Payers point to Spark’s gene therapy as a model for innovative pricing plans

When Spark Therapeutics announced an $850,000 price tag last week for its new gene therapy Luxturna, which treats a rare form of blindness, some critics held it up as the latest example of an expensive new treatment that could break the bank for the healthcare system.

But at the J.P. Morgan Healthcare conference in San Francisco this week, it was clear that sentiment is rapidly changing—and tiny Spark is now being held up as an example of how innovative drug developers can be in helping payers afford these new treatments.

Tim Wentworth, CEO of the pharmacy benefits manager (PBM) Express Scripts, for example, lauded Spark several times during his presentation at the conference. He vowed “to help them bring [Luxturna] to market in a way that helps payers afford it,” adding that Express Scripts was on board with a plan to help provide Luxturna "for the 2,200 patients whose lives it’s going to change.”

When Spark released Luxturna’s price, it also laid out an extensive plan to help PBMs, insurers and government payers cover it, which CEO Jeffrey Marrazzo reviewed at J.P. Morgan.

“The first objective that we had was to ensure there would be broad and rapid coverage for patients,” he said during his investor presentation, “while reducing the potential for markups to payers and the financial risk for treatment centers that are incumbent in the traditional … model.”

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Spark’s plan is threefold: First, it’s offering a rebate program based on proving Luxturna’s effectiveness at 30 to 90 days, and again at 30 months. It reached an agreement in principle with Harvard Pilgrim on that plan, it announced last week, and is in “active discussions” with other payers. If efficacy isn’t proven in those timeframes, “we’re offering rebates back in that context that can go up to but not exceed the standard Medicaid rebate,” Marrazzo said at J.P. Morgan.

Secondly, Spark is working to form contracts directly with commercial payers or their speciality pharmacies—not with treatment centers. It will be left up to payers to negotiate the appropriate payment with the treatment centers, which Marrazzo said should reduce the financial risk for those facilities of costs associated with administering the gene therapy. So far, seven treatment centers are set up to offer Luxturna, he said at the conference.

Finally, Spark said it is in discussions with the Centers for Medicare and Medicaid Services (CMS) on a plan that would allow payers to reimburse Luxturna in installments spread over many years.

“We believe that this is an important principle to work towards, not just with Luxturna but with the pipeline that we have growing, not only at Spark but in general for gene therapy,” Marrazzo said during his presentation.

Drugmakers that dwarf Spark in terms of size and experience are watching the biotech’s interactions with payers carefully, many reported at J.P. Morgan. They’re impressed that such a small player is forging new payment models—but also worried that PBMs and insurers won’t be properly equipped to deliver on their promises.

“The innovation is there, but the financing vehicles need to catch up,” said Jack Bailey, GlaxoSmithKline’s U.S. pharmaceuticals head, in an interview with Reuters. For example, if a patient is initially covered for an expensive therapy by an insurer that agrees to a deferred-payment plan, and then he or she moves to a different insurer, systems need to be in place to ensure the drugmaker can still collect the full payment for the treatment.

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Express Scripts’ Wentworth said he’s confident his company will be ready to accommodate new payment models, not just for Luxturna but also for pricey new cancer treatments that are hitting the market, like the CAR-T engineered cell treatments from Novartis and Gilead.

“When I look at these gene products … the question is how can we help a payer pay for it over a length of time? How can we help a manufacturer guarantee its effectiveness and get the payer back some money if, in fact, the product, which is so new, doesn’t work?” he said during his J.P. Morgan presentation. “That’s what we are built to do, so that’s what we are doing for those products.”

Wentworth said Express Scripts’ strategy for managing the affordability of products like Luxturna goes far beyond negotiating new payment models with drugmakers. He’s counting on the coming wave of inexpensive biosimilars to bring down the overall cost of providing biotech drugs to patients, which would in turn make more reimbursement dollars available to cover gene therapies.

“A huge opportunity, not only for us and our clients, but to create headroom so things like the Spark product can even be afforded, is going to be the wave of biosimilars that we’ll see coming over the next 5 or 10 years,” he said. “Twenty-two hundred patients—we’ve got to find a way to pay for that.”