The first gene therapy approved in the U.S. costs $850,000. Announcing the price on Jan. 3, its owner Spark Therapeutics held out the possibility of some relief, such as installment payments, or slim rebates if the drug, a one-time shot into each eye to reduce or reverse inherited vision loss, doesn’t work or wears off.
According to an independent report that came one week later, however, Spark’s concessions were marginal compared to a much bigger problem: The price is too high and should come down by at least 50 percent.
The nonprofit Institute for Clinical and Economic Review’s report was perhaps the biggest illustration yet of the gap between the value drug companies place upon their own products and outside views of that value—and how difficult it will be in coming years to reconcile the two.
With its fragmented insurance markets and embattled political views on healthcare economics, the U.S. has no single way to calculate a drug’s impact on a person’s life or its positive ripple effects on society. And as more gene therapies like Spark’s, promising long-lasting effects with a single treatment, come to market, pricing disputes will be the norm.
“We need a framework to figure out how to value this stuff, that is unambiguously true,” says MIT economics professor Jonathan Gruber. “We’re going to continue running into problems like this.”
The divergent views of ICER, a Boston-based nonprofit that analyzes the value of drugs, and Philadelphia-based Spark (NASDAQ: [[ticker:ONCE]]), over the price of Spark’s voretigene neparvovec (Luxturna) crystallize this issue. Spark priced the gene therapy at $850,000. In its report issued Jan. 12, ICER estimated that Luxturna is worth $153,000 to $217,000 when considering just the therapy’s direct medical benefits. When accounting for less tangible societal benefits, ICER said a price from$363,000 to $427,000 was appropriate—still half of Spark’s price, in large part because the two sides didn’t see eye to eye on which societal benefits were applicable or how much they are worth.
Don’t expect Spark to change under pressure. ICER’s reports often draw the ire of drug makers but have rarely led to price changes. Spark CEO Jeff Marrazzo believes ICER’s estimates are an “order of magnitude” off. The massive gap doesn’t signal acrimony; the two sides say they are on good terms and exchanged views and information in the run-up to Luxturna’s approval. ICER president Steve Pearson calls their interaction “a very healthy first step” toward figuring out gene therapy pricing.
“I don’t view it as a bad outcome for gene therapy or for innovators or for payers that we’re wrestling over the value-based price for [Luxturna],” Pearson says. “Spark may have different numbers to fit into some of the slots, but the way we’re talking about value now is very healthy. We need to have those conversations.”
With a single injection, Spark’s treatment is meant to help improve vision for the 1,000 to 2,000 people in the U.S. with a genetic mutation, RPE65, which leads to vision loss that often starts in childhood. Spark has been careful not to call it a cure, however. It’s unclear how long Luxturna’s effects will last. Spark’s best evidence so far shows the treatment has been effective for at least four years in a handful of patients. Long-term study is ongoing.
MIND THE GAP
So why the gulf between the two sides?
Pearson argues that all gene therapies will
