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At what price, life? And who pays that price?

At what price, life? And who pays that price?

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The marketplace for specialty pharmaceuticals has continued to evolve with new genetic and cellular entrants to the FDA approval pipeline.  Since these products are not yet approved, pricing for them is not available; however we expect the costs to be extreme.  For example, Roctavian for hemophilia A: Approval has been delayed until 2022.  Its estimated cost could be as much as $3 million. Upstaza which treats a critical enzyme deficiency in the brain and ProstAtak which stimulates a vaccine like response to prostate cancer are on the near-term horizon.

Earlier this year, Zolgensma came on the market. Used to treat a rare childhood disorder, spinal muscular atrophy (SMA), Zolgensma is administered once, treating the gene that is at the root of SMA, and is an alternative to a life-long medication, Spinraza, that costs six figures each year.

Sounds like a miracle, right? It may indeed be that for the child with the condition, and for the parents of a child with SMA—the disease in its most severe form often results in death before the child reaches the age of two.

The price tag is staggering.

However, the price tag for Zolgensma brings its own devastation: $2.1 million for a single dose. If it “works,” and the child lives to reach 70 years old, that translates into just $30,000 per year (it’s more likely though the child’s lifespan will be shorter). Of course, the cost of the drug isn’t spread out that way: News reports state that the drug’s manufacturer—AveXis (an Illinois-based pharmaceutical company owned by Novartis)—will provide “insurers” payment plans spread out over a few years. Presumably, these payment plans will be available to self-funded employers.

The drug’s cost though isn’t the only expense associated with this course of treatment. The medication must be administered onsite, though possibly on an outpatient basis—at approved treatment centers. So the total cost for the treatment will be significantly higher.

And there are more to come.

What are the odds that an employer will be faced with such a claim? In the case of Zolgensma, it’s quite small. SMA afflicts 1 in 6,000 to 1 in 10,000 live US births, and of those, only about 300 have the most severe form of SMA (the one that causes death by the age of 2): the form Zolgensma is designed to treat.

But Zolgensma is only the latest in a handful of gene therapy drugs that have been developed to treat either genetic conditions (Luxturna, which treats retinal dystrophy) or certain forms of cancer (gene therapy drugs are being used to treat leukemia and lymphoma). More such drugs are sure to follow.

Guess who foots the bill.

Nobody can dispute the value of these drugs to the patients and their families. But how do we pay for them? News articles of course always reference the “insurers,” but most readers of Buck’s blogs represent employers, many of whom are self-funded: We know that the word “insurer” often means employer, and so that’s who will be footing many of the bills. As for stop-loss coverage, employers can’t assume they will step in. It is expected that these cases, however few, will be exempt from coverage.

Employers should not wait until they are faced with one of these costly cases as it’s important that the individual afflicted with one of these conditions begins treatment as soon as possible to achieve the best outcome. Proactive discussions need to occur now with your consultant, and your health plans or TPAs to formulate a plan around process, coverage policy, and reimbursement.

Editor’s note: This post was originally published in June 2019 and has been updated to include the latest marketplace information.

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