Now Comes the Hard Part

November 27, 2018

Earlier this month during Novartis’ R&D Day, Dave Lennon caught the attention of the payer community when he said that the company’s gene therapy for spinal muscular atrophy type 1 could be cost-effective at a price of $4 million to $5 million.

Lennon is president of the gene therapy developer AveXis, which Novartis acquired for $8.7 billion earlier this year. Last month the company filed an application with the U.S. Food and Drug Administration for approval to market the gene therapy known as AVXS-101. It expects a decision in the first half of 2019.

Spinal muscular atrophy type 1, or SMA type 1, is a severe neuromuscular disease characterized by the loss of motor neurons leading to progressive muscle weakness and paralysis. It is caused by a genetic defect in the SMN1 gene that codes SMN, a protein necessary for survival of motor neurons. SMA type 1 is the most severe form of the condition, a lethal genetic disorder characterized by motor neuron loss and associated muscle deterioration, which results in mortality or the need for permanent ventilation support before the age of two for greater than 90 percent of patients.

Data from the company’s pivotal phase 1 study formed the primary basis for its submissions. Based on the data included in the applications, the company said it expected that the initial label will be for intravenous use of AVXS-101 for infants with SMA type 1.

When one analyst at R&D Day asked if the gene therapy would $4 million to $5 million cost effectiveness that Lennon referenced in his remarks would be anywhere close to the pricing where Novartis would want to be “from a political point of view,” and to what extent it would consider spreading the therapy cost over the time frame of that benefit and can healthcare systems logistically work with that.

Novartis CEO Vasant Narasimhan said he wouldn’t comment on the pricing of the gene therapy, but he expressed confidence that the company would find a way to make the therapy available broadly to patients who “could have their lives transformed by this medicine.”

“The challenge for us is that the healthcare systems are really not designed to introduce a one-time, potentially curable therapy into the healthcare system. This is an entirely new paradigm that we are introducing with payers, with providers, and with patients,” said Narasimhan. “Even HTAs themselves like ICER are questioning how they think about value in the context of products like AVXS-101, which are potentially curative. How do we think about value creation over the life of a patient, and how do we manage that in current cost-effectiveness modeling.”

One reason why Novartis could get its numbers to work is that Spinraza, the only approved therapy for SMA, carries hefty price tag. The drug lists for $750,000 for the first year and $350,000 each year after that.

But rather than making the case for the value of its therapy, Novartis may end up calling attention to the fact that we are moving to a new therapeutic area where existing pricing models may not work.

As such, AVXS-101 will likely invigorate a broad discussion about the value of functional cures, their value, and how we pay for them.

Part of the problem is that value in drug discussion are about relative, rather than intrinsic, value. As such, value will change depending on the different perspective of drug developers, payers, patients, and society.

In part, the case for AVXS-101 is based on the high cost of an existing therapy. Would AVXS-101 be just as valuable if Spinraza didn’t exists?  Would it be just as valuable if Spinraza was priced at $100,000 a year?

There is a belief that a therapy for a small patient population necessitates a higher price tag to make it economically viable. Which is worth more, a therapy for a population of 1,000 or a therapy that treats a population of 100,000?

How should therapies be priced? How do you determine the value of a therapy? Is it based on the value to the patient?  Is it based on the value to the payer?  Is it based on the benefit to the healthcare system or society at large?

And since a therapy that never reaches is a patient has no value, how do you ensure access?

Is there such a thing as a therapy that is too expensive to be worth producing? If so, who determines that?

How do you ensure both access and innovation?

We’re in a world where we are accustomed to consumer goods delivering greater function at lower and lower prices. Just think about the price and power of a computer today compared to one from ten years ago. But drugs are different. They are not sold into a consumer market. The end user is generally not the payer, the development cycle is long, risky and expensive; competition may not exist, markets are finite, and a therapy’s use may not be driven by something as mundane as convenience but can be a matter of life and death.

The irony here is that payers have foisted a value argument as a way to compare novel therapies to existing therapies. That may have served payers well when it comes to comparing blood pressure or ulcer medications that are new to the market, but what do you when, by the standards the payers have created, you are presented with a therapy that may have a multi-million value?

As AVXS-101 moves toward regulatory approval, the emerging discussion around the pricing of gene therapy, value, and payment models will heat up. It may be that the science of gene therapy turns out to be the easy part.

November 27, 2018
Novartis CEO Vasant Narasimhan

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