Until recently, there had been multiple breakthrough therapies for rare diseases but few cures. Now, advancements in CGT (cell and gene therapies) create possibilities to cure the “incurable”. Yet behind the scenes, each wave of innovation poses challenges for manufacturers, healthcare systems, and payers. We interviewed pharmaceutical Pricing & Market Access experts, Dirk Kars and Christian Schuler, to find out how P&MA hurdles can be overcome, facilitating better access to future cell and gene therapies.
Dirk, Christian, Simon-Kucher has supported pharmaceutical companies in monetizing over 20 gene and cell therapy products around the globe. What is different for these innovations compared to “normal” drugs?
Christian: Cell and gene therapies are disease-modifying, typically, one-shot therapies that treat genetic defects, and in most cases carry very high value for patients and their healthcare systems. So far, gene therapies have targeted rare diseases with high unmet needs – orphan diseases. With no established standards of care, CGTs are often the only chance of saving lives and preventing other seriously disabling symptoms. It could therefore be considered the Holy Grail of pharmaceutical research.
What are some of the hurdles for manufacturers in marketing a cell and gene therapy?
Dirk: Cell and gene therapies are very innovative products, but they present a monetization challenge for both manufacturers and payers. When everything is potentially done with one shot, manufacturers would typically monetize the value of the product with one payment – that is, if they don’t consider alternative, innovative payment methods.
Today, based on limited real life and clinical trial experience, there is no guarantee that these therapies will help a patient through their entire lifetime. At least, conceptually, that should be the case but nobody can guarantee this at the launch of these drugs. Still, C>s are usually the best possible treatment option out there, especially for a very debilitating disease.
What about healthcare systems? What challenges do they face?
Christian: For any institution evaluating these drugs, there is a great level of uncertainty due to missing long-term clinical evidence, high upfront costs, and numbers of patients. Clinical trials often lack an active comparator to show the benefit of an orphan drug, and they often target surrogate endpoints, not hard, patient-relevant outcomes. The challenge for health technology assessment bodies when assessing a product’s value is that manufacturers are asking them to pay for a long-term effect without the supporting evidence.
Dirk: Another challenge is payer concern about the budget impact of these drugs in the first year. Some prices for cell and gene therapies go well beyond the million euro mark, but payers think in annual budgets, not in decades. Their short-term orientation is combined with a silo mentality, sometimes ignoring factors such as hospitalization costs, caregiving, and rehabilitation.
With any paradigm-changing therapy, there is also the concern of the ‘warehouse effect’ when a large number of patients will be treated in the short term. In addition, there could be instances when patients haven’t been previously diagnosed because there was no established marker to look for the disease. So, for some payers, the discussion will not only be about willingness to pay, but about ability to pay. In these cases, manufacturers will also need to work on alternative financing, as well as re-insurance solutions.
Achieving an agreement for a high-priced/curative therapy sounds almost like mission impossible. So, what can actually be done to change this?
Dirk: It is important to remember that the basic mechanisms of pricing and market access will always be value-based. That’s not so different from any other therapy. It's just exponentially more difficult in terms of the mechanics and how you make that commitment and agreement for a one-shot therapy. The value that these therapies deliver – the value of someone's life – is immeasurably high, and prices are a shock to the system. However, companies and payers are gradually becoming more open to value-based approaches. Some countries are considering costs from other areas, such as rehabilitation, or caregiver burden.
Christian: We’ve already mentioned issues surrounding low data quality. Here manufacturers also need to be flexible, committing to payers by reducing uncertainty and making products more affordable. So far, payers have responded well to alternative payment model toolboxes that allow them to choose the most suitable model for them in the long run, for example risk-sharing, pay-for-performance, or annuity payments.
Tell us more about value-based approaches for CGTs. How can this work?
Dirk: In short, value-based contracting means tying the payment for a therapy to the value delivered to the patient. These contracts remove the psychological sticker shock of very high prices and ensure healthcare systems get what they pay for. However, the payment and contracting infrastructure requirements and demands are high. A therapy’s long-term effectiveness needs to be tracked, which requires the right data-capturing capabilities and ideally personalized data on patients.
This could be a challenge in some markets, especially in terms of overcoming legal boundaries. Even today, performance-based contracting is still unknown territory for some of our clients’ lawyers and legal departments. There is a lot of activity on the compliance side to make these contracts waterproof.
Christian: Financing and accounting normally take place upon delivery of a product. But with an alternative payment model for a cell and gene therapy, there needs to be a payment long after the product has been administered. Difficulties may arise, for instance, when a patient switches their insurance. Who then carries the payment commitment?
There is also a risk for the manufacturer when they don’t immediately sell their product at the full price point. C>s can utilize these alternative payment models due to their distinct properties, but there are high transaction costs involved with these approaches for both the manufacturer and the payer.
Dirk: From experience, the long-term costs of offering a performance-based agreement are often underestimated. If manufacturers offer annuities, their cash flow needs to be discounted. That is a substantial amount over 10 years. It is crucial to calculate the real impact of this kind of commitment on revenues and weigh up the advantages and disadvantages for both sides. This is eye-opening for many manufacturers, especially when a simulation reveals the huge financial impact of changing just one small parameter such as interest rate or overall treatment/payment horizon.
What comes next? How will the market evolve?
Christian: Currently, prices for cell and gene therapies are driven by their huge therapeutic improvement, but also the comparably very small patient populations that they serve. This makes the overall budget impact of these products still manageable for most industrialized countries: price tags for these products are high, but the number of therapies is still rather limited.
However, we also know that there's an avalanche of CGTs coming. Several hundred are currently in clinical development, and not necessarily limited to orphan indications but also significantly larger (high patient-volume) indications such as diabetes, hemophilia, or Parkinson’s.
Dirk: We are entering a new dawn where future cell and gene therapies target non-orphan diseases – indications where there is already an existing competitor and standard of care. Especially in cases where the current standard of care already delivers good benefits, manufacturers will need to show where the true added value of a gene therapy lies, beyond the convenience of a one-time use. Otherwise, the value discussion becomes one of pure cost off-set.
What key obstacles could prevent these therapies from reaching the market?
Christian: Let’s take a chronic disease like type 1 diabetes, for example. There is already an established standard of care, and payers’ perceived unmet medical need is comparably low. Patients enjoy a close-to-normal life and price benchmarks for e.g. insulin have been established for decades.
A payer might ask: “Why pay more to cure the disease in one shot?” Without a doubt, such a treatment would receive extraordinary levels of public attention and pressure from patients and caregivers. Everybody would want the cure as soon as possible. Let's assume that it costs €50,000 to cure each type 1 diabetes patient – the sheer number of patients could drive healthcare systems into difficulties. There need to be other ways to solve this conundrum.
Dirk: “Fifty thousand times X” is a key challenge. Due to large patient populations, healthcare systems may need to establish waiting lists for cures, such as only treating the most advanced or severe cases in the first year. With clear disease progression, e.g. organ transplant lists, it may be more straightforward to decide who is treated. But with diabetes type 1, which has become fairly manageable, how would healthcare systems or payers decide who of the long waiting list of patients to treat first?
So how can manufacturers and healthcare systems overcome these challenges?
Christian: With cell and gene therapies, all parties are still learning as they go. What was believed 10 years ago does not necessarily hold true today, and many questions remain unanswered because not all treatments are there yet. Curing type 1 diabetes, for example, with one injection would be a true revolution. But when the time comes, it will require innovative solutions.
Dirk: Pricing will be a critical challenge for manufacturers. It requires an entire rethink of how to demonstrate and argument value. A value discussion is relatively simple for drugs with a clear survival benefit.
Where this is not the case, due to the nature of the disease or the existing standard of care, the arguments need to be softer. For instance, quality of life, ease of use, patient compliance, substitution of chronic therapy, reduced caregiver time, or reduction number of medical appointments. Manufacturers will have a hard time negotiating value packages, and healthcare systems will have to be more flexible when it comes to the inclusion of less tangible parameters. However, there is one thing that all parties involved already agree on: getting cures to patients is the highest priority.
Get in contact with the authors Dirk Kars and Christian Schuler to learn more!
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