Opinion

We Need New Ways to Finance Life-Saving Gene Therapies

For the millions of Americans who suffer from genetic disorders and previously faced a lifetime of expensive and imperfect treatments, new cutting-edge gene therapies hold exceptional promise. However, our current health system is poorly equipped to make these life-saving treatments broadly accessible to patients. That needs to change.

Gene therapies, which were approved in the United States for the first time in 2017, address the underlying causes of genetic disorders, providing cures.

Up to 4,000 diseases are rooted in genetic mutations that disrupt normal cellular functioning. About 25 million-30 million Americans live with a rare medical condition, the majority of which are thought to be related to a genetic abnormality. That number does not capture the millions of people with more common genetic disorders who could also benefit from gene therapy. Currently, more than 300 gene therapy trials are ongoing in the United States and another 800 are enrolling patients.

In the next few years, dozens of additional gene therapies, targeting a diverse range of debilitating diseases, are expected to gain FDA approval. The pace of innovation is quickening. Last month, Food and Drug Administration Commissioner Scott Gottlieb said he expects the FDA to approve 40 gene therapies by 2022, and we might see cures for sickle cell anemia within 10 years.

Of course, the development of gene therapies is a costly enterprise. The R&D investment required to create a novel gene therapy will likely exceed the $1.3 billion to $2.6 billion needed to develop a new biologic drug. Likewise, the failure rates in the fledgling gene therapy market are expected to surpass those of the pharmaceutical industry as a whole, where fewer than 1 in 10 drugs that reach clinical trials ever make it to market.

To provide a suitable return on investment and incentivize further research, many gene therapies will carry eye-popping price tags, sometimes exceeding $1 million per patient. However, the cost may be high but the potentially benefits are even greater.

A new study by the American Consumer Institute shows that despite high upfront costs, gene therapies actually generate significant savings for the health system by replacing expensive long-term treatments, reducing hospitalizations, preventing further health deterioration and improving patients’ quality of life. Also, people being cured will be able to be more productive in the workforce.

A gene therapy for severe hemophilia, for example, is expected to cost about $1 million per patient. However, this one-time cure eliminates approximately $690,000 in annual costs of conventional treatments. In less than two years, the gene therapy pays for itself. Other gene therapies for spinal muscular atrophy, Best Disease (a rare form of blindness) and lymphoblastic leukemia offer similar savings over the long-term.

Yet existing mechanisms to finance medical treatments and manage affordability are inadequate to cope with the growing number of gene therapies being introduced.

Our present health care system discourages insurance companies from paying for therapies with high upfront costs whose benefits are spread over a lifetime, since patients often switch to different insurers over time. Thus, the initial insurance company pays for the therapy, but the new company receives the benefits of lower health care expenditures. This gives the insurance companies the incentive not to provide these treatments.

Some ways to manage costs include outcome-based agreements, where payment is contingent on the treatment producing the desired clinical effect; this approach is already used effectively by some European countries and Medicare for certain high-cost drugs.

A universal insurance fund, paid for through contributions from health insurers, could help defray costs, as could reinsurance mechanisms that protect insurers from catastrophic payouts.

Unless payers, policymakers and manufacturers work together to develop innovative, value-based ways to expand access to gene therapies, these life-saving cures will remain out of reach for too many vulnerable Americans.


Dr. Joseph Fuhr is a senior scholar for the American Consumer Institute and professor emeritus of economics at Widener University.

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