A $2.1 Million Drug Price Record Is Made to Be Broken

(Bloomberg Opinion) -- The record $2.1 million price tag for Novartis AG’s gene therapy Zolgensma – a one-time treatment for a deadly childhood disease that was approved by the Food and Drug Administration on Friday – evokes two very different responses. Critics see out-of-control pricing behavior. Supporters say the sticker-shocked are ignoring the creation of a possible cure for a disease that kills children before their second birthday.

They’re both valid reactions. But we’re heading toward a point where spiraling prices on gene therapies threatens to hamper access or effectively ration usage by income or coverage quality. The problem isn’t just Zolgensma. It’s the dozens of other incoming gene therapies that will use this price as a reference point. Miracle cures don’t do much good if they aren’t accessible.

There’s an argument for premium pricing for gene therapies; for one, they could replace a lifetime of costly alternative treatments in one go. Zolgensma costs $425,000 annualized over five years. That’s a discount relative to prolonged use of the current non-curative standard of care, Biogen Inc.’s Spinraza. 

But pharma has a thumb on the scale. Drug prices have skyrocketed, particularly for the rare conditions targeted by many gene therapies. Charging several times an already inflated price isn’t as much of a deal. The next generation of gene therapies will be even more effective. How much will they cost?  It’s easy to see a path from more approvals at higher prices to an increase in barriers to access, even if gene therapies deliver long-term savings. 

Providers of private health insurers don’t have a robust incentive to think ahead; they’re typically focused on annual budgets and are judged by quarterly earnings, while Americans swap coverage so frequently that they may never see the promised overall savings from these treatments filter down to the cost of their own plans. 

Another issue with the price of these treatments and insurers’ willingness to pay it is that they haven’t completely proven themselves as one-and-done cures. BioMarin Therapeutics Inc. released updated data on Tuesday for its hemophilia gene therapy Valrox, which could cost as much or more as Zolgensma. The medicine can eliminate harmful bleeds for many patients, but there are concerns that the results won’t last. Paying a huge upfront price for a benefit that’s uncertain in several ways isn’t enormously appealing. 

It’s too hard for drugmakers and insurers to agree on contracts that spread the cost of drugs out over time and promise refunds if they don’t work as promised. Part of that is on the government, which needs to remove regulatory barriers to such deals. We also have limited measures of value in health care, leaving pharma to create its own poorly calibrated scale. The fragmentation of insurance coverage also deserves plenty of blame, as it makes fighting back exceptionally difficult.  

Fixing these issues won't be easy or quick. But the time to start is now, rather than when seven-figure price tags aren’t remarkable anymore. 

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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