Financial Impacts of Paying for Gene Therapy for Sickle Cell Disease Under Alternate Prices and Financing Mechanisms

Objective: To understand the role of alternative prices and financing mechanisms on a payer's budget impact and the manufacturers' risks and returns for gene therapies.

Methods: This paper uses fundamental economic principles to interpret the implications of alternative pricing mechanisms in terms of the manufacturer's appropriation share of the value and how alternate financing mechanisms alter it. It demonstrates these concepts by studying the financial impacts for a payer and the manufacturer across alternative pricing and financing mechanisms that could be used by the US Centers for Medicare and Medicaid Services (CMS) to pay for gene therapy for sickle cell disease (SCD).

Results: Unlike value-based and manufacturer-set monopoly prices, an effective monopoly price can be derived to guarantee monopoly profits for manufacturers during their exclusivity period, thereby providing a high appropriation share and substantially lowering price and budget impact for a payer. For SCD gene therapy, the 10-year budget impact for CMS would range from $8.6 Billion-$12.8 Billion under a value-based price, $10.2 Billion-$15.2 Billion under a monopoly price, but reduce to $7.7 Billion under an effective monopoly price. The latter price would still fetch over 50% of the total surplus to the manufacturer while mitigating their risk of sales volume.

Conclusion: I show that significant budget impacts for funding gene therapy are not mitigated across alternative financing mechanisms at any given price. The price determines most of the budget impact. The option of a patent buyout may help negotiate down prices to effective monopoly prices.