StatNews has an article that the Bubble Boy genetic disorder may be curable and raises an excellent example of the pricing and ethical challenges of high cost cures:
GlaxoSmithKline has developed what looks like a cure for a rare and deadly disease, and it’s going to cost $665,000 for a single dose….
Strimvelis, is a gene therapy for severe combined immune deficiency, an inborn illness that leaves children unable to protect themselves against infection.
those results are worth $665,000, according to the Italian Medicines Agency, which agreed to reimburse for GSK’s drug. Severe combined immune deficiency is otherwise treated with risky bone marrow transplants or enzyme replacement therapies that must be taken for life and can cost more than $4 million over the course of a decade, GSK said. Strimvelis, by contrast, could be a bargain.
The initial human clinical trials show that this drug works and it is much more cost effective than the current next best alternative treatment regime. The problem is the price. $655,000 is a lot of money for a single dosing regime. Insurers and other payers would be facing dramatic shocks as what was a constant stream of money is a one time bucket of money instead. The stream of money could be managed by an insurer in the United States being absolutely fugly and driving persistently high cost patients away and onto someone else’s books.
Yet the current price of $655,000 is “only” eighteen to twenty four months of incremental pricing for the current next best alternative. So this is a good deal for the payer with infinite time horizons and an amazing advancement in the quality of life. It could be a financially sucky deal for insurers that assume a lot of churn in their business model. In that case, their best incentive is to deny and delay while praying that the sick individual goes elsewhere.
So in the United States, how do we change that incentive structure? One of my hobby horses is the creation of health cost averted bonds. This is the same logic as creating residual revenue streams for preventive care.
Make it worth the while of an insurer to actively push good long term preventative care even accepting churn will and should happen. Follow-on transfer payments could be made by future insurers to the insurer that paid for the preventative care that has immediate costs but long run pay-offs.
The size and duration of the payments would differ depending on the pay-off period and either the cost of the preventative care or the net costs avoided.
Instead of paying for prevention, future insurers of an individual with SCID would pay the insurer that payed for the gene treatment $5,500 a month for the first ten years. If the individual stays on the same insurer a month after treatment, it is purely an internal accounting mechanism. If the individual is treated by Big Blue but comes to Mayhew Insurance, Mayhew Insurance writes a steady stream of checks for the length of stay on the new Mayhew policy.
If we want to really encourage wide spread adaption of this treatment regime, we add a second layer of transfer payments. If the current treatment regime has an annual average cost (over a ten year span) of $400,000 per year that the gene therapy averts, a transfer payment that is some fraction of the monthly expected costs under the previous best alternative would be made. So the transfer payment would by $5,500 for the treatment and say $10,000 for costs avoided. Monthly average costs avoided would have been around $63,500 so the remaining $18,000 is net systemic cost savings. We can fiddle with those numbers but the idea is to pay the payer for both the cost of the cure and some shared savings of the cure. (The same logic could apply to paying the drug maker for the averted costs in a gain share arrangement where the drug maker sells “direct” to the patient and more importantly the averted cost bond market).
And oh yeah, the kids are better and after a couple of years they are trying to learn how to ride their bicycle while wearng a superhero cape.
That is the core win.