At a time when patients, investors and politicians are increasingly concerned about high drug prices, we are about to see the launch of one of the first $500,000-per-patient medicines.
How can such an eye-watering price be possible, and will it change the way we think about the value of new treatments?
The new medicine, recently approved in the U.S., is a super-innovative chimeric antigen receptor T-cell – or CAR-T – technology. It boosts the effectiveness of a patient’s own cells to fight blood cancer, offering some patients with acute lymphoblastic leukemia a potential cure. A patient’s white blood cells are modified outside of the body before being reinfused, armed to fight the cancer. This is a one-time treatment and has shown an 83% complete disease remission rate in treated patients.[1]
So what’s the catch? Well, the treatment is likely to cost in the region of $500,000 per patient.
The medicine’s effect is not the only thing that is truly innovative. How individuals will be asked to pay for the medicine is also interesting. The drug’s manufacturer will only require payment if the medicine demonstrates that a patient has benefited from the treatment. This approach, called ‘outcomes-based pricing’ is not entirely new, but it highlights how drug companies are increasingly thinking of ways of sharing the risk of treatment failure with the payer. It also underscores the company’s confidence in its new medicine.
In our view, this type of value-based pricing, or ‘pay for performance’, is set to become more widely used, in particular where results can be shown quickly in patients who would otherwise have limited treatment options.
We expect this new risk-sharing approach to encourage those who foot the bill for such drugs to think differently about how they value new treatments: if you only pay when the treatment is a success, the risk inherent in shelling out for such expensive medicines may no longer seem so daunting.
We think this could not only prove to be good news for patients, but also ease the concerns of investors and politicians.
[1] https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm574058.htm
Authors
Newton global research team
Our team of research analysts.
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