Breakthrough therapies are breaking patients' banks. Key changes could improve access, experts say.
CSL Behring’s new gene therapy for hemophilia, Hemgenix, costs $3.5 million for one treatment, but helps the body create substances that allow blood to clot. It appears to be a cure, eliminating the need for other treatments for many years at least.
Likewise, Novartis’s Kymriah mobilizes the body’s immune system to fight B-cell lymphoma, but at a cost $475,000. For patients who respond, it seems to offer years of life without the cancer progressing.
These single-treatment therapies are at the forefront of a new, bold era of medicine. Unfortunately, they also come with new, bold prices that leave insurers and patients wondering whether they can afford treatment and, if they can, whether the high costs are worthwhile.
“Most pharmaceutical leaders are there to improve and save people’s lives,” says Jeremy Levin, chairman and CEO of Ovid Therapeutics, and immediate past chairman of the Biotechnology Innovation Organization. If the therapeutics they develop are too expensive for payers to authorize, patients aren’t helped.
“The right to receive care and the right of pharmaceuticals developers to profit should never be at odds,” Levin stresses. And yet, sometimes they are.
Leigh Turner, executive director of the bioethics program, University of California, Irvine, notes this same tension between drug developers that are “seeking to maximize profits by charging as much as the market will bear for cell and gene therapy products and other medical interventions, and payers trying to control costs while also attempting to provide access to medical products with promising safety and efficacy profiles.”
Why Payers Balk
Health insurers can become skittish around extremely high prices, yet these therapies often accompany significant overall savings. For perspective, the estimated annual treatment cost for hemophilia exceeds $300,000. With Hemgenix, payers would break even after about 12 years.
But, in 12 years, will the patient still have that insurer? Therein lies the rub. U.S. payers, are used to a “pay-as-you-go” model, in which the lifetime costs of therapies typically are shared by multiple payers over many years, as patients change jobs. Single treatment therapeutics eliminate that cost-sharing ability.
"As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket,” says Patricia Goldsmith, the CEO of CancerCare.
“There is a phenomenally complex, bureaucratic reimbursement system that has grown, layer upon layer, during several decades,” Levin says. As medicine has innovated, payment systems haven’t kept up.
Therefore, biopharma companies begin working with insurance companies and their pharmacy benefit managers (PBMs), which act on an insurer’s behalf to decide which drugs to cover and by how much, early in the drug approval process. Their goal is to make sophisticated new drugs available while still earning a return on their investment.
New Payment Models
Pay-for-performance is one increasingly popular strategy, Turner says. “These models typically link payments to evidence generation and clinically significant outcomes.”
A biotech company called bluebird bio, for example, offers value-based pricing for Zynteglo, a $2.8 million possible cure for the rare blood disorder known as beta thalassaemia. It generally eliminates patients’ need for blood transfusions. The company is so sure it works that it will refund 80 percent of the cost of the therapy if patients need blood transfusions related to that condition within five years of being treated with Zynteglo.
In his February 2023 State of the Union speech, President Biden proposed three pilot programs to reduce drug costs. One of them, the Cell and Gene Therapy Access Model calls on the federal Centers for Medicare & Medicaid Services to establish outcomes-based agreements with manufacturers for certain cell and gene therapies.
A mortgage-style payment system is another, albeit rare, approach. Amortized payments spread the cost of treatments over decades, and let people change employers without losing their healthcare benefits.
Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
The new payment models that are being discussed aren’t solutions to high prices, says Bill Kramer, senior advisor for health policy at Purchaser Business Group on Health (PBGH), a nonprofit that seeks to lower health care costs. He points out that innovative pricing models, although well-intended, may distract from the real problem of high prices. They are attempts to “soften the blow. The best thing would be to charge a reasonable price to begin with,” he says.
Instead, he proposes making better use of research on cost and clinical effectiveness. The Institute for Clinical and Economic Review (ICER) conducts such research in the U.S., determining whether the benefits of specific drugs justify their proposed prices. ICER is an independent non-profit research institute. Its reports typically assess the degrees of improvement new therapies offer and suggest prices that would reflect that. “Publicizing that data is very important,” Kramer says. “Their results aren’t used to the extent they could and should be.” Pharmaceutical companies tend to price their therapies higher than ICER’s recommendations.
Drug Development Costs Soar
Drug developers have long pointed to the onerous costs of drug development as a reason for high prices.
A 2020 study found the average cost to bring a drug to market exceeded $1.1 billion, while other studies have estimated overall costs as high as $2.6 billion. The development timeframe is about 10 years. That’s because modern therapeutics target precise mechanisms to create better outcomes, but also have high failure rates. Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
Skewed Incentives Increase Costs
Pricing isn’t solely at the discretion of pharma companies, though. “What patients end up paying has much more to do with their PBMs than the actual price of the drug,” Patricia Goldsmith, CEO, CancerCare, says. Transparency is vital.
PBMs control patients’ access to therapies at three levels, through price negotiations, pricing tiers and pharmacy management.
When negotiating with drug manufacturers, Goldsmith says, “PBMs exchange a preferred spot on a formulary (the insurer’s or healthcare provider’s list of acceptable drugs) for cash-base rebates.” Unfortunately, 25 percent of the time, those rebates are not passed to insurers, according to the PBGH report.
Then, PBMs use pricing tiers to steer patients and physicians to certain drugs. For example, Kramer says, “Sometimes PBMs put a high-cost brand name drug in a preferred tier and a lower-cost competitor in a less preferred, higher-cost tier.” As the PBGH report elaborates, “(PBMs) are incentivized to include the highest-priced drugs…since both manufacturing rebates, as well as the administrative fees they charge…are calculated as a percentage of the drug’s price.
Finally, by steering patients to certain pharmacies, PBMs coordinate patients’ access to treatments, control patients’ out-of-pocket costs and receive management fees from the pharmacies.
Therefore, Goldsmith says, “As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket.”
Transparency into drug pricing will help curb costs, as will new payment strategies. What will make the most impact, however, may well be the development of a new reimbursement system designed to handle dramatic, breakthrough drugs. As Kramer says, “We need a better system to identify drugs that offer dramatic improvements in clinical care.”
"Making Sense of Science" is a monthly podcast that features interviews with leading medical and scientific experts about the latest developments and the big ethical and societal questions they raise. This episode is hosted by science and biotech journalist Emily Mullin, summer editor of the award-winning science outlet Leaps.org.
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Meet the Psychologist Using Psychedelics to Treat Racial Trauma
Monnica Williams was stuck. The veteran psychologist wanted to conduct a study using psychedelics, but her university told her they didn't have the expertise to evaluate it via an institutional review board, which is responsible for providing ethical and regulatory oversight for research that involves human participants. Instead, they directed her to a hospital, whose reviewers turned it down, citing research of a banned substance as unethical.
"I said, 'We're not using illegal psilocybin, we're going through Health Canada,'" Williams said. Psilocybin was banned in Canada in 1974, but can now be obtained with an exemption from Health Canada, the federal government's health policy department. After learning this, the hospital review board told Williams they couldn't review her proposal because she's not affiliated with the hospital, after all.
It's all part of balancing bureaucracy with research goals for Williams, a leading expert on racial trauma and psychedelic medicine, as well as obsessive compulsive disorder (OCD), at the University of Ottawa. She's exploring the use of hallucinogenic substances like MDMA and psilocybin — commonly known as ecstasy and magic mushrooms, respectively — to help people of color address the psychological impacts of systemic racism. A prolific researcher, Williams also works as an expert witness, offering clinical evaluations for racial trauma cases.
Scientists have long known that psychedelics produce an altered state of consciousness and openness to new perspectives. For people with mental health conditions who haven't benefited from traditional therapy, psychedelics may be able to help them discover what's causing their pain or trauma, including racial trauma—the mental and emotional injury spurred by racial bias.
"Using psychedelics can not only bring these pain points to the surface for healing, but can reduce the anxiety or response to these memories and allow them to speak openly about them without the pain they bring," Williams says. Her research harnesses the potential of psychedelics to increase neuroplasticity, which includes the brain's ability to build new pathways.
"People of color are dealing with racism all the time, in large and small ways, and even dealing with racism in healthcare, even dealing with racism in therapy."
But she says therapists of color aren't automatically equipped to treat racial trauma. First, she notes, people of color are "vastly underrepresented in the mental health workforce." This is doubly true in psychedelic-assisted psychotherapy, in which a person is guided through a psychedelic session by a therapist or team of therapists, then processes the experience in subsequent therapy sessions.
"On top of that, the therapists of color are getting the same training that the white therapists are getting, so it's not even really guaranteed that they're going to be any better at helping a person that may have racial trauma emerging as part of their experience," she says.
In her own training to become a clinical psychologist at the University of Virginia, Williams says she was taught "how to be a great psychologist for white people." Yet even people of color, she argues, need specialized training to work with marginalized groups, particularly when it comes to MDMA, psilocybin and other psychedelics. Because these drugs can lower natural psychological defense mechanisms, Williams says, it's important for providers to be specially trained.
"People of color are dealing with racism all the time, in large and small ways, and even dealing with racism in healthcare, even dealing with racism in therapy. So [they] generally develop a lot of defenses and coping strategies to ward off racism so that they can function." she says. This is particularly true with psychedelic-assisted psychotherapy: "One possibility is that you're going to be stripped of your defenses, you're going to be vulnerable. And so you have to work with a therapist who is going to understand that and not enact more racism in their work with you."
Williams has struggled to find funding and institutional approval for research involving psychedelics, or funding for investigations into racial trauma or the impacts of conditions like OCD and post-traumatic stress disorder (PTSD) in people of color. With the bulk of her work focusing on OCD, she hoped to focus on people of color, but found there was little funding for that type of research. In 2020, that started to change as structural racism garnered more media attention.
After the killing of George Floyd, a 46-year-old Black man, by a white police officer in May 2020, Williams was flooded with media requests. "Usually, when something like that happens, I get contacted a lot for a couple of weeks, and it dies off. But after George Floyd, it just never did."
Monnica Williams, clinical psychologist at the University of Ottawa
Williams was no stranger to the questions that soon blazed across headlines: How can we mitigate microaggressions? How do race and ethnicity impact mental health? What terms should we use to discuss racial issues? What constitutes an ally, and why aren't there more of them? Why aren't there more people of color in academia, and so many other fields?
Now, she's hoping that the increased attention on racial justice will mean more acceptance for the kind of research she's doing.
In fact, Williams herself has used psychedelics in order to gain a better understanding of how to use them to treat racial trauma. In a study published in January, she and two other Black female psychotherapists took MDMA in a supervised setting, guided by a team of mental health practitioners who helped them process issues that came up as the session progressed. Williams, who was also the study's lead author, found that participants' experiences centered around processing and finding release from racial identities, and, in one case, of simply feeling wholly human without the burden of racial identity for the first time.
The purpose of the study was twofold: to understand how Black women react to psychedelics and to provide safe, firsthand, psychedelic experiences to Black mental health practitioners. One of the other study participants has since gone on to offer psychedelic-assisted psychotherapy to her own patients.
Psychedelic research, and psilocybin in particular, has become a hot topic of late, particularly after Oregon became the first state to legalize it for therapeutic use last November. A survey-based, observational study with 313 participants, published in 2020, paved the way for Williams' more recent MDMA experiments by describing improvements in depression, anxiety and racial trauma among people of color who had used LSD, psilocybin or MDMA in a non-research setting.
Williams and her team included only respondents who reported a moderate to strong psychoactive effect of past psychedelic consumption and believed these experiences provided "relief from the challenging effects of ethnic discrimination." Participants reported a memorable psychedelic experience as well as its acute and lasting effects, completing assessments of psychological insight, mystical experience and emotional challenges experienced during psychedelic experience, then describing their mental health — including depression, anxiety and trauma symptoms — before and after that experience.
Still, Williams says addressing racism is much more complex than treating racial trauma. "One of the questions I get asked a lot is, 'How can Black people cope with racism?' And I don't really like that question," she says. "I think it's important and I don't mind answering it, but I think the more important question is, how can we end racism? What can Black people do to stop racism that's happening to them and what can we do as a society to stop racism? And people aren't really asking this question."