Novartis: Alternative payments will ‘reset the paradigm’ for covering gene, cell therapies

When Dave Lennon, president of Novartis unit AveXis, said in November that the company’s experimental gene therapy to treat spinal muscular atrophy (SMA) could be cost-effective at a price of $4 million to $5 million, some pricing critics immediately raised red flags.

But then the Institute for Clinical and Economic Review (ICER) did its own analysis of the therapy, Zolgensma, using $2 million as a hypothetical cost, and “we felt quite validated,” Lennon said during a FierceBiotech panel discussion last week. The treatment would be more cost-effective than Biogen's Spinraza at that price, ICER suggested.

“We still think there are some elements missing in terms of societal impacts and some of the longer-term impacts of these kinds of therapies, especially in young children,” Lennon said of the ICER review during the panel at the Phacilitate Leaders World conference in Miami.

Zolgensma is still awaiting FDA approval, and Novartis hasn't yet hit upon a price, but $2 million would dwarf the costs of other advanced treatments, like Spark’s eye gene therapy Luxturna, priced at $850,000. Thus ICER's draft report “bodes very well for cell-based therapies and gene-therapy based assessments,” Lennon asserted.

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But the ICER assessment also underscores the need for biopharma companies, both large and small, to start thinking about offering alternative payment models for gene and cell therapies, said Lennon and his co-speaker on the panel, Usman “Oz” Azam, M.D., chief executive officer of Tmunity, which is developing CAR-T therapies for cancer. Azam previously headed up the gene and cell therapies unit at Novartis.

Novartis is considered one of the pioneers of alternative payment models. When its $475,000 CAR-T treatment for blood cancer, Kymriah, was approved in 2017, it agreed to an outcomes-based model with the Centers for Medicare & Medicaid Services (CMS) that stipulates full payment will only apply if patients respond by the end of the first month after treatment. More recently, Novartis said it would work out “innovative” payment plans for Luxturna in Europe, where it markets the treatment under a deal with Spark, which itself had already struck alternative payment deals with U.S. insurers.

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Alternative payment models provide “a mechanism to stave off some of the pricing pressure that exists, because we find a mechanism to give value back,” Lennon said at Phacilitate. “So I think we do have an opportunity to reset the paradigm under which we’re discussing what we should be charging for medicine, justifying that, and then really staying behind that based on outcomes.”

Although it isn’t easy for startups to think about insurance reimbursement when they’re still just trying to prove their products work, it’s essential that they do so, Azam said during the discussion. Tmunity is creating value profiles for its cell therapies as soon as it starts testing them in people, he said. “Even in phase 1, we’re thinking about those signals and how we’re going to translate them into phase 2, 3 development. What are our active comparators? How are we going to look at real-world evidence concurrently?” Azam said. “Companies like ours have no choice but to build those capabilities.”

Outcomes-based payment arrangements can be challenging, however, Lennon said, because pharma companies don’t have good systems in place for following patients to make sure they’re still on therapy. A 30-day outcome like that established for Kymriah is easy to manage, because within that short time frame “patients won’t switch [insurance] plans; they come back for evaluation,” he said. “As you go out longer it becomes a challenge, and the system’s not prepared.”

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What’s more, Lennon said, some payers feel they were burned by high-priced drugs that ended up being prescribed to more patients than initially expected, like Gilead Sciences' hepatitis C virus (HCV) treatments Sovaldi and Harvoni, and checkpoint inhibitors to treat cancer, such as Merck’s Keytruda. Offering alternative payment models for gene and cell therapies could help quell those concerns.

“It comes down to two things: specificity and transparency,” Lennon said. “Payers just don’t trust we’re being specific about who we’re going to go after and we’re being transparent about what we really want from them. They feel burned too many times with a company defining a population and that population being three, four, five times as much.”

So how can biopharma companies be better prepared to negotiate alternative payment models with insurers? Azam suggested that cancer drug developers prioritize companion diagnostics that help companies track how patients are responding. That will make it easier to manage pay-for-performance deals. “That is a relatively new area for cell and gene therapy companies in terms of investing in a parallel track for companion diagnostics,” he said.

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Azam said he’s optimistic that small companies will become more adept at thinking about pricing earlier in the life cycles of their products. “Certainly younger-stage companies have no choice—our investors, our boards are demanding it,” he said. “It’s just a reality now.”

Pharma companies should also work with the insurance industry to develop payment models that go beyond outcomes-based deals, Lennon said. One idea that’s gaining steam is an “annuity-based” payment system, where insurers reimburse for a pricey therapy in installments spread over time. Such arrangements could be partially based on outcomes, or “just an offering to defer costs over time,” Lennon said. “I think HCV could have benefitted from that type of approach.”

During a question-and-answer session, an audience member asked whether widespread screening of newborns for SMA would help justify the value of Zolgensma and other gene therapies developed to treat genetic diseases. The U.S. Department of Health and Human Services added the disease to the Recommended Uniform Screening Panel used by state health departments last summer.

“Some states have gotten right on top of it; some states are currently working through it,” Lennon said. About 14% of newborns are now screened for SMA, he added, saying, “I think that’s where genetic disease in general is going to go.” He noted that ICER evaluated the cost-effectiveness of both Zolgensma and Spinraza in presymptomatic patients and determined it is “more cost-effective than treating later.”

“From a pricing perspective, [newborn screening] only creates more value,” Lennon said.

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ICER’s draft report (PDF) on SMA treatments, released in late December, was unusual, because the agency completed it without knowing Zolgensma’s actual price. But it won’t be the last time the influential agency gets out ahead of high-priced treatments, Lennon predicted. “I do think ICER wants to try to be cutting-edge in terms of the assessments to try to provide guidance to payers … prior to the approval of products, so I do think we’ll see more of this.”

A spokesperson for ICER told FiercePharma that the agency will release its final report on SMA treatments on February 21 and that it will based upon a "hypothetical price range that aligns with each treatment’s ability to improve patients’ lives."

When Lennon initially suggested the potential value of Zolgensma was $4 million to $5 million, it was his “Steve Austin moment,” he joked, referring to the popular 1970s TV hit “The Six Million Dollar Man.”

Zolgensma’s final price tag won’t end up that high, of course, but the panelists agreed that, as the costs of gene and cell therapies rise, it will be incumbent on the biopharma industry to maintain an open conversation with payers about how the healthcare system will be able to afford them.

“I think where the industry has gotten in trouble in the past is pricing became unhinged from any concept of value or the reality of what a medicine can do for patients,” Lennon said. The ability of biopharma innovators to prove their products will ultimately generate value “is what the promise of these therapies is,” he said.

Editor's note: This story has been updated to include input from ICER.