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The real drug pricing debate is upon us

Money stuffed inside a pill bottle
Illustration: Sarah Grillo/Axios

The first FDA approval of a multi-million dollar drug is expected any day now, sparking a new national debate over what we're willing to pay for medical breakthroughs.

Why it matters: The future of medicine is in personalized and scientifically advanced drugs, meaning that Zolgensma's imminent approval is just the beginning of the seven-digit price tag era. While drug companies say the drugs' effectiveness justifies their costs, some experts are pushing back.

Driving the news: The approval of Zolgensma, a gene therapy with the potential to cure spinal muscular atrophy, "could come any day," said Dave Lennon, president of Novartis-acquired AveXis.

  • The company hasn't yet announced the drug's list price, but it's estimated to cost around $2 million, the WSJ reported. Lennon said that the value of the product is between $4 and $5 million.
  • To help with the sticker shock, the company has floated allowing insurers to pay for the one-time drug over 3–5 years. It will also offer outcome-based arrangements, meaning insurers will receive rebates if patients don't have the expected results, Lennon said.
  • “We are currently in discussions with all of the largest payers within the U.S. around reimbursement for Zolgensma, and there’s high interest in completing contracts for that," he added.

The big picture: The list price drugmakers set isn't the price insurance plans will actually pay. Still, their decisions about how to cover Zolgensma could have a ripple effect: 68 gene therapies are expected to launch by 2024, according to Evaluate.

  • Lennon said that Novartis is looking at leveraging the same technology to address 4 other diseases, including Rett Syndrome and Lou Gehrig's disease.

What they're saying: "Outcomes-based arrangements are not a panacea to the root problem of excessively high drug prices," a spokeswoman for America's Health Insurance Plans said. "As with any new drug or therapy, insurance providers will evaluate the evidence to make coverage policy decisions."

  • "These are not real prices. This is their asking price," said Peter Bach of the Memorial Sloan-Kettering Cancer Center, who added that Novartis's proposed alternative payment structures don't solve the root problem: "These outcomes guarantees are intended to distract from the fundamental question of the price itself.”

Questions about gene therapies' affordability will be particularly pronounced in state Medicaid programs, which are constrained by state budgets.

  • "Not any one of them is going to break the camel’s back. But there’s a tsunami coming and all together it’s going to be problematic," said Matt Salo, executive director of the National Association of Medicaid Directors.

The bottom line: "There’s no doubt people and companies that bring to market gene-based therapy that cure previously incurable diseases should become rich. The question is how rich," said Walid Gellad, a professor at the University of Pittsburgh Department of Medicine.

  • "There are many other life saving therapies that cure conditions that we don’t pay $5 million for," he added.

Editor's note: This piece was clarified to show Novartis hasn't announced if it will allow patients to pay for the one-time drug over 3-5 years.