Trends and Pricing Models for Cell and Gene Therapy

A Fierce Pharma article explored the treatment paradigm in raising cancer and rare disease, sharing panellist viewpoints from the Fierce Biotech Next Gen virtual event in June 2022. As the popularity of cell and gene therapies increases, the question of whether costs associated with such therapies will cause shock to healthcare systems, is becoming increasingly relevant.

In a new series of articles, Florent Gros and Dr. Rabab Nasrallah, respectively Partner and Investment Professional at Earlybird Health, discuss the pricing implications of new cell and gene therapies and how existing limitations in this field may influence venture financing in the years to come.

The Landscape of Cell and Gene Therapies

Cell and gene therapies (C&GTs) are increasingly changing the treatment paradigm in cancer and rare disease. As their popularity continues to rise, the question around whether the cost associated with such therapies will cause shock to healthcare systems becomes increasingly relevant. While from a capital needs perspective, understanding the limitations facing venture financing of these new modalities becomes evermore important, and how these limitations are being overcome will be fundamental to driving investment strategies.

Early development of C&GTs is rife in biotech startups, accounting for the personal experience of Earlybird’s Florent Gros in the executive development of such products at several companies including Gensight Bio, Vivet Therapeutics and Handl Therapeutics.

However, historically, marketing gene therapy products has been led by large pharmaceutical companies, and with high development costs, the price per therapy has been high. In the U.S., on average, cell therapies are priced at around $500K per treatment course, and gene therapies at around $1M per treatment course (mercer.us, 2021).

This raises the question of whether these treatments can be afforded by healthcare systems, and how the pressure will increase as C&GTs driven by precision medicine and individualized therapies come into play. With new C&GTs creating challenges for healthcare systems, payers and manufacturers, the question remains on how these new waves of innovation will impact pricing and market access.

Pricing C&GTs: Different Approaches

Payers have raised concerns around the budget impact of such drugs in the first year, where some C&GTs price over the €1M mark, but this is thinking in annual budgets and not decades of chronic disease burden on healthcare systems. The short-term visibility combined with a silo mentality sometimes ignores factors such as hospitalization costs, caregiving, and rehabilitation.

Novartis was one of the first companies to go to market following FDA approval in 2019 for its Spinal Muscular Atrophy (SMA) treatment Zolgensma (Fierce Pharma, 2022). Despite the drug’s $2.1 million price tag in the U.S., cost analysts at the Institute for Clinical and Economic Review (ICER) endorsed the drug for its ability to benefit SMA patients and deliver savings to the healthcare system (Fierce Pharma, 2019).

Current discussions with payers suggest that covering such high-cost therapies should be outcome-based and related to measurable clinical benefit (Simoens, S. et al., 2022). In this context, pharmaceutical companies need to implement long-term post-marketing surveillance, i.e., monitoring patients over long periods of time (years) to demonstrate therapeutic benefit — which has been difficult mainly due to data quality and legal boundaries.

As the orientation changes with the potential impact of C&GTs, industry and payers are becoming more open to outcome-based or value-based approaches, with some countries considering costs from other areas, such as rehabilitation or caregiver burden.

This would avoid burdening the reimbursement system in a given year, quite a win-win.

If you are a founder of a C&GTs company, feel free to connect with Florent and Rabab on LinkedIn or reach out to the Earlybird Health team at health@earlybird.com.

Did you enjoy this article? Please clap or share it. To learn more, stay tuned for the follow-up reflection on C&GTs’ implications from a VC perspective.