pay down an additional 20%, but only if the treatment meets certain criteria, such as eliminating or reducing the number of transfusions. “We only get paid if we do what we said we’d do,” Mr. Leschly said.
Bluebird faces hurdles in implementing the payment scheme, Mr. Leschly says. In the U.S., insurance is often tied to employment, and Bluebird has to ensure it will get paid if patients change jobs or insurance carriers. The company is also concerned that it will have to share the discounts it gives to patients who receive the least benefit with Medicaid, which is entitled under federal law to receive the best price on prescription drugs.
Pharmaceutical companies have been facing increasing scrutiny of high drug prices from patients, doctors, lawmakers and health plans. In response, companies have begun experimenting with new payment models, such as offering retroactive rebates if their products fail to meet prespecified effectiveness criteria.
The rise of gene therapies, which promise a cure with just one treatment, has intensified the debate over how to pay for the drugs because a few are fast approaching and could cost $1 million or more.
Last year Spark Therapeutics Inc. priced Luxturna, its gene therapy for an inherited vision loss, at $850,000. Spark has agreed to rebate some of the price to insurers, including Harvard Pilgrim Health Care in Wellesley, Mass., if the treatment doesn’t work as intended. Spark has also asked the Centers for Medicare and Medicaid Services to allow the company to pilot an installment payment plan that would be exempt from Medicaid best-price rules.
Novartis AG’s gene therapy for a genetic muscle disorder known as spinal muscular atrophy could gain U.S. approval later this year.
“With gene therapy, you’re going to have drugs routinely priced at over $1 million, and it’s really going to push all of us to think in a different way,” says Steve Miller, chief clinical officer at Cigna Corp.
Outcomes-based payments spread over time may best ensure patients get these drugs without causing a sudden financial shock to the health-care system, says Michael Sherman, chief medical officer at Harvard Pilgrim in Wellesley, Mass. “It’s the best model I know of when you have high-cost treatments of unknown durability,” he said in an interview.
Harvard Pilgrim is talking with Bluebird and other gene-therapy developers, including Novartis, about entering into such contracts once their drugs come on the U.S. market, Dr. Sherman said.
Write to Joseph Walker at firstname.lastname@example.org