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- [00:01]
Kurt Nickish
You're listening to Is Business Broken, a podcast from the Merotra Institute for Business, Markets and Society at Boston University Questrom School of Business. I'm Kurt Nickish. On today's episode we look at the business of gene and cell therapies. These are innovative treatments, sometimes called living drugs. They have the potential to cure an individual of a rare disease by modifying that person's genes. Scientists are working on these therapies for cystic fibrosis, sickle cell disease, rare cancers and more. But due to the labor intensive individualized treatment, these drugs are expensive to the tune of millions of dollars per patient. How do we ensure continued innovation and provide access to life saving treatments without breaking the bank? That's the question we posed at a live event that BU Questrom held this past spring. I talked to Andrew Obershain, CEO at Bluebird Bio Michael Sherman, Venture Partner at RA Capital Management, Congressman Jake Auchincloss, the Democratic U.S. representative for Massachusetts 4th congressional district and Rena Conti, Dean's Research Scholar and Associate professor of Markets Policy, Public Policy and Law at BU Questrom School of Business.
- [01:36]
Audience Member
Can we just give all these amazing panelists a big hand to a warm.
- [01:40]
Andrew Obershain
Welcome to get started.
- [01:45]
Audience Member
So Andrew, let's start with you. What are gene and cell therapies briefly? And why are they revolutionary?
- [01:55]
Andrew Obershain
First of all, thank you for having me here today. So cell and gene therapies at their best and at their simplest are a one time treatment that are a cure for what have historically been chronic genetic diseases. Genetic diseases that could be treated but not cured. And this has been a long time coming. The research into gene therapy started in the 80s and the 90s. We've had many failures over the years there. We thought this day would never come. In the early 2000s, we got to a point with gene therapy where we started to cure one patient at a time. We'd cure one patient and then we would see a number of failures. And then recently, the 2010s, 2020s, we finally gotten to a point where it's been repeatable that we've been able to essentially correct what gene therapy and cell therapy is correct genetic defect in somebody and have it work and have that patient be cured of a disease. So I'll talk about Bluebird just for a second. We have now had three gene therapies approved in the U.S. the first one is for a very rare disease called adrenal leukodystrophy. These boys get diagnosed at an early age. If they're not treated, they will progress and die. Within five years, it's a neurological disease. We've been able to give them a treatment that can actually delay the progression of that disease quite significantly. We've also brought forward two therapies for hemoglobinopathies. Big word. It basically means disorders of the blood system. So one for beta thalassemia. These patients need blood transfusions every three weeks to stay alive because they're missing a healthy copy of hemoglobin. We're able to replace that copy of hemoglobin, and these patients are able to live transfusion free. And we've brought forward a therapy for sickle cell disease which leads to severe pain crises that are so debilitating, these patients go to the hospital multiple times a week. We've been able to replace the faulty copy of hemoglobin with a healthy copy of hemoglobin and keep these patients out of the hospital and living a life more normal than they've ever lived.
- [03:52]
Audience Member
Andrew, you just started treatment for that. The first commercial patient this month, I read.
- [03:58]
Andrew Obershain
We did in fact, actually just last week, we actually collected cells from the patient, our first commercial sickle cell patient. Those cells would be sent to a manufacturing plant to have that be corrected, a healthy copy of hemoglobin put into those cells, and then those cells will be shipped back to the hospital, the patient will be brought back in, and those cells will be given to the patient. And the patient should live, hopefully disease free for the rest of their life.
- [04:24]
Audience Member
I mean, we all imagine drug factories pumping out lots of pills into bottles. This is almost, I mean, not to make you sound like an artisanal pickle maker, but that sounds like very bespoke. Right? You're like really doing a lot of work for one person.
- [04:39]
Andrew Obershain
It is really bespoke. So just imagine these cells come in. There's people in white suits who go into a clean room for two days at a time to manipulate the cells, put the missing gene in, create the bag of cells, then gets froz to the hospital. It really is. It's individuals making an individual drug for an individual patient.
- [05:01]
Audience Member
It costs $3 million is what I read.
- [05:04]
Andrew Obershain
Yeah. So we have three therapies. They range cost from 2.8 to $3.1 million.
- [05:09]
Audience Member
Yeah, it's a unique market. Right. A lot of people would go after bigger things or they would go after, I don't know, long Covid millions of people suffering from it today. Big market, you can sell lots of drugs. If you develop for something like that, what are the unique risks to doing something? So bespoke and specialized, in a word, bankruptcy.
- [05:33]
Andrew Obershain
This is hard. We've been around since 2011 and at various points in time people have been very excited about us or not excited about us. At one point I think we had a market capitalization of $10 billion under my leadership that is now 200 million. And we have made fantastic progress scientifically. But that has. And so what it really takes is a very dedicated group of people dedicated to a mission to bring these forward. But there is a lot of risk I want, you know, I think we actually very, very appropriately we have the three sources of funding up here. We have academia in general, we have venture capital and finance. Right. And we also have government with the nih. There's a lot of sources of capital for innovation and all three are necessary for a healthy ecosystem. All three exist in Boston, thankfully. And you do take a lot of risk as a development company, gene therapy company, both the manufacturing side, the science side and in particular, no one's ever commercialized these before. So there's a lot of uncertainty from our funders about how these therapies would be brought to market.
- [06:34]
Audience Member
Michael, let's turn to you and bring you in the conversation we've just heard about these really innovative, life changing therapies and their cost. Your firm invests in these products. I'm just curious what motivates your funders and what's the investment thesis there?
- [06:50]
Michael Sherman
Yeah, and thank you. And I'm going to speak from the investor perspective, but also even probably more importantly from a payer perspective. So I've been in RA for about a year and a month now. Before that I've worked in all areas of the healthcare ecosystem, but most recently at Harvard Pilgrim Healthcare in point 32 Health, which was formed as result of a merger. As chief medical officer and you know, it's hard, what they're doing is hard. Curing cystic fibrosis, which used to be a death sentence. I work with people who perfectly healthy thanks to what came out of Vertex. Changing the DNA in cells, that's hard and it's risky. And by the way, there has to be a reward to attract capital or not going to see any more of these innovations. If you can't earn a return for doing what you've done, then God help us. So that's hard. You know what shouldn't be hard? Paying for this. Yet it's a financing system that was not designed for these. Our last decade, last century, last millennium financing system that's created challenges and I saw that as an opportunity, as a payer to how do we resolve that? How do we cut through this? Because at the end of the day, the question shouldn't be what does it cost? It's what are you getting for your money? And it's very clear through value assessments and other technical things I can get into if you'd like. These are worth it if they work. So as a health plan, cmo, I changed the dialogue from how do we say no to this? Which is kind of the knee jerk response, particularly when you don't have a lifetime's worth of data to support a lifetime cure. But how do you get to yes, and there are challenges. Limited data, rare diseases, it's hard to do perfect clinical trials. How do you sort through that? When the first gene therapy came out, luxturna for a rare type of blindness. I remember being at the table at Duke Margolis center in dc, sitting across from someone named Jeff Marrazo, and he was CEO of a company, Spark, which had come up with that drug. And I challenged him, I said, okay, I believe it's worth close to a million if it works. What if it doesn't? That led to a discussion where we came up with a value based agreement, meaning that there was some money paid back if it didn't do what it was supposed to. Not just immediately, but after a couple of years. We have followed a similar approach with Novartis for the Solgensma and working with Bluebird. And that's become part of the ethos that de risks it. It allows payers and others to say, yes, we're going to cover it without hiding the uncertainty. So that's important. And I'll remind you, in these cases, we could say go back, do more trials. These are cases where cald, et cetera, there may not be other treatments. People are suffering and dying. That's not a really good response, is it?
- [09:25]
Audience Member
Definitely not. You're also seeing this as a trained physician too, right? You've had those conversations with patients before. It's great to hear about the insurer perspective. From the investment venture partner perspective, you're saying now it shouldn't be hard to pay for this, but it is. So when you're, I mean, how does that factor this uncertainty factor into what you fund?
- [09:47]
Michael Sherman
Well, first of all, it may not work. There's a high failure rate. We see the winners, we don't see the losers. There has to be enough of a roar to attract capital or we won't see these innovations. So we do our homework. We also try to advocate, for example, we don't Want there to be barriers to coverage. For example, there may be thousands of dollars in cost here. We actually got together with the pharma companies, said we're going to minimize it. In addition, those value based agreements, we said we're not going to charge much and frankly there probably shouldn't be any cost share. This isn't like a branded drug where if we give you a better deal on a generic, you'll go with a high value generic. If you are getting these, you probably need them. So there are ways to de risk it. The other thing is the importance of advocating. Two thirds of the employers are in self insured programs and they don't have to follow the same rules. So people, there are people who think they're insured and they find out I'm not actually covered for that. For these cases we need to be clear. It's unconscionable to deny these. It's not okay. We need to shine a spotlight on that. We need to ostracize employers who are opting out and we need more solutions.
- [10:51]
Audience Member
I love how you're jumping to solutions. We're going to get there. Congressman, you're very familiar with this. You're familiar with this industry. You're also trying to keep health care costs down. You're trying to keep insurance costs cheaper for employers. It's that something that funds, you know, helps the private sector grow. You've got a lot to balance. As a policymaker, what's your philosophy on this?
- [11:14]
Congressman Jake Auchincloss
I think it starts by asking the right question. When it comes to cost, the question is cost to whom? Cost to society or cost to the patient? Very different things. When a person has a disease, society is paying that cost and they're paying that cost really at the end of the day in two different ways. One is in wages or one is in molecules. And what I mean by that is someone has a disease, let's take heart failure, there's lost wages from that individual because of the disease that they have and the time out of the workforce. But then there's also the wages. You are paying doctors and nurses and medical device technicians and physicians, assistants, the caregivers, the skilled nurses at the facilities. Huge amount of wages and those inflate over time. Labor costs are going up on a secular basis. And so society can pay for disease with wages, lost wages and also with wages for caregiving and skilled medical care. Or society can address disease with molecules with the biopharmaceutical intervention. And the cost comparison is not even close. It is always a good deal to Pay for disease with molecules over wages. And so when we talk about cost from a social perspective, society gets a bargain with new medicines. Look at heart failure, for example. Heart failure, just the clinical cost of heart failure. Forget about caregiver burden or lost productivity. Literally just what Medicare pays for heart failure. To hospitals every year for round numbers here, 10 million people is about $250 billion. Now let's imagine as is happening in Boston right now, potential genetic therapies that would significantly mitigate, even eliminate heart failure amongst the population. That company, I can guarantee you, is not in its entire lifetime going to make $250 billion in revenues, which is what CMS spends every single year on it already. We know off the bat, a new effective drug is a bargain for society. Biomedical innovation is a great deal, always has been. We got to fund the basic research, we got to fund the CMS reimbursement to make it happen. But then we talk about cost of the patient there. My answer is kind of simple. It should be zero. Because there's a social contract inherent in insurance which says you pay a premium to an insurance company so that when a doctor prescribes you an appropriate treatment, they cover it. There is no moral hazard in health insurance. Nobody is overusing a sickle cell therapeutic. No one's trying to get high off their asthma inhaler like this. This is not auto insurance, where the insurance companies say, all right, well, we gotta make sure this person has a little bit of skin in the game. So they're driving carefully. No, not with health insurance. It's a social contract. And giving patients high out of pocket exposure is frankly indefensible.
- [14:12]
Audience Member
And in this case, just impossible. Right. If you're Talking about a $3 million drug, it's just.
- [14:17]
Congressman Jake Auchincloss
Well, we say impossible, except as Mike pointed out, we've got self insured employers who effectively are giving their beneficiaries 100% out of pocket exposure by neglecting to cover that intervention. And you know, you're an employee, let's say you come, you get a new job at an exciting firm, small company, you don't have any kids yet get the health insurance benefits. You have a kid, your kid has a rare genetic condition. Thank God there actually is a cure for this thing. But you didn't go through the 75 pages of health insurance to see if this little genetic condition that you never heard of and you didn't even have kids for if that was covered, and now you've got 100% out of pocket exposure. It's impossible, It's Unconscionable. The good news is that it doesn't have to be this way because insurance works beautifully for events that are rare, unpredictable and expensive. And we just described a genetic disorder. Rare, unpredictable and expensive. This is the ultimate insurable good. We just have to force insurance companies to do the right thing.
- [15:17]
Audience Member
Rena, let's go to you. I mean, a lot of what we've been talking about, these are themes that have always been there for paying for healthcare. You research this specifically. What's unique about this market, these new therapies and this slice of rare diseases with very promising, but at least initially expensive therapies.
- [15:37]
Rena Conti
These drugs are very interesting and unique because they are priced based on their value specifically. While $1 million or $3 million sounds like a lot of money in practice, these products have the promise of providing a life well lived, an education served, a family that can make choices about taking care of their kids and going to work. And so the longevity promise of these therapies, the curative nature of these therapies makes them actually completely a good deal. Just to put a fine point on how unique this is, much of my work has been in the cancer space and in other specialty disorders where we're thinking about these products providing one month of additional life, maybe in a very unique patient population. And those products aren't value based in terms of how they're priced. And so this is a very unique position in which the companies are being exceptionally responsible in their pricing and yet our system does not work for them.
- [16:53]
Audience Member
Why doesn't our system work for that? If it's a good deal, where's the sticking point?
- [16:58]
Rena Conti
Sure. So there are two points. The first is that in work that I've done, we've estimated how much money we expect to spend on these therapies if they're fully penetrate into the US market. In other words, if everybody who's eligible for using them actually gets treated in the next 10 years, we estimate, if all things go as well as they possibly could, that we're going to spend approximately $25 billion a year on these therapies. That is a drop in the bucket of how much we spend on pharmaceuticals. We spend approximately trillion dollars, a little bit less on prescription drugs each year in the United States. We also spend almost $5 trillion a year on health care. Again a drop in the bucket. However, our estimates suggest that two thirds of the population who are eligible for these therapies are children or they're working age folks who are commercially insured. Both of those patient populations are fundamentally Underinsured. In other words, we are at the mercy of insurance companies that can either slow walk coverage and access to these therapies or can actually laser out access to these therapies altogether just because of.
- [18:23]
Audience Member
The way our insurance system is set up. Essentially.
- [18:26]
Rena Conti
Although we have made great strides in providing access to insurance across the US population over the past 10 years, there are loopholes in how much these insurers have to provide care for very expensive things. This area of medicine is one of those places where there's a loophole in how generous insurance can be.
- [18:51]
Congressman Jake Auchincloss
There's also a mismatch in liabilities and benefits. And I think Mike, I'm sure could speak to this as well, in that you pay as an insurance company, let's say $3 million for a one off treatment and it works. And now this beneficiary of yours has a lifetime ahead of them. The challenge is, is that in the grand scheme of commercial insurance, that beneficiary is going to churn. They're going to go to a different health insurance company and so you've paid for the treatment, but then the downstream premium payments coming from this healthy individual now are going to be accumulated by a different insurance company. And this is especially challenging as you get to the population that is sub Medicare age, but that could be screened for issues that Medicare will pay for. So I mean, Alzheimer's is the big one, right? We're probably going to be in a situation 10, 20 years from now where when you're 40 years old, 50 years old, you can get a diagnostic screening kit, some part genetics, some part neurological testing, and you'll get pretty solid feedback about your likelihood, your predisposition for Alzheimer's and things that you could do to forestall Alzheimer's. The problem is, is your commercial health insurance company, if you're under an ERISA plan, is probably going to say I don't, it's not really my problem, that's Medicare is paying for that by the time you get Alzheimer's. Now that's not totally true because there is competition between health plans and people are going to really want those tests and they're going to demand those tests from their employer sponsored plans. But you can see the challenge here and there is a case to be made, as happened with dialysis, for Medicare to reach in to the commercially insured population age groups and start to cover things like diagnostics for Alzheimer's that are in the grand scheme of things actually really going to save money for cms.
- [20:34]
Michael Sherman
Yeah, I'd agree. I think one model for all of these gene therapy approaches is to carve it out into a federal fund. Everyone pays a little bit and it's covered. You don't worry about the difference between insurers. Again, two additional observations here. One is what Jake said is correct payers when they're not sure what others, first thing they do look over their shoulder. We don't want to be the only one covering that. So implication your data needs to be really good and it needs to be unconscionable to deny. The second point, which the congressman is absolutely correct about is 2/3 of the population is now self insured. Now if you're an employee, you have a card in your wallet, it says Blue Cross, Blue Shield or human. You don't have a clue if your employer is self or fully insured. And the fully insured have to play by the rules that the federal government has established and their state requirements and it's and they have to follow. They can't kind of go rogue on policies. The self insured can. In essence they can say we're not covering any drug over $250,000. Send them. And there are businesses which saying oh we'll throw them out into the patient assistance programs which creates a disincentive for pharma companies that have launched them to continue doing so. So again I think those are huge loopholes and can people who have jobs sometimes in healthcare institutions don't realize that they're at risk. So again I think that I don't want to get into policy changes but there should be an informed consent. It should be explained. You do understand we're self insured and we don't actually cover gene therapies. I mean that would create particularly for these type of unconscionable to deny therapeutics that create enormous pressure.
- [22:13]
Audience Member
Right.
- [22:14]
Rena Conti
Just to add. So there's another aspect of where the taxpayer comes in here which is that as families appreciate that they are underinsured or uninsured for these type of therapies, well, who is the insurer of last resort? State Medicaid programs. And so there becomes this concern about state finances in that if the states are the insurer of last resort, they're concerned about their budgets, that people will drop out of private insurance, which is not what we want, and get onto the state role. And this state has to figure out how to adjudicate patient treatment matches while paying for health insurance for other things, plus roads, schools and all the other things that we need the state to do.
- [23:02]
Audience Member
Yeah, Andrew, does a lot of this sound Familiar. You actually released earnings today. And I read in there that a lot of what you're reporting is just negotiated agreements with insurers and state Medicaid programs.
- [23:15]
Rena Conti
Good news.
- [23:18]
Andrew Obershain
So just for context, for the sickle cell pop particular, over 50% of the sickle cell population is insured by Medicaid. We've just actually also last week published our data that showed how we went about valuing this therapy. Exactly what the congressman was talking about. How much benefit did the patients get by or cost was there to lost work hours, how much healthcare costs they have, therefore, how much were the therapies? The value and it was 3.7 million. All right, so higher than our price. And we share that information with the states, with commercial insurance companies, and we also offer an outcomes based agreement. If it doesn't work, we'll give you a rebate. Right. So you're only going to pay if these therapies work.
- [23:58]
Audience Member
A lot of insurers ask for this too. Right.
- [24:01]
Andrew Obershain
It's something that they definitely value and that very much changes the conversation.
- [24:06]
Audience Member
How so? Just explain that.
- [24:08]
Andrew Obershain
Well, I think so. I think Michael can explain even better having sat with a payer. But payers in general, although they want to save money, they are in the business of insuring patients and making sure they get good health care. They don't want to pay for bad health care though. They don't want to pay for bad outcomes. And so for them, there's a bit of marketing that if they cover this and they can say, hey, we've negotiated this outcomes agreement, they can go to their employers and say, we will cover these. And guess what? We negotiated such a great deal because we'll only pay for it if it actually works. That's actually a good marketing tool for them as well.
- [24:37]
Michael Sherman
But I'd also add, keep in mind that the goal is to have a therapeutic that works again. Another anecdote from my health plan days. We had an agreement. I won't give a gene therapy, but one of the few that's been out there for cancer. We came to an agreement with Takeda and again, it's hard to manage and say no to cancer drugs. So I give a lot of credit to Takeda and it's hard to measure. So we came up with something elegantly simple. If someone doesn't continue on it for at least 60 days, it's either not working or not tolerated. There'll be a refund of all the money. So again, kudos to them. We need more of that. And one of my colleagues at point 32 health who didn't know a lot about healthcare I guess came up to me and said how much money have we saved so far? And I said nothing. And she said no, that's a good thing. Would you be telling me that the place didn't burn down so we overpaid on the fire insurance? The fact we didn't collect on the value based agreement, that's good. The goal is for the drugs to work. That's a stopgap measure. But again there's a lot of short sighted people out there. But absolutely these agreements can help de risk it.
- [25:41]
Audience Member
So we just talked about some of the financial innovations here that are happening. Are there others out there on the horizon being tried that you think are promising that we should discuss here? Let's turn now to some what you feel the solution should be.
- [25:55]
Rena Conti
So there are two obvious solutions. The first is insurers just simply cover. Secondly, we could have insurance innovation where there's specialized types of coverage that might be able to both take on the risk but also collect data, ensure that patients really are getting the best treatment for them at the best location and can feed that back to the system to help innovators innovate. The last possible solution here is for the federal government to provide insurance for these type of services. And we've seen other examples of that historically which includes universal coverage for end stage renal disease and also the Ryan White program which provides insurance for folks with HIV that don't have alternative coverage.
- [26:50]
Michael Sherman
There are some innovative models. We've looked at companies out there that are trying to create niche carve outs. The idea that maybe for a company for each employee you pay $2 per employee per month and they cover the gene therapies. And there's a fundamental flaw with that model and why I have concerns. And it's because you don't have to buy the insurance unless you need it. So think about the aca. People have to buy insurance because you can't just have a stable product where people can buy it after they hit buy the car from their iPhone on the way to the er. Right. That doesn't work. So because again back to that self insured conundrum. Are you going to buy that car VAT product? Well, I'll buy it after I have someone born with the disease or an employee that joins. So the only people paying into that fund a couple of dollars per month per employee are those who need it. It doesn't work. So that again gets back to the idea of that loophole making that at this point not A viable business model. But again, there are ways legislatively, either through closing these so called loopholes or through carving it out to a central entity which by the way could engage in long term disease management. I see that not just as an economic model, but a care management model that I think is an opportunity.
- [28:03]
Audience Member
Congressman, what are you learning here and what's your takeaway when you go back to Washington?
- [28:09]
Congressman Jake Auchincloss
Well, I'm always learning when I'm hearing Rina and Andrew and Mike talk about these issues. I think a couple takeaways for me. One is we need stronger ERISA regulations for health plans and for the both the self insured and the third party insured. And the comparison here is with retirement benefits. That's actually a success story. If you're an employee, you're buying things for your 401k through your employer. That's a well regulated competitive market. You know that you're not not facing counterparty risk in terms of unjust fees. You know that what you're buying is something that is actually being well managed by a fiduciary. On the health plan side, it's kind of the wild west. You really don't know what you're buying. Under erisa, it's not well regulated. The competition is minimal. We've got all kinds of middlemen from benefits consultants to pharmacy benefit managers that don't have your incentives at heart. In fact, they actually have contra incentives. And a lot of that can be done through tighter Department of Labor regulations that actually some of it doesn't even require a congressional statute. And so I think we need to apply the same rigor, keeping that tight bound of regulation with competition in there to reveal latent preferences of people. On the healthcare side, the other thing I would say is, you know, the title here is Life Sciences Innovation. A big part of that is payment models for sure on the insurance side. The other part of it though is also basic research funding. So I'm on the Select Committee on Competition with China. It's been a bipartisan panel this last Congress. We talk a lot about economic competition against the Chinese Communist Party and you know, heaven bless them, my Republican colleagues, they love to talk about how we are going to win the 21st century. But then they talk about cutting funding for the nih. They talk about cutting funding for the Department of Energy, cutting funding for the National Science foundation, cutting funding for Head Start. These are bad ideas. One in terms of real percentage of our gdp, they're nominal. You can pick up the Pentagon and you can shake the couch cushions and that much money will fall out for what we spent on the nih. So it's just not even real money that we're talking about in the grand scheme of our budget. But two peer reviewed, curiosity driven research is how the United States has succeeded in this increasingly knowledge based globalized economy. We were at about 6% of our gross domestic product being spent on R and D after World War II. We're barely at 3%, frankly. That's generous. We have got to double national R and D intensity over the next 10 years and there used to be bipartisan commitment to that. We've got to reengage that bipartisan commitment and if it takes the specter of competing with China to do it, so be it. I would prefer that we just have the innate resolve but I'm in politics and I'm going to take the hooks I can get.
- [30:50]
Audience Member
Andrew, your work benefits from that R and D work that the decades before led to the therapies that you're developing and delivering now. What's your hope for cell and gene therapies and for Bluebird bio going forward here?
- [31:06]
Andrew Obershain
Well, I hope that the conversation that we're having here today are entree into the market. I hope that we can be commercially successful not for us, but for the 250 small companies behind us that are developing new cell and gene therapies and that we pave the way here so that those companies have an easier time bringing those therapies to market. And that does involve NIH funding for some of them. It also involves making sure that their investors know that if they develop these that they can get paid. So my hope is that we in this very near future create the pathway for others to follow.
- [31:40]
Audience Member
Well, we're going to turn to audience questions. I'm going to stay with you Andrew, just sticking here with that treatment. One question is clarification here. Your sickle cell treatment is this comment is that it's a prime example of healthcare's social contract with society considering how sickle cell affects people of African descent. Is that like fair statement?
- [32:04]
Andrew Obershain
Absolutely. This has been an underserved population for a long time that has not had the healthcare innovation the that it deserves. So this is finally and there's been a number of treatments approved recently for sickle cell in the last decade, for decades before that there was a single one. And it's taken decades to bring innovation to this patient population who have been wholly underserved.
- [32:25]
Audience Member
Okay, bringing it back to equity and justice here. So next question. In the case of extremely expensive orphan drugs, who should pay in those cases, does price matter? Bringing up the example of the newly approved Len Meldy. Am I saying that right? Lymp meldy okay, at 4.3 million per dose.
- [32:47]
Congressman Jake Auchincloss
Can I jump in on that?
- [32:48]
Andrew Obershain
Yeah.
- [32:49]
Congressman Jake Auchincloss
The simple answer to me is who pays for that? The answer is we all have to pay. Everybody pays. And everybody pays through two mechanisms. One is the taxes that we pay to fund the basic research that that identifies the targets and then get commercialized as interventions. And the second is we all pay with premiums. Everybody needs to in this country have health insurance. Cause we're all gonna get sick. And those premiums are what create the marketplace for biomedical innovation. And the insurance company should cover the full sticker price of those new medicines and not expose the patient to any out of pocket cost. The wrong answer for who pays is the sick person because that person didn't choose for that outcome to happen. And really it's fitting that we're at Boston University at a university because it's very Rawlsian mentality. We're behind the veil of ignorance. As we design a health insurance system. Nobody knows how they're going to be born and what conditions they may develop. And in that situation, behind that veil of ignorance, you want to design a health insurance system where you pay a predictable reasonable amount every single month. And then if the worst happens to you or to your family, you are.
- [33:59]
Michael Sherman
Covered lameldi again, four and a quarter million. But it is ultra rare. So it gets back to the fact if the insurance companies cover it, when you allocate that over the population, it's actually very little. The problem you run into is when there are unconscionable cost shares which shouldn't exist. I mean that's ridiculous. And also the bigger issue again, which we spoke about before, is when some employers say they're not doing their fair share or don't purchase reinsurance. Again, you can be a self insured employer, you can be big like JP Morgan or Harvard University and basically self insure over thousands of employees or you buy reinsurance that exists. The problem is that some are choosing not to do that and saying sorry, can't afford it.
- [34:41]
Audience Member
I mean we have a system problem here. We all have to pay. Not everybody wants to pay everything that they should, I guess. Right. Let's talk. Since we're talking about costs here, one question is about what drives costs so high for these treatments. Will costs come down with scale over time? Like what's the answer there?
- [35:01]
Andrew Obershain
So two things. First of all, when Bluebird prices therapies we have a very consistent way of doing it, which is we do that cost economic evaluation. We see how much that value is and we price less than that. The second thing we do is we offer an outcomes based agreement where we give money back. So that is how we price the therapies. We don't price it as cost plus. Right. How much does it cost plus something. However, having said that, it is incredibly expensive to manufacture these therapies. Incredibly expensive. Especially when you're a small company. You have to invest in all the infrastructure up front for the manufacturing, et cetera. You have to make all the. We have to make a virus that we then use to drop in the gene. It's incredibly expensive. The costs will come down like any other technology. They will. If you look at small molecule costs, they came down over time. If you look at antibody costs, they came down over time. It's going to take a little while. This is where the FDA does not offer you a lot of flexibility for innovation. Very small changes to the process take a long review and risk. And therefore there's not a lot of incentive for companies right now to drive down the cost of existing manufacturing processes because of the FDA delay. I think there should be some innovation there that we could do as well. Have the FDA have a little bit more flexibility in how those are reviewed.
- [36:13]
Audience Member
It sounds like it will still always be to some extent more expensive than, than conventional therapies. You can bring costs down, but we're talking about a different class here.
- [36:23]
Andrew Obershain
It is a different class. Yes.
- [36:24]
Audience Member
Okay, so one question is, you're all making the case here for a single payer healthcare system. What are the chances? We're gonna explore this possibility especially for these cell and gene therapies.
- [36:39]
Congressman Jake Auchincloss
There is an intellectually robust case for a single payer system when it comes to biopharmaceuticals. The concern that I have there is that markets do a great job of aggregating and revealing preferences of the population in a way that single point command and control planners may not. What we see when you have competition between commercial health insurance plans is that they are compensating and paying for cutting edge therapies because their beneficiaries want them. We are seeing through competition the revealed preferences of 140 million Americans on ERISA plans. And it turns out that people like cures for diseases. It's a better product, it's a great product. And as with most markets and most industries, the price pretty much gets it right. The challenge is in Washington D.C. this will shock everybody. Sometimes we can be myopic and there's going to be this compulsion amongst command and control planners to price control in very drastic ways if they are this monopsony buyer. And that will deter innovation and it will not actually capture the revealed, the latent preferences of the American public. And regrettably, we see this in other countries. We see European countries really radically underpaying for the pharmaceutical innovations that their populations really want and their populations are being denied access to.
- [38:02]
Andrew Obershain
Can I have a cautionary tale with this as well? Because we actually experienced it. So I was the head of Europe for Bluebird Bio. I launched our first gene therapy there for beta thalassemia, which is now in the US I went through price negotiations with all the European countries, including Germany, and received a price from Germany that would not cover my costs and therefore had to withdraw the product from Europe. And so Bluebird Bio is no longer in Europe for that very reason.
- [38:27]
Michael Sherman
So patients in Europe don't have access to the drug.
- [38:29]
Andrew Obershain
That is correct.
- [38:31]
Michael Sherman
And we worry as investors, we actually discount the rest of the world, which makes it harder to justify investing in innovative medications. Again, we've had this philosophical debate and we're out there actually trying to encourage as best we can others to do their part. Again, not poor countries, but other high GDP countries. But it's a tough one internally the way we think about it. Yes, we're paying disproportionately, but I'd rather pay disproportionately and have those innovations and not have them. But long term, everyone needs to do their fair share.
- [39:03]
Congressman Jake Auchincloss
This was actually a bipartisan proposal in Congress not long ago was for a pharmaceutical trade negotiator to try to get free riding developed countries to appropriately compensate for the biomedical innovation that we are really disproportionately funding. If I could change, I mentioned I was on the China Select Committee. If I could change one thing about near term US China relations that I thought was feasible, it would be to get China to stop subsidizing fentanyl exports to the United States, which is poisoning 100,000Americans to their death every year, and to start actually being a good actor in how they are compensating through their health insurance programs. Biomedical innovation, because that's a 1.4 billion person market that would radically expand the scale economies for R and D. Sure.
- [39:50]
Audience Member
And I mean, think about sickle cell disease in Africa, that potential for benefit there we have. We've got a question here that's a little systemic. It's interesting. How should we think revenue in traditional Pharma life sciences end up losing the revenue and market share as a result of curative treatments. So the interesting problem, for example, patients won't be taking traditional hypertension, diabetes meds, et cetera. If you have cell and gene therapies nipping things in the bud.
- [40:19]
Andrew Obershain
Well, I think the penetration of the cell and gene therapies is going to be plenty of room for a little while for those. So I think it's going to be slow evolution before we get there. I would love if that was the problem, if all the sickle cell patients got cured tomorrow. But we, for example, said that this year that we would collect cells, we would initiate treatment in 85 to 105 patients across all three of our therapies. And across all three of our therapies, there's 22,000 patients, 23,000 patients in the U.S. so we're just the tip of the iceberg right now.
- [40:48]
Michael Sherman
Agreed. The Blockbuster employees can go work for Netflix.
- [40:52]
Audience Member
Okay.
- [40:52]
Michael Sherman
I mean, no, really, intellect, that's, you know, educated people move around. But again, this is a fraction.
- [40:59]
Rena Conti
We should have a system that values health, full stop.
- [41:02]
Audience Member
That's a great place to end this. Let's thank these amazing panelists for a great, great conversation.
- [41:18]
Kurt Nickish
That's Andrew Obershain, Michael Sherman, Congressman Jake Auchincloss, and Professor Rena Kont. Next week, we dive further into questions of innovation and access to gene and cell therapies. With Professor Conti, we look at her research on the topic, including the financial impact of these therapies. We'll explore what are these therapies really worth? That's next week. To get that episode and more, please follow the show on Apple Podcasts, Spotify or wherever you listen. Thanks for listening to IS Is Business broken? I'm Kurt Nickish.