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we have commercial success, but I also felt we should do it in a way I think the world should look at in the future. I actually had some conversations with some payers along the way who expressed the same things to me. Medical officers at plans said we can’t have another example of what happened in Europe. We gotta get this right here in the U.S., we gotta work on that together. I felt a shared responsibility to work on that with them and figure out the right solutions to try to do that.
X: What do you think the ripple effects of your payment models will be?
JM: As with anything in the world of policy writ large, as things become entrenched, they have a funny way of sticking that way for some time. I believe that if we do our job right, we might consequentially force a complete shift. People will always sell directly to payers and there won’t be these markups [from hospitals], there won’t be treatment centers taking on huge economic consequences by buying these products. That changes how things work within the whole supply chain, which has been squawked about and needed for a long time. And on the outcomes-based piece, I think people are going to have to say they are staying behind their product in the short term and the long term. We’ll see whether people follow in those footsteps or not.
X: There is obviously a lot of talk about the $425,000-per-eye price tag. How did you come up with it?
JM: We looked at what we thought the cost of blindness was and what the consequences were of this therapy’s ability to shift that. We modeled it in excess of $1 million, and to me that was corroborated by long-term disability policy payouts that are over that figure. There were about 25 court cases in states that release award information for people who either partially or fully lost their sight. The awards were $250,000 on the low end and $4 million on the high end of those cases, with an average at about the $1 million mark. That is independent corroboration having nothing to do with economic modeling. I think that’s helpful in showing how our society values sight. People are going to disagree with the inputs in our model, but we were transparent on how we thought and why we thought it was worth a certain amount.
X: ICER was among those who disagreed with your assessment. What’s your response?
JM: First, I just don’t think that they captured and understood the therapy’s impact on the quality of life of the patient. When you look at the numbers, they essentially estimated an 8 percent change in a patient’s quality of life. I think it’s stupid to get to an exact percentage, because guess what, that’s kind of hard to model directly. I don’t think you can listen to those patients standing at the ad comm and say that Luxturna has a marginal impact on someone’s life. That’s one thing. [Editor’s note: The 8 percent change Marrazzo outlines is a calculation based on figures from Table 5.6 of ICER’s report.]
The second thing is we just don’t see indirect costs the same way. We spelled out that the cost of loss of wages for caregivers over a [patient’s] first 18 years of life is substantial. Obviously that depends on what job you have and how much you’re making. But if you add that up over 18 years, even if you take the standard minimum wage or average wage in the country, you’re getting to a pretty consequential number over that period of time. And then if you add the patient’s productivity loss on top of that and say over the next 30 of 40 years the patient isn’t able to work, that’s a lot of money. They had a number that was literally an order of magnitude [different]. [Editor’s note: To calculate indirect costs, ICER included costs for education, productivity loss, informal care such as the unpaid time from caregivers, and nursing home care over a lifetime.]
X: How much of this type of intangible value should flow back to a drugmaker?
JM: I don’t think a manufacturer should take all of that value. What’s the right number? That’s a judgment call. We felt that the judgment came down to, there was a value point here, there was what payers would obviously try to negotiate and say well it’s only affordable here, and we came in between those two things. And I think by coming between those two things, we did two things. One is we didn’t necessarily grab all of the value, and two, we went above what payers were positioning as affordability. But we came in to a point where, most importantly, I believe we can drive access for patients, and help the peers that are going to come behind us in gene therapy.
X: When it’s just one therapy like this for a small population, that high priceis a drop in the bucket. But what happens when, over time, dozens of gene therapies with similar prices make it to market? Are the costs sustainable?
JM: In totality, as a portfolio of gene therapies, I think there are more opportunities than not to drive major cost offsets to the healthcare system. Most [therapies] for blindness—I don’t mean Luxturna—is likely to add cost, because there’s not a whole lot of direct medical cost in blindness, but a lot of indirect costs. But when you start talking about hemophilia, Pompe disease, AveXis with their [spinal muscular atrophy] product, which may be replacing a chronic drug in nusinersen (Spinraza), there are cost offsets. In one of our hemophilia trials, we had 10 patients that take, on average, $406,000 per year of [blood-clotting factor replacement drugs]. In a situation where you have a drug cost like that, and you can do a one-time gene therapy that can not only reduce annual bleeding rates by 100% and factor infusion rates by near 100%, you eliminate $406,000 worth of factor expense every single year and you keep doing that because the effect is durable.
If you look at a one-year period, and you have one time payment models where everything gets charged up front, there’s going to be major cost density issues in given years when these drugs launch because you’re going to have a huge bolus as these patients come in. But that’s why taking these payments and spreading them out, which is the work we’re doing with CMS, is so critical.
X: What will an installment plan with CMS look like?
JM: We’ll make sure the details are finished with CMS before we say what they are specifically. But the goal and premise is to say there’ll be some payment that we get up front, on delivery, some payment within some short period of time after that that will be tied largely to initial efficacy, and then some payment many years later that will be tied to durability of effect. It’s like the outcomes-based rebate, but just turned on its head. There, we get the money up front and only give it back if something doesn’t happen. Here, you turn it around. We get part of the money up front, we get part of it here and part of it here—it’s really who’s holding the cash versus who’s holding the receivable.