The Food and Drug Administration recently approved betibeglogene autotemcel (Zynteglo), the first cell-based gene therapy for the treatment of adult and pediatric patients with beta-thalassemia who require regular red blood cell transfusions. Following its US regulatory approval, Bluebird Bio announced a price for Zynteglo of $2.8 million per patient. Prior to the manufacturer’s price announcement, we—the Institute for Clinical and Economic Review (ICER)—determined a value-based price range for Zynteglo between $2.1 and $2.4 million per patient using conventional cost-effectiveness analysis methods from the health system perspective.
When conventional cost-effectiveness analysis methods are used to determine a value-based price for a new intervention, prices are based not only on the intervention’s health gains but also any savings from offsetting costs associated with current standards of care, regardless of whether the standard of care itself is priced to align with value according to opportunity costs within the US health system.
Standard-Of-Care Price Distortions Lead To Distorted Value-Based Prices Of Potentially Curative Treatments
In hemophilia A, for example, conventional methods suggest that a one-time therapy resulting in a cure could be valued at more than $10 million given the opportunity to offset expensive standard supportive care. Bundling up all the cost savings of potentially inefficient standards of care and assigning those savings to the manufacturer in the calculation of a value-based price only magnifies the impact of the unreasonableness of the cost of current care. This conventional method represents a type of “inheritance” approach in drug pricing that guarantees that any price distortions within the standards of care will live on for future therapy generations, handing down price distortions in the prior generation to that of the present. We have previously argued for the introduction of an approach in which potential cost savings are “shared” between the manufacturer and the health system, with a suggested 50/50 split between the manufacturer and health system. This approach facilitates policy debates even if there are no normative standards by which to determine what percentage of the cost savings that should be assigned to the manufacturer and what percentage should be returned to the health system. We applied this new approach to the specific case of Zynteglo to explore the impact of shared savings on estimates of a value-based price for this intervention.
The Zynteglo Example
What is the recommended price for Zynteglo based on conventional value assessment methods (that is, 100 percent of cost offsets awarded to the manufacturer)?
Under conventional value assessment methods, all cost savings estimated to be achieved with a new treatment are allocated to the manufacturer. This approach is aligned with incentives to reward treatments that generate cost savings in the system. These methods assume, however, that existing standards of care treatment is priced according to the value it provides. In the Zynteglo example, a one-time gene therapy is anticipated to replace a standard of care consisting of transfusion and chelation therapy for eligible patients. Assuming that existing treatments are appropriately priced, and 0 percent of the cost savings associated with the treatment are assigned to the health system, we determined a value-based price range for Zynteglo between $2.1 and $2.4 million from the health system perspective. Average lifetime discounted standards of care costs totaled $2.26 million. These findings were based on a validated decision-analytic model, comparing Zynteglo to standards of care for the treatment of transfusion-dependent beta thalassemia calculated at thresholds of $100,000 and $150,000 per quality-adjusted life year (QALY) gained.
What is the recommended price for Zynteglo when 100 percent of the cost offsets are awarded to the health system?
Building on the prior ICER report, we conducted an analysis that awards 100 percent of the cost savings to the health system rather than including the cost savings into a value-based price. This alternative approach assumes that the gene therapy should only be priced based on estimated health gains (with no added value being assigned to cost savings). Using the same decision-analytic model, we calculated value-based prices ranging from $480,000 to $750,000 at thresholds of $100,000 and $150,000 per QALY gained.
What is the best percentage of cost offsets that should be awarded to the manufacturer?
To appropriately account for potentially inefficient standards of care treatments, the optimal percentage of cost offsets that could be awarded to the manufacturer lies somewhere between 0 percent and 100 percent. Under the Zynteglo example, we illustrate the range of value-based prices according to the percentage of cost savings not assigned to the manufacturer but rather assigned as cost savings to the health system at $100,000 and $150,000/QALY thresholds (exhibit 1).
Exhibit 1: Relationship between value-based prices for Zynteglo and percent shared savings with the health system
Source: Authors’ analysis. Notes: The blue line represents the value-based price when calculated using a $150,000/QALY threshold and the red line represents the value-based price when calculated using a $100,000/QALY threshold. QALY is quality-adjusted life year.
For example, if 50 percent of cost savings were shared with the manufacturer in terms of a value-based price but the remaining 50 percent of cost savings were returned to the health system, the value-based price range for Zynteglo would be $1.30 to $1.57 million (exhibit 2). The best percentage of cost offsets to return to the health system rather than award to the manufacturer depends upon the degree of price distortions in the current standards of care.
Exhibit 2: Value-based prices for Zynteglo according to percent shared savings at $100,000 and $150,000/QALY thresholds
Source: Authors’ analysis. Note: QALY is quality-adjusted life year.
Sharing Cost Offsets Is One Solution To Account For Price Distortions In Value Assessments
For gene therapies such as Zynteglo to be sustainable in the US, modifications to conventional cost-effectiveness methods may be required to best support policy making and price negotiations. Such alternative approaches are most useful when there are concerns about the affordability or value for money of standards of care therapies or concerns about the lack of future generic competition. Questions remain around the appropriate level of shared savings; in addition to measuring the value-based price for standards of care therapies, considerations such as research and development costs, federal investments in research, and size of the eligible patient population may play a role in informing these discussions. Emerging research from a dynamic efficiency lens over the lifecycle of an intervention suggests that 24 percent of the long-term value should be returned to the manufacturer to incentivize future innovation. However, additional research is needed to map conventional cost-effectiveness analyses to approaches that take a dynamic lifecycle approach to estimating value.
Where Do We Go From Here?
A shared savings approach for one-time treatments to account for potentially inefficient standards of care is not the only option to manage market price distortions. We have proposed an annual cost-offset cap as another approach. This approach caps the total cost offsets awarded to a new intervention at $150,000 per year. Others support accounting for these standards of care market distortions and adjusting value-based prices accordingly but argue that ICER’s two adjustment solutions fall short of providing a definitive answer on how much adjustment is best. The annual cost-offset cap is suggestive of a social opportunity cost valued at $150,000 per QALY gained for the current standards of care; however, current standards of care will not achieve complete units of health gained versus its previous next best alternative, thus suggesting lower possible offset caps. One could argue that efforts to identify and use a value-based price for standards of care versus its previous next best alternative is another solution; however, there are feasibility challenges in measuring and conducting this additional hypothetical analysis.
In an environment with expected growth in one-time therapies, there is an urgent need for research to respond to questions about appropriate handling of standards of care market price distortions. To properly incentivize one-time therapies, the field must agree on best practices to identify, measure, and adjust for these market price distortions. In doing so, we will continue to incentivize innovative one-time treatments that yield population health gains while eliminating system inefficiencies for future generations.
Authors’ Note
This work was funded by the Institute for Clinical and Economic Review. The authors acknowledge all contributors to the Betibeglogene Autotemcel for Beta Thalassemia: Effectiveness and Value; Final Evidence Report who laid the foundation for the research presented in this article.
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