Reform Payment Models to Encourage Gene Therapies

Gene therapies are transformative treatments that fundamentally differ from traditional medical and pharmaceutical options because they modify a patient’s DNA in order to address the genetic causes of diseases. These therapies have the potential to dramatically improve the lives of millions of Americans living with life-threatening or life-altering diseases.

Since gene therapies directly address the genetic causes of diseases, doctors and scientists anticipate that these therapies will be cures. If successful, the goal will no longer be simply treating these devastating diseases – the goal will become curing them!

These innovative technologies are already available for several diseases and offer the hope for a cure for millions of people living with Alzheimer’s Disease, Cystic Fibrosis, Hemophilia, HIV, Cancer, Muscular Dystrophy, Parkinson’s Disease, and Sickle Cell Disease.

Perhaps most importantly, gene therapies can offer patients living with these devastating diseases a future with a dramatically improved quality of life, and these benefits cannot be overstated. The focus on curing diseases, rather than treating them, is also expected to create widespread long-term health care cost savings that will offset the direct costs of the treatments.

Since these new therapies offer the hope of cures, patients who were formerly living with these diseases will need fewer hospital admissions, significantly reducing future hospital expenditures. Patients will also require fewer medicines and fewer visits to their physicians, particularly fewer visits to expensive specialists over their lifetimes. Consequently, lower future expenditures on medicines and doctor visits will translate into more future systemic savings.

Making gene therapies a reality still faces large scientific obstacles for some diseases, but for the gene therapies coming to market, the policy inadequacies are quickly becoming the largest obstacles preventing widespread access. Paramount among these policy obstacles is the current payment system.

Just like organ transplants, which can cost over a half million dollars per transplant or more, gene therapies are expected to be very expensive; and, the current payment system is not equipped to make such expensive therapies widely available.

The current health care insurance system is readily available to cover routine health care expenditures, such as most of the costs for checkups or the $25 it costs to purchase generic penicillin. These relatively smaller expenses do not create financial risks for most patients. However, when patients require major surgeries or must manage devastating diseases, health insurance often fails to adequately reduce the financial risks. Yet, these are the true health care risks that patients face, and covering these financial risks is the ultimate purpose of having health insurance.

The system fails health insurers as well. Nearly one-half of the population is covered by employer-sponsored health insurance. Since the average tenure of an employee is less than five years, this means that health insurers face a great deal of turnover, making it very difficult for them to effectively manage patients’ lifetime health care costs, especially the high costs for emerging treatments like gene therapies. Effectively, the system is asking insurers to pay the high upfront costs for gene therapies even though they will not likely benefit from the lower future prescription, hospitalization, and physician costs.

Broad-based reforms that improve the effectiveness of health insurance and ensure patients have adequate catastrophic coverage are required to ensure the availability of gene therapies. Since health insurers cannot face unlimited risks, such a system will likely require greater use of re-insurance or high-risk pools to effectively manage the truly exceptional costs.

With respect to the costs that patients must still cover, reforms should leverage innovative ideas such as health care installment loans that have been proposed by Andrew Lo (a Massachusetts Institute of Technology economist) and David Weinstock (from the Dana-Farber Cancer Institute). As proposed by Lo and Weinstein, these loans would be the equivalent of mortgages for large health care expenses that would let patients finance their share of the costs over time, and would be contingent on the success of the therapy.

Gene therapies exemplify the medical revolution that can help us live longer, healthier lives. In light of the promise these therapies offer, it is imperative that we get the policy environment right. The right policy environment fixes the payment system to encourage both the development and availability of these exciting new therapies.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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