Key points
- Gene therapy usually involves a one-time treatment, but can cost anywhere from $2 million to $3.5 million per patient.
- As Gilead Sciences did with its hepatitis C drugs, gene therapy companies have used value-based pricing to justify high fees for new therapies.
- Unlike Gilead’s hepatitis C drugs, these gene therapy treatments have not yet cured rare diseases, but instead take care of the worst symptoms.
- 5 stocks we like better than CRISPR Therapeutics
Gene therapy treatments have made headlines as advances in gene editing have become mainstream thanks to the advent of CRISPR/Cas-9 technology. The shot heard ’round the world in the medical industry occurred on December 8, 2023, when the US FDA approved Casgevy, the first FDA-approved gene-editing treatment for sickle cell disease (SCD). Vertex Pharmaceuticals Inc. NASDAQ: VRTX and co-developed by CRISPR Therapeutics AG NASDAQ: CRSP.
The year 2024 could be the turning point for the general acceptance of gene therapy. There is one big obstacle for all the benefits it brings: the huge price. Gene therapy treatments range from $2 million to more than $3 million for a single treatment. Very few people can afford this treatment, and very few insurers cover reimbursement for these procedures.
Gilead Sciences Hepatitis C Drug Pricing Controversy
In 2013, Gilead Sciences Inc. NASDAQ: YELLOW has received FDA approval for its hepatitis C virus (HCV) drug, Sovaldi. This miracle cure had a success rate of 90% to 96% in curing HCV.
A course of treatment once a day for 12 weeks could cure HCV for a price of $84,000. In 2014, Gilead launched Harvoni, which combined two antiviral drugs into a single pill for $95,000 for a 12-week course of treatment. The treatment’s sticker shock caused severe backlash from patients, insurers, and ultimately Congress.
In 2015, a bipartisan investigation was launched into the prices of Sovaldi and Harvoni due to prices perceived as exorbitant, resulting in limited access to patients.
The investigation did not lead to any legal action but raised awareness about drug prices. The report found that Gilead prioritized profit maximization over patient affordability. Gilead has used lobbying strategies and restrictive covenants to maintain high prices.
Does value-based pricing justify the price?
Gilead argued that the high prices were due to value-based pricing and research and development costs, not to mention the $11 billion it spent to acquire Pharmasset and gain access to sofosbuvir. Value-based pricing considers what a patient would have to pay to typically treat the symptoms of an illness. Gilead has argued that its HCV drugs save lives and are much cheaper than the lifetime medical costs of treating HCV.
Treatment of chronic hepatitis C can cost an average of $10,000 to $30,000 per year by monitoring liver function, antiviral medications, and the risk of complications such as cirrhosis and fibrosis.
If liver cirrhosis were to form, medical costs could range from $30,000 to $70,000 per year and result in the need for a liver transplant. Liver failure costs could range from $50,000 to $100,000, including intensive care, medications and potential liver transplant.
A steal at $84,000
Gilead argued that paying $84,000 to $95,000 to alleviate future medical complications and costs makes the price seem like a bargain. The company said: “The pricing of Gilead treatments for hepatitis C reflects the significant clinical, economic and public health value of these medicines and is comparable to, or in many cases lower than, the cost of older, less effective regimens “.
In the end, insurers reluctantly agreed to cover the treatments under restrictive terms. However, there are many cases in which patients do not get clearance or clearance is delayed until they enter advanced stages of liver damage, such as cirrhosis.
Too good for its share price
Incidentally, analysts downgraded the stock because the drugs were too effective. Because they were treating HCV, they would cut off future recurring revenue after the 12-week treatment was completed.
Gilead Sovaldi and Harvoni’s revenues peaked at approximately $19.1 billion several years after launch and have followed a downward trajectory, falling to approximately $2.4 billion in HCV drug sales in 2022.
The price drops
The cost of Gilead’s HCV drugs has not decreased much, despite competition and generics. The current price of Harvoni depends on your insurance plan, pharmacy prices, discounts and coupons.
A 28 day (4 week) supply costs about $32,251 on average GoodRx Holdings Inc. (NASDAQ: GDRX), or $96,753 for a 12-week treatment. The generic version costs less than a third, about $10,090, and goes up to $3,681 for a 28-day supply or $30,270 for a 12-week treatment.
The multimillion-dollar costs of gene therapy
The cost of gene therapy treatments makes Sovaldi and Harvoni look like multivitamins. A one-time treatment of Vertex Pharmaceutical’s FDA-approved SCD gene-editing therapy, Casgevy, costs $2.2 million per patient.
Bluebird Bio Inc. NASDAQ: BLUE Gene therapies for SCD cost about $3 million each for a single treatment. Zynteglo therapy for transfusion-dependent beta-thalassemia (TDT) costs $2.8 million. Patients with TDT do not produce hemoglobin and require long blood transfusions on average twice a month or 16.8 transfusions per year. The average lifespan of TGT patients is 39 years, with an average medical cost of $5.4 million.
The price of Sarepta Therapeutics Inc. NASDAQ:SRPT the single infusion of the Elevidys gene therapy for Duchenne muscular dystrophy (DMD) costs $3.2 million.
Hemgenix by CSL Behring
A one-time infusion for Hemgenix, an FDA-approved gene therapy treatment for hemophilia B, costs $3.5 million compared to the conventional treatment’s average annual costs of $614,886.
Hemophilia B is a genetic disease that prevents the body from clotting, causing episodes of excessive bleeding. The average lifespan of a patient with hemophilia B is 77 years and total medical costs can exceed $47 million. Hemgenix can reduce the need for blood infusions for eight years, saving the U.S. healthcare system up to $5.8 million per treatment.
New medical therapies are generally expensive because they are new and generally address rare diseases with a limited population. Gene therapy, CAR T cell therapy, and immunotherapy are all new therapies. High research and development costs and value-based pricing contribute to the multimillion-dollar prices.
Treat the symptoms
Unlike hepatitis C, there are no definitive cures for SCD, TDT, hemophilia B and DMD. Current gene therapy treatments work to control and minimize symptoms, which can be drastic. Estimated lifetime medical costs for SCD are approximately $1.2 million. According to the Muscular Dystrophy Association, annual per-patient costs for DMD treatment are estimated at approximately $50,953.
Costs will remain high until competition and manufacturing costs decrease, as generic versions of the gene therapy are not available. It could come down to what the Centers for Medicare and Medicaid Services (CMS) and health insurers are willing to reimburse for treatments. Gene therapy companies have learned some lessons from Gilead Sciences. Value-based pricing can justify high prices, and treatment can be more profitable than cure.
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