At $2.1M, Novartis gene therapy will be world’s most expensive drug

https://www.statnews.com/2019/05/24/hold-novartis-zolgensma-approval/

by hhs • 7 years ago

56 68 7 years ago

statnews.com

avocado4• 7 years ago

Do payers in other countries agree to cover 2.1M bill or is it only the US?

tzakrajs• 7 years ago

waits for generic treatment to surface for 1/10000 of the price in another market

jtmcmc• 7 years ago

this is not just synthesizing a chemical - this is using an engineered virus to deliver a newly functional gene.

There is a reality here that these therapies are really fucking expensive to produce. If we want them to be cheap or free their discovery needs to be subsidized and funded in a non-profit driven manner

tareqak5• 7 years ago

Payers in other countries can use their countries' negotiating power to negotiate with Novartis. The United States is definitely capable of doing the same in theory.

arkades2• 7 years ago

No, it’s not. Medicare is legally restricted from negotiating drug prices. Yes, that’s a ridiculous law.

Edit: to clarify, Medicare does not only cover seniors. Other important groups include those with end-stage renal disease and those with significant disabilities. Those often also receive Medicaid, and are known in industry jargon as “dual-eligible.” Medicare becomes their primary payor, with Medicaid picking up the balance of what Medicare won’t cover. Both programs are ultimately overseen by CMS (center for Medicare and Medicaid services). Pay negotiations for Medicaid occur on a state level, but a huge chunk of the tab is picked up federally, so they tend to weigh in.

Newborns with SMA will almost certainly be initially covered by parental private insurance (pre-dx), and transition to dual coverage afterwards. Please note that there are a combination of gene therapies under discussion, only one of which will be given once at birth- the rest will entail ongoing costs that will be borne by Medicare and Medicaid.

pstrateman• 7 years ago

Something like this is expensive because... it's actually expensive to do.

Typically that means single payer systems simply will refuse to pay for it at all.

i.e. this medication will not be available anywhere except the US

pkaye• 7 years ago

Even within the US it will out of reach to most people even with insurance.

buildzr• 7 years ago

Is this actually going to be available anywhere but the US?

Expensive, rare treatments like this often aren't paid out in socialized systems.

s1artibartfast• 7 years ago

I expect that the countries covering Spinraza will also cover the new Novartis treatment as it will cut costs.

https://www.treatsma.uk/treatments/spinraza/spinraza-access-...

gruez• 7 years ago

Novartis is likely to face backlash from critics who believe charging millions of dollars for any medicine — no matter how effective — renders it unaffordable for a healthcare system already under financial stress.

If the alternative is no cure at all, what's the issue? I guess you could argue that some governmental organization could be doing it so you can save money by not having to pay out profits, but I doubt voters would support tax hikes to help the 0.001% (or whatever) of the population that has this disease.

There’s also competition. Spinraza, approved in late 2016 and sold by Biogen, has already been used to successfully treat thousands of patients with severe and milder forms of SMA. The drug requires regular spinal infusions costing $750,000 in the first year and $375,000 annually thereafter, for life.

$2.1M vs $23.2M (assuming 60 years of life). Seems like a bargin compared to Spinraza.

mises2• 7 years ago

It's also important to note that advanced drugs for rare illnesses are expensive for a reason: high development costs and a very small market. Costs must amortized over a very few. There also aren't really any economies of scale, because each treatment is unique. Socialized medicine won't cover something like this; the option is a very high price in America or nothing at all.

omegaworks• 7 years ago

the option is a very high price in America or nothing at all.

False dichotomy. We have robust public and private medical research universities.

ip262• 7 years ago

If the alternative is no cure at all, what's the issue?

If it's a fair price based on all their costs, then there's no issue. But if it is exorbitant even after considering all the costs- well, many people take umbrage with healthcare profiteering.

tvladeck• 7 years ago

there is no such thing as a "fair price"

rayiner2• 7 years ago

Determining the “fair price” based on costs is not rational. What is the “fair price” for an iPhone? It’s certainly not based on costs. It’s based on what the alternatives cost.

For things like drugs and treatments, which often are covered by patents, you shouldn’t necessarily get to charge whatever the market will bear. But even then, looking to costs is a bad idea. If saying “you should be entitled to a 10% return above your costs” actually worked, why not do it for everything? Why not pass a law that says that smart phones can only be sold for 10% above cost? If that would work for drug development, it would work for smart phones too. From the supply side, the two are very similar: top talent + massive capital investment + high-tech manufacturing = product. We’d have $300 iPhones every bit as good as what we have now, right?

For drugs, a “fair price” is best determined by looking to return on investment. If the investors in Novartis are earning 10x what they could have earned by investing in a web tech start up, maybe that is unreasonable. Such high returns are unnecessary to keep capital from fleeing to alternative industries.

But that’s not what is happening. Novartis’s return on invested capital last quarter was 9.5%. Alphabet’s was 37%. Novartis is not making outsized profits. It’s making healthy profits consistent with investing in a high-risk, high-tech industry.

A contrary moral rule creates perverse incentives. It tells people that if you want to save lives, you need to invest billions of dollars while getting a minimal return. But if you just want to peddle advertising, you’re free to make as much money as you want. If you consider some things “too important” for the profit motive, what you’re doing is incentivizing people to invest money, time, and their careers in things that aren’t important.

aaavl28215• 7 years ago

Avexis spent ~$700M on developing this drug. But drug prices don't just cover costs for developing the drug. They also have to cover losses from other failed r&d projects, and also cover the cost of capital

money isn't free. If for profit companies didn't fund this research, no one would. Opportunity cost of money is a real cost and it is reflected in the price of any commercial good -- drugs are no exception

Is there profiteering in some cases? Yes. Is there in this case. Probably a bit. But it is not realistic or fair to think drug companies should price solely based on a cost-plus model, ignoring losses from failed research efforts and the cost of capital

However, cost of capital is a huge driver of costs and reducing it would be very valuable. The question is how to do that

If you're curious to see how these different things affect drug price, I made a tool where you can play around with different drivers of drug prices (incl cost of capital) to see how they affect price: https://www.baybridgebio.com/drug_pricing_calc.html

yingw787• 7 years ago

I think it's probably more of a psychological issue. I doubt even a Roman emperor would really care if he got this disease, since he wouldn't know about the cure. It'd be God's will, or something, and he'd die in a warm bed with warm memories.

If you or somebody you cared about suffered from this disease, and knew a cure existed, and knew that cure was out of your reach because you didn't have the money to pay for it (or lived in a system that privatized gains and socialized losses), you'd feel a great deal of emotional pain. You wouldn't die the same way.

Saying $2.1M is a bargain because the other solution is $23.2M is like saying the $SOCIAL_MEDIA_APP terms and conditions are fair because they're available and you should have read it in full as a preteen. It doesn't account for human nature and gives a cold shoulder to factual reality. It's not kind or empathetic to a lot of people, even if it is fair and just. That's where I think why people talk past each other a lot about healthcare.

Full disclosure: I am a software engineer in the U.S. who had his life saved about 32 times in the E.R. in Canada from supra-ventricular tachycardia. I grew up in lesser means and I might be dead or my family bankrupted had I grew up in the U.S. and paid the fair ER fees each time. So I owe Canada my life, and a blood debt I really can't pay off in my lifetime. I'm certainly not unbiased.

cc812• 7 years ago

I live in Sweden and there will be debates about things like this as well because often these treatments are about improving lives compared to alternative treatments.

So for a rare disease there might exist a current treatment that results in them being bedridden and unable to feed themselves without an assistant. But with this new treatment the patient will be able to move around themselves in a wheel chair and feed themselves with some minor aid from an assistant.

How much more expensive can such a treatment be for it to be worth it? If you are the person involved the difference in life would be immense and worth any money but for someone on the outside those millions might be better spent on other care.

TheOperator3• 7 years ago

I grew up in lesser means and I might be dead or my family bankrupted had I grew up in the U.S. and paid the fair ER fees each time.
or

What an optimist you are!

return12• 7 years ago

but I doubt voters would support tax hikes to help the 0.001% (or whatever)

in any country with socialized healthcare they are paying it anyway

armenarmen• 7 years ago

If the alternative is no cure at all, what's the issue?

Wanting something non existent and magical hurts way less than knowing a cure is there, and you just can't afford it.

It reminds me a bit of: https://en.wikipedia.org/wiki/Methuselah%27s_Children

Where a community of people secretly and selectively bred for longevity are found out by "normals" who then try to kill the long-living people for not sharing their secrets to a long life

aaavl28215• 7 years ago

At $2.1M, zolgensma will be more cost effective than spinraza, but it is not at all clear that zolgensma will be durable enough to provide 60 years of extra life

The full ICER cost effectiveness is worth a look: https://icer-review.org/wp-content/uploads/2018/07/ICER_SMA_...

Bombthecat• 7 years ago

Where do you stop?

At what price point or at which percentage of population do you stop?

Yes,this means super expensive drugs will be only for the rich.but I don't see any other way...

hombre_fatal• 7 years ago

The final quote raises the interesting question:

Peter Bach, director for the center for health policy and outcomes at Memorial Sloan Kettering Cancer Center, is troubled by Zolgensma’s price and believes ICER’s updated cost-effectiveness analysis takes too many liberties.
“You can look at this in either of two ways. It’s an amazing treatment and only a few kids will need it so a million here and million there is not worth more than shoulder shrug,” he said. “Or we have a big problem. Biopharma has been entirely redirected to rare diseases because the market will tolerate any price and the FDA will require pretty minimal data.”

ThrowawayIP• 7 years ago

That quote just states that some corporate board rooms have found a local maximum in the profit vs (time to market & R&D costs).

Pharma companies do not operate by any moral mandate but are only seeking profit.

adonovan• 7 years ago

Why are gene therapies so expensive? Is it simply the need to recoup high R&D costs across a smaller "market" of patients with rare diseases? Or is the marginal per-patient cost actually higher than a regular pharmaceutical?

return12• 7 years ago

i think the article says it s the former. engineering a virus is not that expensive

toufka• 7 years ago

These new gene-/immuno-therapies tend to be:

1) much more sophisticated/cutting edge in terms of R&D,

2) the R&D is all of a new kind, so there has been little prior amortization of resources from prior successes.

3) _curative_, so from a purely market perspective a XX% discount on a [cost/year * lifetime] relative to a small-molecule drug that needs to be taken regularly, forever, is in these very high ranges, and still economically appealing from a cold hard actuarial perspective.

The high prices also attract advanced technology development in the area, and I think society wants & demands that rapid technological development of these powerful tools. Imagine trying to pay competitive salaries to a large number of sophisticated genetic engineers and all of their tools and equipment, when there are literally only a five or six products on the market with which to support their efforts.

It is still very unclear how we as a society should be paying for that development. And placing that burden on (those) individuals seems unreasonable.

aaavl28215• 7 years ago

Avexis, the company that developed this drug before Novartis bought it, spent ~$700M to get it approved. The drug will treat a few hundred patients per year. So they have to charge a high price

zolgensma is the second gene therapy ever approved in the US. The technical risks are very high and making them at scale at a high level of quality required rare and expensive expertisr

codeulike• 7 years ago

Just an FYI - The R+D and govt approval process is expensive. The actual treatments are - I'd wager - relatively easy to produce. So this Novartis treatment is delivering DNA fragments via AAV. Its not attempting CRISPR or anything like that, its just gets extra copies of the unmutated gene into the nuclei so the right proteins can get made. I think they call that upregulation. So its basically AAV plus DNA fragments.

So for example you can buy engineered AAV viruses online. They sell this stuff for research. Looks like its about $350 a pop

https://www.addgene.org/viral-service/aav-prep/

Novartis aren't using CRISPR here but as another example these guys sell CRISPR for your research experiments:

https://www.addgene.org/crispr/guide/

Here's some Crispr for plant experiments for about $400

https://www.addgene.org/kits/stuttmann-dicot-genome-editing/

So I'm sure there a lot more to it than that, but even so, it seems to me that the nuts and bolts of this stuff - once known - are going to be easy to produce. How long till we get a generic?

Creationer• 7 years ago

At what point do you say: this child just isn't meant to be? Why would you subject someone to a life of annual spinal injections, and society to the huge financial cost?

Zarath• 7 years ago

I don't think you're wrong but it is a very controversial topic

kinkrtyavimoodh• 7 years ago

In fact one could go a step further and argue that it's almost immoral to bring such a child to the world.

inertiatic• 7 years ago

Any reasonable individual would "subject themselves to a life of annual spinal injections" if the alternative was being dead.

So, if the average person wouldn't tell themselves they're "just not meant to be", there is also no point where you get to say that for a child.

aaavl28215• 7 years ago

Avexis, the company that Novartis acquired to get this drug, spent ~$700M developing it. The drug will treat a few hundred patients a year. Without a high price, it isn't profitable. for these drugs to get covered at such a high price, they have to be very effective, which this drug seems to be

However, did Novartis have to charge $2M? Avexis was trading at a $3B market cap not long before Novartis bought it for $8.7B. Analysts were projecting a $1-1.25M price tag, which is closer to the cost effective range

Novartis probably paid up for avexis bc it was a competitive deal process and they thought they could get away with a higher drug price than the market expected. At the time of the acquisition people thought Novartis was paying a premium for the platform, by charging $2M for the drug it seems like more of a pricing play than platform deal

I wrote a case study on avexis with more detail here: https://www.baybridgebio.com/blog/most_expensive_drug.html

JamesBarney• 7 years ago

I've always been curious how that 700M breaks up? How much of that is FDA trials and how much is paying 1000 phds to work on designing drugs for 7 years.

Of course the follow up question is there any way to get that number lower.

aaavl28215• 7 years ago

It seems very high to me as well, especially since they were allowed to submit for approval with only one 15-patient study completed and interim data from a few other studies. I think they have tested the drug in under 100 pts to date

Per the financial statements, ~$500M of that $700M was r&d (the rest was general and administrative expense). A lot of the r&d spend was payments to third party research and manufacturing firms. Given the small clinical trial size I'd imagine more money went to contract manufacturing than research.

There are very few companies and people that can make gene therapies at scale at acceptable quality levels. It seems like this expertise is quite expensive. There was probably a lot of process development here since making these drugs at scale is so new (here "at scale" means "enough for ~100 patients")

They also spent a lot building out their own manufacturing site.

They also had a $135M license payment, I think to the company they licensed their viral vector from

continuations• 7 years ago

Maybe that $700M includes money they spent on ideas that turned out to be failures.

So something like they spent $100M on this one winning idea but also $600M on 50 other ideas that went nowhere.

negamax• 7 years ago

Reading at the comment and $8B acquisition cost and $1M profit. They just need to treat 8000 people. Eventually market forces will take over and cost will come down by magnitudes

Hint: genome sequencing

Causality1• 7 years ago

The drug requires regular spinal infusions costing $750,000 in the first year and $375,000 annually thereafter, for life.

I don't understand how this is justifiable. As an insurance company, the only way to cover this treatment is by raising premiums for all customers. By raising premiums, people on the edge of being able to afford insurance are pushed out. There is no way in hell this treatment doesn't cost more lives than it saves.

TheOperator3• 7 years ago

Which is why most insurance plans wouldn't cover it.

JamesAdir• 7 years ago

I can't shake the feeling that the medical companies have huge incentives to develop drugs that are taken for a long period of time instead of one time treatment. There should be some government incentives that will make sure that companies who offer simple cheaper solutions will have some benefits out of it.

At $2.1M, Novartis gene therapy will be world’s most expensive drug

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