Transformative Medical Therapy Will Require New Cost-Benefit and Pricing Models

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Current regulations increase development and manufacturing costs, are a potential disincentive for investors


BOSTON – Gene replacement therapy (GRT) is a transformative medical technology. However, a new regulatory model and a pricing paradigm that fully accounts for its value will be needed to ensure its continuing development, according to a new paper published by Pioneer Institute.

GRT treats diseases by using or modifying genetic material and is particularly useful for rare diseases.  The first gene therapy available in the US was approved six years ago. “Gene therapy may only have to be administered a single time to treat the root cause of a disease, as opposed to traditional medical treatments that can be needed for a lifetime,” said Anne M. Sydor, PhD co-author of “Value and Pricing Models for Gene Replacement Therapies: The Current State of Affairs” with William S. Smith, PhD, and Robert Popovian, PharmD, MS.  “They can prolong life while reducing long term healthcare costs, patients’ level of disability, and caregiver burdens.”

But GRTs are far more expensive to develop and manufacture than traditional drug therapies and require much more significant up-front investments in new technology and infrastructure.  Achieving their full potential will require the development of a new pricing paradigm that fully accounts for the transformative value of the technology and the fact that therapies may only need to be administered once.

Current rules require GRT developers to invest in large-scale manufacturing capability before there are signs of clinical efficacy in humans and improvements in the manufacturing process could trigger a requirement for new safety studies and clinical trials.  Such rules are disincentives to innovation and add to already high development and manufacturing costs.

Long-term public and private investment will be needed to ensure the viability of gene therapy research over time. Unfortunately, federal and state drug-pricing pressures, high manufacturing costs, and regulatory uncertainty deter investors. Large biotech companies have been discontinuing gene therapy programs partly because of perceived risk and poor return on investment.  Most gene therapies are developed by small companies, making it essential that investors see a reasonable prospect of success.

Traditional medications used for years have a more gradual rise in revenue that continues until most eligible patients are using the drug, then plateaus at a predictable rate based on the number of people starting or discontinuing treatment.  This is not the case with GRT.

“This different revenue generation model demands a deep pipeline and faster development for GRT companies to support new research and development and provide a return for investors,” said William S. Smith, Ph.D., director of Pioneer’s Life Science Initiative.  “Regulations that are a disincentive to innovation and lengthen the time to the market may drive investors away.”