"Our insurance system is not designed for one-time, very large payments," Michael Sherman, chief medical officer for the New England-based insurer Harvard Pilgrim Health Care, told attendees at a recent gene therapy conference in Washington, D.C. A key question in valuing Zolgensma is whether benefits shown to date will endure. Novartis justifies that unprecedented cost with Zolgensma's life-saving benefit. I authored the Washington Post bestseller, "Mistreated: Why We Think We're Getting Good Healthcare--And Why We're Usually Wrong," and am a board-certified plastic and reconstructive surgeon, a clinical professor of surgery at Stanford University, and on the faculty of the Stanford Graduate School of Business. "A therapy that can cure disease in a single treatment isn't a unit of drug," wrote former FDA Commissioner Scott Gottlieb in a recent op-ed. Babies born with a severe form of a rare genetic condition known as spinal muscular atrophy almost always die before their second birthday. Novartis estimates the current treatable patient population to be roughly 1,100 in the U.S. Until recently, no approved treatments were available for SMA. In principle, addressing the genetic cause of the disease should reverse the progressive muscle weakening seen with SMA. Twitter. Powered and implemented by Interactive Data Managed Solutions. Novartis intends for that price to be paid in installments of $425,000 a year for five years. Opinions expressed by Forbes Contributors are their own. The United States doesn’t overtly ration medical care, unlike other nations. Here's what we still don't know. However, the criteria currently guiding drug-company R&D decisions are based on profits, not on moral, ethical or societal considerations. If you have a severe bleeding event, you can absolutely see the cost per patient climb above $1 million for a patient in any given year. With regulators, drugmakers and payers pulling in similar directions, real-world evidence is likely to become a more central feature of drug development despite its many shortcomings. But the Swiss drug giant was really only after the firm’s technology, which transfers DNA into cells through viral vectors. But Zolgensma, with its $2 million per-dose price tag, is a harbinger of rationing to come. Spinraza can help babies survive and improve motor function, but is not a cure. It's approved to treat SMA Type 1, as well as later-onset forms. Doctors and hospitals contribute to the economic challenges patients face, as well. By a measure of cost per life-years gained, ICER judges an appropriate value-based price for Zolgensma to be between $1.2 million and $2.1 million. Germany funded the development of Pfizer’s COVID vaccine—not U.S.’s Operation Warp Speed, Parler is the new Twitter for conservatives. Subscribe to BioPharma Dive: Topics covered: Pharma, biotech, FDA, gene therapy, clinical trials, drug pricing and much more. They say Zolgensma is merely the latest example of unethical and monopolistic pricing strategies among drug manufacturers. A treatment for SMA, as an example, checks both boxes. Shining A Light On Medicine’s Unacknowledged, Unethical Practices. Quotes delayed at least 15 minutes. Roche plans to file the drug for approval later this year. Zolgensma, as the treatment is called, is only the second gene therapy for an inherited disorder to be cleared for commercial use in the U.S. Its keenly awaited approval marks another milestone for a fast-moving field, and validates the decision by Novartis last year to acquire its developer, the biotech company AveXis, for $8.7 billion. In today’s $3.5 trillion healthcare industry, which accounts for close to 20% of the U.S. GDP, such a rapid escalation in spending would force medical providers to limit patient access. “You cannot put a price on your child’s life,” said Tina Anderson, whose son will soon celebrate his fourth birthday thanks to Novartis. I’m passionate about transforming the American healthcare system and helping people understand the consequences of their medical decisions. Gene therapies for hemophilia, muscular dystrophies, sickle cell disease and retinal disorders are advancing rapidly through drugmaker pipelines and could reach patients over the next several years. I previously served as CEO of. Clinical studies show that childhood trauma not only reduces life expectancy for the victim, but also severely impacts the victim’s future children and additional generations. Discover announcements from companies in your industry. You may opt-out by. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. I previously served as CEO of The Permanente Medical Group, the largest medical group in the nation, and as president of the Mid-Atlantic Permanente Medical Group. Likewise, there’s growing evidence that rising out-of-pocket expenses are forcing many to avoid or delay expensive tests and procedures. In fact, when the cash-strapped state of Oregon tried to implement a data-driven and transparent process to “prioritize” Medicaid services in 1990, the public outcry was so deafening that lawmakers had no choice but to quickly ditch the plan. The FDA approved Zolgensma for pediatric patients under the age of two with bi-allelic mutations in the SMN1 gene. 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"I think it's very encouraging and we have every reason to believe it will be sustained.". Each year in the U.S., roughly 450 to 500 people are born with SMA, about 60% of whom are diagnosed a severe form of the condition known as Type 1. It's the world's most expensive drug. All Rights Reserved. Here’s what you need to know, CA Notice at Collection and Privacy Notice, http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. © 2020 Fortune Media IP Limited. Likewise, surgeons perform approximately 700,000 arthroscopic partial meniscectomies each year at a direct cost of $4 billion. Anderson joins a chorus of other moms praising the FDA’s ruling. FDA approval of the world’s first multimillion-dollar drug is warning shot for American healthcare. Follow me on Twitter @RobertPearlMD. EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, You cannot put a price on your child’s life. Next, drug makers look for a captive audience. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. While unprecedented, Novartis' price does come close to what ICER deems to be cost-effective, according to a newly released estimate. Each year, more than 4,600 young people (ages 10 to 24) commit suicide, resulting in more age-related deaths than cancer, heart disease, AIDS, birth defects, strokes, pneumonia, influenza and chronic lung disease combined. For diseases like SMA that are quickly diagnosed and potentially deadly, parents and advocacy groups will do anything to make sure the treatment is covered. All rights reserved. For the SMA patients for whom Zolgensma is approved, Novartis believes Zolgensma should be the preferred treatment option over Spinraza. Novartis plans to offer up to 100 doses for free per year in countries where Zolgensma is not yet approved. "We believe Zolgensma will be a very strong option for patients who are already being treated by the currently approved therapy," said Novartis CEO Vas Narasimahn on a Friday conference call with reporters. In the case of Zolgensma, Novartis side-stepped R&D expenses by purchasing the drug’s developer, leaving the company with no doubt about the profitability of its investment. To their credit, the pharmaceutical and biotech industries spend more than $100 billion each year researching and developing new drugs, more than three times what the U.S. government invests in basic research. At $2.125 million per dose, Zolgensma is the most expensive treatment ever brought to market. Zolgensma, a gene therapy, will cost $2.1 million. That’s about 2.5% of the nation’s current healthcare spending earmarked to address the second-leading cause of death among teenagers. "It has the potential to be a cure if patients are treated early before they have manifestations of the disease," said Jerry Mendell, a physician at Nationwide Children's Hospital in Ohio and a lead investigator for the initial study of Zolgensma, in an interview. The free newsletter covering the top industry headlines, potential to be a cure if patients are treated early before they have manifestations of the disease," said, By signing up to receive our newsletter, you agree to our, Press release from RCPE - Research Center Pharmaceutical Engineering GmbH, At gene therapy meeting, insurance execs grapple with expected cost, Pharmacquired: Splashy deals belie a shallow pool of heart drugs left to acquire. The FDA is requiring Zolgensma's label to include a warning that acute serious liver injury can occur. © 2020 Forbes Media LLC. This groundbreaking process could lead to the development of more than 100 different gene-therapy treatments over the next two decades. At $2.125 million per dose, Zolgensma is the most expensive treatment ever brought to market. After an initial 4 injections, doses are taken chronically every four months. The FDA approved Novartis' Zolgensma, a one-time treatment for spinal muscular atrophy. FORTUNE may receive compensation for some links to products and services on this website. Novartis spent $8.7 billion to acquire AveXis, the Illinois-based firm behind Zolgensma. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell My Personal Information | Ad Choices A gene therapy approved Friday by the Food and Drug Administration promises to change that, offering a potential one-time fix for the genetic deficiency behind the neuromuscular disease. Meanwhile, parents like Ms. Anderson worry that if drug manufacturers like Novartist weren’t allowed to make a handsome profit, there’d be no incentive to cure orphan diseases like SMA. These parents believe that $2.1 million is a fair price compared to the alternative: a lifetime of paying for at-home care, ventilators and repeat hospitalizations, “all of which can add up to far more than the cost of Zolgensma.”. It simply acquired AveXis (the firm that did) for a price that Novartis will recoup in relative short order, according to analysts. Their eventual success or failure will depend on clinical results foremost, but whether drugmakers and insurers solve payment and reimbursement will matter nearly as much.