Deep Tech Opportunity: It’s time to overhaul regulation and reim­burse­ment for one-and-done treatments

In last week’s report excerpt we put a spotlight on the third-generation cell and gene therapies that are offering prospective cures for previously intractable diseases. Developers and manu­fac­turers, with high R&D and manu­fac­turing costs, have put seemingly eye-popping price tags on many of these drugs. For example, Orchard Ther­a­peu­tics’ drug Lenmeldy, an infusion of genetically modified stem cells approved for the treatment of the rare neuro­log­ical disease metachro­matic leukody­s­trophy (MLD), was priced at $4.25 million, a world record. Hemgenix, CSL Behring’s gene therapy for hemophilia B, costs $3.5 million, while Zynteglo, Bluebird Bio’s gene therapy for beta thalassemia, costs $2.8 million.

But before you spit out your coffee, consider the bigger economic picture. The standard therapy for hemophilia B includes regular prophy­lactic infusions of clotting factor IX, at an annual cost of $700,000 to $800,000 per patient and a lifetime cost of $21 million to $23 million. Three years after their single-dose Hemgenix treatments, 94 percent of patients no longer needed prophy­lactic treatment. That makes the CSL Behring therapy look like a real bargain.

Here’s the challenge: payers such as insurance companies, self-insured employers, and governments have figured out how to cover the costs of most chronic treatments, but they’re having trouble digesting the high upfront expense of one-and-done, curative treatments. More specif­i­cally, they know that individuals often change insurance providers, so they’re incen­tivized to reject coverage of curative treatments, in the hope that the patients who need them will simply leave and reduce their insurers’ costs. The mismatch creates access barriers for patients and unpre­dictable economics for manu­fac­turers. ​“The problem has been the recal­ci­trance of payers to adapt — of regulators to say to insurers, ​‘You have to cover these,’ or of insurers to put in a business model that makes sense, like a payment plan that is more spread out,” says DCVC Bio Managing Partner Dr. Kiersten Stead.

What kind of business model would make sense? Some manu­fac­turers already offer outcomes-based agreements under which payers and patients receive a rebate if the therapy isn’t as effective as hoped. These arrange­ments are intended to shift some of the risk away from payers, but they require rigorous tracking, and they delay rather than lower high upfront payments for patients who do respond. In short, this model is not working. 

We’re more attracted to several other innovative proposals. One is a subscrip­tion model where payers would pay a fixed annual fee to access a therapy for a defined patient population. Quantile Health, a new datascience company we admire, has introduced a Netflix-like reim­burse­ment platform in which payers pay a fixed cost reflecting the underlying risk of their patient population, and manu­fac­turers agree to provide access to treatments to anyone in these populations. Another model is amor­ti­za­tion, which would allow payers to spread the costs of expensive medicines across many years.

All of these models would require closer collab­o­ra­tion among regulators, insurers, and manu­fac­turers to ensure that ground­breaking treatments are accessible. ​“There’s got to be some sort of insti­tu­tion­al­ized or regulated cooperation to make sure that one-and-dones get covered,” Stead says, ​“because right now we’re on a path to incentivize the U.S. healthcare system to prioritize chronic treatments even when curative treatments are available.”