CNN over the weekend reported on some pretty awesome preliminary medical news in Paris:
In a world first, a teenager with sickle cell disease achieved complete remission after an experimental gene therapy at Necker Children’s Hospital in Paris, researchers say….
Worldwide, more than 275,000 infants are born with sickle cell disease each year. In the United States, approximately 100,000 people, most of African ancestry or identifying as black, currently have it. About one in every 365 black children in the US is born with sickle cell disease, for which the life expectancy is now about 40 to 60 years…Before receiving treatment, the teen had terrible pain and needed blood transfusions, which required twice-yearly hospitalizations, Leboulch explained. His many complications included necrosis of the hip, which necessitated hip replacement surgery…
Leboulch and his colleagues have global phase 2 and phase 3 trials for the thalassemia treatment underway in France, the US, Australia and Thailand.
There are a couple of very important disclaimers. First, this was a proof of concept test. If everything goes right and there are no surprises, this treatment is many years away from approval and use. Secondly, this is a major deal if it can be replicated safely.
So let’s get into the policy problems on the assumption that eventually this or something like this will be approved and used in the United States. I am going to assume that the actual cost of production of the cure is expensive but that sets the floor of the price instead of the ceiling of the price. There are a couple of different ways that pricing can be established. And this brings us to major policy challenges:
If it is priced like the initial Hep-C drugs, it will be priced at millions of dollars for a course of treatment.
The logic would be that the cure averts forty to sixty years of care. ACA risk adjustment prices sickle cell treatment as roughly seven times more expensive than average premium. That logic would justify a $1,000,000 or more price tag. Another logic would look at the added life years plus a quality improvement factor. If we bump the expected life span of an individual up by 10 years, that justifies $1,000,000 or more at a QALY rate of $100,000 per quality year. Further prices could be bumped up as the expected current 40 to 60 years of life will see significant improvement in the quality of life as the patients won’t be sick. Combining the cost of averted care, longer lifespans and better life spans the treatment regime could be considered “high value” even if it costs $2 to $3 million dollars per complete cure.
And someone will argue that they are doing a great deal of service and charity by only charging $1.5 million dollars. I will have sympathy for that analysis but I’ll make sure I’m out of rotten fruit throwing range as that argument is advanced. Good lord that is a lot of money.
And now let’s get to insurance policy problems. We will have a massive game of either risk dodging or de facto racial underwriting. There are massive gains that will be captured by a long term sickle cell cure. Most of those gains go to the patient and their family. Some of those gains go to insurers in the years after the cure as they no longer have to pay for current best treatment regimes. None of those gains go to the insurer who pays for the current treatment. No benefit design system of cost sharing or preauthorization or anything else will make a dent into the costs of the treatment from the paying insurer’s point of view. A $5,000 deductible is nothing, a $10,000 deductible is nothing, a $50,000 deductible is nothing from the insurer’s point of view.
So if an insurer is stuck with numererous potential multi-million dollar claims, it will run like hell to avoid that exposure. It won’t authorize genetic screening for at risk children, it will engage in utilization management by hassle, it will cut its networks to specifically exclude the doctors that are trained to do this procedure cluster. It will not market in heavily African American neighborhoods, zip codes and cities or if it is forced to market there, it will do so in culturally insensitive manners. It will do anything that it can legally do (and probably some more than that by some insurers) to make someone else pay. We will see a Gresham law race to the bottom of benefit design. Private carriers won’t want to pay. They want someone else to pay and then they want to cover a healthy patient at a near normal cost profile after the treatment regime is completed.
The concept of a time consistent transferable insurance contract or a cure bond or a residual payment from future insurers to the paying insurer could all mitigate against the strong incentive for insurers to attempt to dodge payment. But all of those proposals need national legislation.
And this leads us to the next major policy problem. Sickle cell is not evenly distributed. Vermont will see far less prevelance of sickle cell patients than Mississippi. Sickle cell is a clustered disease within fairly well defined populations with little leakage outside of those populations. That population is not uniformly spread across the country.
Why does this matter?
The CNN article argues that this treatment could conceivably be used on children. Earlier use of the treatment would lead to more value in the combination of more averted care and a longer period of a better quality of life. Medicaid covers roughly half the live births in this country and a significant proportion of kids. Mississippi Medicaid would be on the hook for 50 to 100 new sickle cell treatments every year. This would be a Medicaid cost of $50 to $200 million dollars per year depending on the number and the pricing assumptions. Vermont might have one Medicaid sickle cell treatment every year or every other year.
Vermont could handle sickle cell cures as a quasi-random low probability catastrophic case. Mississippi can’t. The magnitude of the exposure is massively larger and it is a recurring exposure unlike Hep-C where there are models where the virus is driven to low level status as more people are treated and infection pathways are closed off due to cures. Every year there would be a new cohort of babies who have sickle cell who would need treatment.
And these assumptions assume current Medicaid law is in place. Vermont’s occasional sickle cell treatment would lead to a one-off boost from the Federal government while Mississippi would see a near permanent increase in their federal match, assuming all other services are kept constant for Mississippi Medicaid.
If Medicaid is block granted, a massively expensive but high value treatment like this would not be available for Medicaid as the savings don’t accumulate on the budget before the next election. Mississippi could not afford to cure its citizens of a scourge or if it did, thousands of others would lose needed care. Block grants are not condition flexible nor amenable to localized clustering of high expense conditions.
So this is tentative good news with massive implied policy challenges.
Nicole
Thank you for a great explanation of the implications of this kind of (potential) breakthrough. It’s a hard thing to get through some folks’ heads- that insurance companies aren’t interested in cures if they are the ones who have to pay for the cost- that it’s actually cheaper to kick the can down the road to someone else. Makes total business sense, not so much humanitarian sense.
Here’s an instance where I hope, when/if this becomes a viable cure, the US gov’t will be in the hands of more liberal lawmakers who will see the value in establishing a fund to pay for the cure. Much in the way the vaccine court takes the threat of lawsuits off pharmaceutical companies so that they will keep manufacturing vaccines, which are not the highest of profitable enterprises. (that is why the vaccine court was created by the gov’t, yes?)
Starfish
Why is a QALY valued at $100k? What percentage of the population could afford that cost without being bankrupt? I think that there should be some consideration around who is being cured and if they can afford the cure.
David Anderson
@Starfish: I don’t have a good explanation as to why a QALY is priced around $100K. That is rough estimate of where federal regulations tend to value a human life in terms of economic costs of regulations versus protection of life. The UK NICE uses an estimate of 20,000 to 30,000 pounds for a QALY so applying currency conversion and a GDP multiplier and just the much higher US medical spend, $100,000 is a defensible first guess
https://www.nice.org.uk/advice/lgb10/chapter/judging-the-cost-effectiveness-of-public-health-activities
As to the second part of your question, I agree, almost no one can afford to buy a QALY on their own, that is why we have insurance (social and private)
Tim F.
Ha! There’s a bit of nostalgia for you. I worked on this exact question – mutant hemoglobin candidates for sickle cell gene therapy – years and years go. A whole group of us made different mutant versions of hemoglobin and tested their anti-sickling effects in a test tube. My mutant was awful! It made the disease ten times worse, or it would have if some crazy person ever gave it to a patient. Some of my co-workers had better ideas and the paper was overall pretty promising. This trial does not use one one of our candidates but I am really glad to see the general idea works in the real world.
Victor Matheson
Flat out great post.
Oatler.
The Oregonian’s web page gave huge attention to the Oswego thing, not because much happened, but to rack up clicks and comments from “interested” readers.
Yarrow
Thanks for posting the article. I hadn’t seen it. It’s great news and hopefully a breakthrough.
Appreciate your going through the rest of the “how does this affect insurance” analysis as well. Presumably this type of affect groups with diseases that affect only certain populations as well, assuming those populations are unevenly distributed across states.
LevelB
I think this was done using CRISPR. The disruption this technology could bring is literally incomprehensible.
https://en.m.wikipedia.org/wiki/CRISPR
B.
David Anderson
@Yarrow: It makes the case for national risk pools (single payer, national private carriers, shared risk modeling from regional players etc) and some way to create very long shadows of the future (single payer, residual bonds, time consistent contracts etc)
I am assuming that there are other specifically clustered diseases that can be cured at an OMG level of one time spend where the NPV of the cure is far less than the treatment but OMG is still a lot of money.
Patricia Kayden
sickle cell disease, for which the life expectancy is now about 40 to 60 years…
Victor Matheson
On a related note, the fact that people may have different insurers throughout their life is also a major issue in designing efficient payment mechanisms in legal cases involving personal injury and medical malpractice, the area of health economics in which I work at times. In a place like Ontario, with a universal provincial health insurance system, current lawsuits claiming future medical damages follow a predictable and (somewhat) efficient path. Not so in the United States where tort awards can result in huge windfalls for plaintiffs or defendants depending on the insurance status of the individual and the state involved.
Neldob
Facinating. Thanks again.
some_doc
In a sane world, the obvious answer is to federalize this specific treatment. Carve out a specific Medicare benefit for this treatment at any age, in the same way that back in the day we carved out a hemodialysis benefit for Medicare (don’t have to put the patient on Medicare entirely, as we do with dialysis). That provides some negotiating power on the cost end, as well as preventing the market failure you describe.
Part of your geographic argument, though, is that in the current situation states can simply not provide the expensive care that sickle cell often requires through indirect means like reducing medicaid eligibility – “let them die”, as it were. While they will have a harder time directly refusing a therapy like this. Sure, MS will be on the hook for more sickle cell cures than VT, but MS should already be paying vastly higher costs for sickle cell care than VT. If MS is avoiding those costs, that’s already a huge human welfare problem.
Emerald
I’m amazed and in wonderment that gene therapy is now being done on humans, even if it’s still “experimental.” Imagine the number of diseases that can be cured.
Me, I’m borderline osteoporotic. I’m waiting for gene therapy to build bones. Thought I’d have to wait ten years. Maybe now it’ll happen sooner?
Ruckus
@Patricia Kayden:
I did. My friend who’s memorial I just attended had sickle cell. It determined her entire life. I’ve sat with her in ICU while she battled a crisis, we have discussed the many, massive treatments she had to put up with to make it past the average life expectancy of a person with this disease. The cost of $100,000 to cure her would have been minuscule compared to what was spent over her life, not even taking into account the pain, suffering and never knowing if this day might be your last. I mean on some level we all have that concept, today might be our last, but for a sickle cell patient (among other diseases) this is not a philosophical question. On a side note she also had to go to specific hospitals/doctors who knew she had sickle cell. Most would tell her she was just looking for drugs and wouldn’t believe her when she told them she was having a sickle cell crisis. I know of one time she had to travel 25 miles to a hospital who knew her because none of the several ones closer would help her.
Yarrow
@David Anderson: Yes, there are a lot of specifically clustered diseases out there. One of the great things about the internet has been that people with those kinds of diseases can find each other, discuss treatments, provide support and understanding for each other, and work for cures. It remains to be seen how many of them can be “cured” by a one time intervention, however much that costs.
Agree, it shows how federalizing such treatments for certain diseases is the only sensible way to go. Which probably means it’s not going to happen any time soon.
David Anderson
@some_doc: My Mississippi argument is that lets say there are 100 sickle cell individuals born in Missisippi per year year. Assume 50 year life span and 20% out-migration (I am pulling these numbers out of my ass) so a pool of 4,000+ individuals with 100 additions per year. Current pool costs 7x standard ACA premium or someplace in $35,000 to $40,000 per year for a total spend of $150 million per year on sickle cell treatments.
Now let’s introduce a $1 million dollar cure. In year 1, 4,000 people are eligible for a total exposure of $4 billion. Mississippi can’t afford that even if over a 30 year payback period, it saves money. Year 2, 100 people are eligible so the savings is $50 million (150 million prior treatment averted – 100 million in treatment) Repeat for a very long time. They never break even.
Yarrow
@David Anderson: Aren’t your numbers based on costs for the treatment staying the same? Discoveries in related treatments could bring the costs for this treatment down, as has happened with other medical advances. New research could show ways in which this treatment could be offered more cheaply. It’s really now and the next, say, five years in which this treatment will be as expensive as it is now. If medical research can continue to go forward, that is. Cost cutting around that is an issue as well.
amygdala
@Ruckus: This. So much this. On the one hand, it’s amazing, how much better we’ve become at managing sickle cell disease, even before what could turn out to be a cure. As a student and intern, I remember the the sickle cell patients being exclusively young adults. They didn’t live into late middle age or beyond, but now they do.
But it’s still a difficult life, with pain, hospitalizations, and doctor visits up the wazoo. We know know that exchange transfusions can decrease the risk of stroke, but the transfusions are time-consuming, expensive, and not without risk. Patients lose splenic function with time and that increases the risk for some infections. Hematologists in African-American communities are ace clinicians, because they have to be. It’s a vicious, sneaky disease.
I haven’t gotten my mitts on the paper yet, but I’m looking forward to reading it. Really hoping this is a game-changer, while David and his squad figure out how we pay for it.
amygdala
@Yarrow: One of the problems with health care is that advances don’t bring cost down as reliably as occurs in, say, technology. There are a lot of reasons for this, including the fact that cost containment hasn’t historically been much of a research priority.
MPAVictoria
This is the reason why the government should simply set the price.
David Anderson
@Yarrow: Oh yeah, three to five years later the cost savings get bigger faster but even zeroing out costs to treat at 5 years produces a non-discounted breakeven for the initial cohort at year 29. At a 5% discount rate, it does not break even ever. We basically have to treat the huge block of people who need help in year 1 as the transition debt in much the same way that Social Security privatization attempts makes explicit the transition debt of giving defined benefit pensions to people who did not pay into them all that much in the 30s, 40s and 50s.
rebmarks
I would just like to point out that this breakthrough is happening in a country with national healthcare.
J R in WV
@rebmarks:
This! People act like the only way to have medical advances is to pay through the nose for medical care! Not true.
When we were in Europe last, I needed an over-the-counter medication, and our hotel sent me around the block to the nearest pharmacy, where they were glad to help, and had trouble taking cash for the medication. Amazing.