Novartis struggling to win payer coverage for $2.1M gene therapy Zolgensma: analysts

Only about one-third of the top 30 U.S. insurance companies have made their decisions about how to cover Novartis’ new $2.1 million gene therapy to treat spinal muscular atrophy (SMA), Zolgensma, but analysts at one influential Wall Street firm are already worried.

Ronny Gal and his colleagues at Bernstein collected early coverage decisions on Zolgensma from 11 payers and found them to be “surprisingly restricted,” the firm said in a Tuesday note to clients.

“The restriction reflects unexpected and material payer resistance to the Zolgensma price point” and suggests that even if Novartis produces more data from ongoing clinical trials of the product, “payers will only grudgingly expand coverage and penetration into the broader population,” they wrote.

A spokesperson for Novartis said via email that the company does not believe Bernstein's analysis represents "an accurate picture of the reimbursement situation or decisions that are occurring on the ground." "[M]ultiple patients across different SMA types, weights and ages" have been treated and covered, the spokesman added, and the company will provide additional details when it releases its second-quarter earnings results on July 18.

Zolgensma kicked up a pricing controversy long before the FDA approved it, after one Novartis executive suggested the gene therapy would be cost-effective at a price of $4 million to $5 million. Then the Institute for Clinical and Economic Review (ICER) released a report saying Zolgensma would not be cost-effective at any price higher than $1.5 million.

But after Zolgensma was approved and priced, Novartis won over the cost watchdogs by saying it would work with payers to develop outcomes-based installment payments spread over five years. That would bring the per-year cost to $425,000, half what it would cost to treat a patient with the leading chronic drug therapy, Biogen’s Spinraza, for 10 years, Novartis said at the time. ICER subsequently said Zolgensma is worth up to $2.1 million.

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Nevertheless, the initial coverage moves are more restrictive than Zolgensma’s label is. For example, Horizon Blue Cross of New Jersey is not covering the gene therapy for patients previously treated with Spinraza, Bernstein found, and nine of the companies won't allow concurrent treatment with Spinraza. Health Net is requiring any patient who'd used Spinraza to prove their disease progressed while on treatment before it will cover Zolgensma.

Four of the insurers Bernstein surveyed are refusing to treat presymptomatic SMA patients—a major red flag, Gal and colleagues wrote.

Gene therapy, after all, is meant to be a cure. Treating children before they develop symptoms offers the potential for a healthy life many can’t achieve with chronic drug therapy. And even though clinical trials ahead of Zolgensma’s approval focused on symptomatic patients, the FDA approval allows its use in those who haven't developed symptoms yet.

Therefore, Bernstein analysts said, “by making coverage choices that may be legally defensible but deny Zolgensma to patients who could clearly benefit, the payers are sending a clear signal that they are very unhappy with the price of Zolgensma.”

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Payer resistance may be bad news for Novartis, but it’s a boon for Biogen, at least in the short term. Bernstein’s analysis of Zolgensma coverage decisions prompted the firm to boost its estimates for Spinraza, which has a sticker price of $750,000 for the first year and $375,000 per year after that. Bernstein now projects Spinraza sales of nearly $1.4 billion by 2024, not $1 billion as it previously estimated.

Other Wall Street firms are even more optimistic about Spinraza’s ability to compete with Novartis’ pricey Zolgensma. The consensus estimate places sales of Spinraza at $2.2 billion this year, with receipts growing slightly each year until 2023, when it peaks at $2.3 billion in sales.

So can Novartis overcome early resistance from payers? Absolutely, Bernstein said. The company is running additional trials, which could deliver data to persuade insurance companies to ease up on their coverage restrictions. Novartis is also working with patient advocacy groups to “apply pressure to ICER,” the analysts wrote, in the hopes that the cost watchdog will increase its estimate of a fair Zolgensma price.

For Novartis, “it is a long path ahead,” Bernstein concluded.

But the broader message from payers about gene therapy is clear, the analysts said: If there is competition on the market, expect pushback on price.