Roche CEO: Novel But Costly Gene Therapies Justify New Payment Models
Executive Summary
Roche CEO Severin Schwan says the process of paying for hugely expensive gene therapies that can cure diseases needs revamping.
The up-front, one-off payment model for patients being treated with revolutionary gene therapies isn't tenable given the huge burden their high prices would place on healthcare systems, but any solution must adequately compensate the biopharmaceutical groups that develop and commercialize them, says the CEO of Roche.
Speaking to journalists during the Swiss group's first-quarter update - in which he said Roche's delayed takeover of US-based gene therapy company Spark Therapeutics Inc. remained "on track" - Severin Schwan acknowledged that expensive gene therapies could put unmanageable stresses on healthcare systems and society as a whole.
"The values of gene therapies can be tremendous for the system, but we need to find new, innovative approaches to make it sustainable for our partners in the system.” - Severin Schwan
He also said the advent of gene therapy, which introduces new genetic material into a person’s DNA, also promises to reduce the burden of disease on society in general by providing cures, and that a balance therefore needs to be found that might involve spreading the cost of the medicines out over time.
Gene Therapy Needs New Commercial Model
"The values of gene therapies can be tremendous for the system, but we need to find new, innovative approaches to make it sustainable for our partners in the system,” the Austrian CEO said.
"Gene therapies have the potential to actually cure disease, and consequently the value of that to the healthcare system can be huge, not only for the patients who suffer from that disease but also from a cost perspective because you save a lot of follow-on costs and I would add, go beyond that from a societal perspective, if those patients are really cured, as they can go back to work and make their contributions paying taxes, social contributions, etc.,” Schwan said.
"Having said that, what is special with gene therapies is that you get this up-front treatment and that can indeed be a one-off burden for a healthcare system and I believe we will need to find innovative approaches and new pricing models.”
The issue will become more relevant once Roche takes control of Philadelphia-based Spark Therapeutics, which it has offered to buy for $4.8bn and which, after a regulatory delay, is expected to close in the first-half of the year. (Also see "Roche $4.8bn Buy Sparks Hemophilia Gene Therapy Race " - Scrip, 25 Feb, 2019.)
Roche views Spark as a valuable prize, largely due to its gene therapy for a rare type of blindness which the US FDA approved in 2017, known as Luxturna (voretigene neparvovec).
The Swiss major's proposed acquisition of Spark Therapeutics gives it a leading seat at the table in the emerging field of gene therapy, and thus future conversations with patient groups, payers and HTAs.
"I could well imagine that, rather than having one-off payment at the beginning of the treatment, to actually spread out the payment over several years and link it to the performance of the medicines,” he told reporters.
“That approach offers risk sharing between the providers of such therapies and payers and, importantly, you avoid these payment peaks, making it much more sustainable from a financing point of view.”
M&A Strategy
The logic behind Roche's targeting of Spark Therapeutics was consistent with the company's M&A strategy, and could be seen again in future transactions, Schwan said.
“We expect to close this transaction in the first half of this year ... it’s fully in line with what our M&A strategy is and has been in the past."
"We have had a number of very early stage transactions, in-licensing opportunities, small acquisitions, and occasionally there are acquisitions of this size where we complement our portfolio with respective technologies such as in this case [with Spark]. So yes, it is very much a reflection of our M&A strategy which you should expect in future as well,” the CEO said.
Strong First Quarter
Schwann made the comments when presenting the group's first-quarter sales update which, as widely expected, saw strong sales growth from newly launched products off-set the effects of biosimilar competition to its cancer franchise in Europe, with Ocrevus (ocrelizumab), hemophilia product Hemlibra (emicizumab), Perjeta (pertuzumab) and Tecentriq (atezolizumab) all substantially surpassing forecasts. (Also see "Product Sales, Pipeline & Biosimilar Timelines Key Themes For Roche 1Q" - Scrip, 15 Apr, 2019.)
That allowed Roche to raise its 2019 outlook for both sales and core EPS to a mid-single digit range, at constant exchange rates, from a low-to-mid single digit range.
Roche said it consequently expected to further increase its dividend in Swiss francs.