Earlier this week, Bluebird Bio received FDA approval for a genetic treatment for a disease called beta thalassemia. This disease makes blood cells not have enough hemoglobin. It is a very rare disease with perhaps 1,000 people in the US being symptomatic. It is also one hell of a policy challenge.
Priced at $2.8M per dose. ICER analysis estimates cost-effectiveness up to price of $3M (given mean $6.5M lifetime cost for beta-thal).
Since US insurers generally don’t manage lifelong risk, I’ll be curious how the market responds to this pricing. @statnews @adamfeuerstein https://t.co/39ErFaLsxK
— Pradeep Natarajan (@pnatarajanmd) August 17, 2022
Two things can be true.
- Over a societal perspective and infinite time frame, a $2.8 million drug/cure can be cost effective
- For insurers using 1 year contracts, this is a massive cash flow problem
Structurally this is a similar problem that payers including private insurers and Medicaid agencies faced in 2013 and 2014 when the first Hep-C anti-virals came on the market. A disease that previously had been poorly managed could likely be cured with a cost effective one time treatment that was equal in price to several years of the previous best in class treatment. 5 or 10 years worth of costs were compressed into a single quarter for a patient who received the treatment. The payer had no guarantee that they would ever see the reduced expenditures in Year 2 through 10 if they paid for the Hep-C cure in Year 1. Almost all of the benefits accrued to either the now much healthier individual or future payers. Insurers aggressively found ways to not pay for Hep-C cures early on. I would not be surprised if insurers have significant and arduous prior authorization requirements for a drug that costs almost as much as the first arbitration year of a Major League average 2nd basemen with a bit of pop in his bat.
In the ACA context, insurers probably have a pretty decent idea of where the people who are likely to qualify for this treatment live in a given state. This treatment will not risk adjust well so anyone who receives this treatment will be a massive money loser for the insurer. A big insurer with several hundred thousand covered lives in a single state might not care but smaller insurers could see most of their profit margin disappear if they get five of these patients. This may change decision-making.
The current budget neutral federal catastrophic reinsurance program where the feds pay a fraction of all claims costs over $1,000,000 per year will help make insurers risk agnostic but it is likely to be insufficient. Reinsurance programs that pay a percentage of claims between say $20,000 and $250,000 will also slightly reduce idiosyncratic tail risk. However, as I mentioned yesterday, these “caliper” reinsurance programs are not efficient at removing risk from insurers even as they are effective at lowering gross premiums.
Here is where a national reinsurance program where every insurer in a given line of business pays into a pot that covers this, and likely other, expensive genetic cures would be quite useful in shaping markets where insurers compete on their ability to negotiate prices and effectively manage care to reduce premiums without pissing off their customers too much instead of a market where insurers compete against other insurers on their ability to identify and run like hell away from bad risk.
Old School
I can’t click through to the full article, but it says Zynteglo is a one-time treatment that works by replacing a defective gene with a normally functioning one, thereby allowing the body to produce healthy blood cells.
So the $2.8 million per dose would not be on ongoing issue, but one and done.
Not sure if ACA has any coverages related to specific treatments. Could something like that be accomplished?
ChicagoPat
Wow, imagine a billionaire dropping 3 billion to cure everyone in the US with this disease, instead of pissing 10 times that away trying to troll twitter.
Cervantes
Universal, comprehensive, single payer national health care. Problem solved.
Ken
@Old School: There’s an FDA release here. Derek Lowe has also discussed genetic treatments for inherited blood disorders.
The treatment likely involves extracting the patient’s bone marrow, genetically altering it, culturing those cells for a bit to make sure nothing’s gone horribly wrong, and re-implanting the modified marrow. So “one-time treatment”, but not in the sense of “take this pill and you’re cured”.
Lowe notes that genetic diseases of the blood are an attractive target because the marrow can be manipulated in this way. For most other genetic diseases, it’s difficult to imagine how you would even get the treatment to the right cells. Even in this case, note that the treatment does not change the patient’s genome outside the marrow; they can still pass on the trait to their children.
J R in WV
David,
You’ve got a pretty amusing typo where you discuss the cost of a “Major League average 2nd basement ” — where I’m pretty sure you meant a 2nd baseman, which could become a basement pretty easily, even auto-misspell coulda done that. Anyway, deleting that “T” on the end of basement would make the grammar nazis happy…
Old School
@Ken: Thanks. I meant in the sense that one insurance company would have the large expense. It wouldn’t be that every five to ten years, another dose is required.
Xantar
So if I’m understanding this correctly, this would be an advantage of a universal federal system since in that case the patient pool is essentially the entire country. In that case, a few thousand people getting a multimillion dollar treatment can be pretty easily absorbed. Right?
Elizabelle
@Xantar: I think so.
Chetan Murthy
Yesterday I entered a bar to purchase a drink (which I then consumed outside, b/c I’m not a fool). While waiting for my drink, I observed a SINGLE commercial break in the TV programming, and during that break, no fewer than THREE different drug commercials. And this, around 6pm local time, so prime-time. Madness. The drug companies have so much fucking money, so much fucking money. This really needs to stop: these drug adverts, I guess, subsidize network television, but are otherwise a deadweight loss.
Mai Naem mobile
I happen to be in a South Asian sub group where thalassemia is a genetic issue. I’ve seen discussions of pre marital testing of couples since a child is more likely to have thalassemia if both parents are carriers. That sounds a lot more affordable than $2.8M a treatment. Thalassemia is much more common outside the US than in the US but I don’t see other countries paying $2.8 million for a treatment so I am not sure how you spread the cost even worldwide. Also, its not just a pill that you can manufacture somewhere else and reduce the cost that way.
David Anderson
@J R in WV: I’m a Pirates fan :) I’m used to the basement.
David Anderson
@Xantar: Yep — or at least the back end plumbing so a fragmented surface market acts as if there is a national pool that pays extraordinary expenses.
WeimarGerman
There are other cost models for some of these drugs. When the Hep-C cures came on the market, Australia negotiated an annual fee with the pharma company to pay for all treatments nationwide. They have a co-pay of what seems like $50 AU per script.
As mentioned in the OP, the original pricing model for these drugs in the US was avoiding the cost of a liver transplant in a percentage of the people with Hep-C. Somehow they landed at $75,000 per cure.
The AU govt negotiates that they know they have an incidence of X liver transplants per year, so they pay for curing X cases+some cost of each dose, not paying $75,000 per person when no one knows which people will progress to need a transplant.
The thalassemia issue seems similar to new genetic treatments for sickle cell trait too. In both cases I would argue that the solution is that these people all move to Medicaid, just like people on dialysis do, and let CMS negotiate a national policy for these remarkable cures.
Ruckus
@Xantar:
Yes.
If the federal government ran healthcare PROPERLY a one time, even million dollars per person charge would be absorbed by everyone, and if that person then lived and became a productive being, the cost could be averaged over a lifetime.
We, as a country, spend billions a year, which sounds like an enormous sum but if averaged over 330,000,000 people and the companies they work for and over time, it is a relatively minor amount, as would be the cost for each of us for good healthcare. Add in that it could mean far more productivity for the country as a whole because we all could have actual healthcare and that cost is not bad at all. I see this at the VA. Sure some people require some rather large costs. I had cancer and got radiation treatment in an almost new massive, multi million dollar machine. However as it’s the VA and the clients have experience waiting in line for every damn thing, the cost per person was much better – the machine ran pretty much non stop. We got extremely good treatment and while I paid copays for mine because of my military experience (not in combat), the cost was still rather low, likely far cheaper than most insurance copays. Universal American healthcare would cost less because it would remove profit from the equation, like it does at the VA. And if millionaires/billionaires want to pay for snooty healthcare they could.
pluky
@Cervantes: Now, now, don’t go off being obviously rational on us. We have to keep the system we have with incremental tweaks because reasons.
David Anderson
@pluky: 218-51-1-5 is the reasons
gene108
@WeimarGerman:
Dialysis and post-kidney transplant patients are eligible for Medicare, not Medicaid. They are distinctly different programs.
gene108
@Ruckus:
Profit is never entirely out of the equation, even in government run programs that get payments per service, whether it’s mass transit systems or hospitals or other state run enterprises. Loss making entities are either an inefficient allocation of taxpayer money, which suffer from corruption, poor management, or just a poorly thought out program from the beginning.
Second, if money gets sucked out of healthcare how many jobs will be lost and where will those savings go? Medical billing, for example, like manufacturing decades ago is a path to better pay than other jobs available to people without a four year college degree.
pluky
@David Anderson:
I know. Masters in Public Policy with a concentration in health care delivery systems, followed by years in the trenches as a medical and disability pricing actuary. Doesn’t mean I have to like it!