Is Business Broken? Podcast Summary
Episode: Why Cell and Gene Therapies Cost So Much – And What Can Be Done
Release Date: October 3, 2024
Host: Kurt Nickish
Guest: Rena Conti, Dean’s Research Scholar and Associate Professor of Markets, Public Policy and Law at BU Questrom School of Business

Introduction

In this enlightening episode of Is Business Broken?, host Kurt Nickish delves into the intricate world of gene and cell therapies—innovative treatments that hold the promise of curing rare diseases by altering an individual's genetic makeup. Joining him is Rena Conti, a distinguished scholar from Boston University's Questrom School of Business. The discussion centers on the soaring costs of these therapies, the rationale behind their pricing, and the challenges surrounding their accessibility.

The High Cost of Gene and Cell Therapies

The conversation kicks off with a striking observation about the pricing of gene and cell therapies. Rena Conti explains that there are currently 17 to 18 approved therapies in this space, each costing between $500,000 to $4.2 million per patient. She draws an analogy to highlight the bespoke nature of these treatments:

“Just like a bespoke suit, those costs that are individualized to the individual patient result in cost.”
— Rena Conti [01:57]

Conti emphasizes that unlike mass-produced medications such as aspirin, gene and cell therapies are highly personalized, requiring extensive labor and precision to match individual patient genomes and immunological profiles. This customization inherently drives up costs.

Value-Based Pricing and Cost-Effectiveness

Kurt Nickish probes deeper into the economic underpinnings of drug pricing, questioning how these therapies are evaluated beyond their immediate costs. Conti responds by elaborating on the concept of value-based pricing:

“Drugs are priced based on the value that they provide to patients. Many of these therapies target diseases that really haven't had many treatments available, embodying the technological advance of bringing treatments to patients that otherwise don't have them.”
— Rena Conti [02:09]

She further explains that these therapies are assessed for their cost-effectiveness, taking into account the long-term benefits such as improved quality of life and increased longevity. Although the upfront costs are substantial, the potential for a “one and done” treatment could lead to significant savings over time by reducing ongoing healthcare expenses and enabling patients to resume normal activities.

Insurance Coverage Challenges

A significant portion of the discussion centers on the role of insurance companies in covering these expensive therapies. Conti highlights the uncertainty surrounding the long-term efficacy of these treatments:

“We might not know the longevity benefits of these therapies for a really long time... this drives coverage and reimbursement decisions.”
— Rena Conti [07:43]

Insurers are cautious about approving these therapies due to limited clinical trial data, often based on small patient populations. This leads to rigorous gatekeeping processes, which can delay or prevent patients from accessing necessary treatments:

“Insurers have put many gates up for patients and their physicians to have to prove that they really are eligible for this treatment.”
— Rena Conti [09:49]

The host adds a critical perspective on insurers' motivations:

“If you want to be cynical, you could say they're trying to slow down what they're going to see as a big cost center for their work going forward.”
— Kurt Nickish [11:23]

Conti counters by discussing the alignment of incentives and the challenges insurers face in balancing immediate costs against long-term benefits that may accrue outside their coverage periods:

“We're in this kind of locked in this not great equilibrium where every insurer is thinking to themselves, well, it might not be to my patient benefit or to my financial benefit to provide access.”
— Rena Conti [13:18]

Public Investment and Access Disparities

The episode underscores the significant public investment that has fueled the development of these therapies. Conti notes that billions of dollars from government-funded research projects like the Human Genome Project and cancer research initiatives have laid the groundwork for today's advancements:

“Here we are with the promise of these investments coming into fruition... they are really a product of both enormous public investment, but also private effort and investment.”
— Rena Conti [17:12]

Despite this collective investment, access to these therapies remains uneven. While Medicare-insured individuals generally receive good coverage, those with employer-based or commercial insurance face significant barriers. This disparity highlights a gap in the healthcare system where publicly funded research leads to privately accessible treatments, benefiting only a subset of patients.

Future Directions and Solutions

Looking ahead, Conti advocates for a systemic evolution to better accommodate the influx of gene and cell therapies:

“We need to move towards a system away from bespoke coverage and reimbursement and into more of a rational system for matching patients to treatments that might benefit them.”
— Rena Conti [21:38]

She suggests that innovations in financing and reimbursement are essential. One such innovation is the emergence of outcome-based agreements, where payment is contingent on the therapy's effectiveness:

“Innovators are willing to make deals with payers... if the therapy doesn't work, then you get your money back to some extent.”
— Rena Conti [24:19]

Conti envisions these financial solutions as temporary bridges while the healthcare system adapts to the realities of widespread gene and cell therapy deployment. She calls for collaborative efforts among business leaders, policymakers, and academia to develop sustainable models that ensure patient access without stifling innovation.

Conclusion

The episode concludes on a hopeful note, with Conti expressing optimism that stakeholders can align to overcome current obstacles:

“I am incredibly hopeful that... we can also innovate on our insurance provision to guarantee that patients actually get access to these therapies once they actually come to market.”
— Rena Conti [28:34]

She emphasizes the importance of policy interventions to create a more equitable and efficient system, ensuring that the substantial public investments in research translate into tangible benefits for all patients.

Takeaways:

• High Costs: Gene and cell therapies are expensive due to their bespoke nature and the extensive labor involved in customizing treatments.
• Value-Based Pricing: These therapies are priced based on the significant value they offer, including potential cures and long-term health benefits.
• Insurance Challenges: Insurers face difficulties in covering these therapies due to uncertainties about long-term efficacy and alignment of incentives.
• Public Investment: Substantial government funding has been instrumental in developing these therapies, yet access remains unequal.
• Future Solutions: Innovative financing models and policy reforms are needed to ensure sustainable access and continued innovation in the gene and cell therapy space.

For more insights and detailed discussions, tune into the next episode of Is Business Broken?, where Kurt Nickish explores the impact of social media on society and the measures needed to combat misinformation.

This summary encapsulates the key points and discussions from the podcast episode, providing a comprehensive overview for those who haven't listened.