It's Official: Novartis SMA Gene Therapy Zolgensma Is World's Most Expensive Drug
Executive Summary
The total cost of Zolgensma is more than $2m – in line with estimates – or $425,000 annually for five years if payers choose an annuity-like payment plan. Novartis is also negotiating value-based reimbursement agreements for infants treated with the one-time infusion.
Novartis AG is setting new records as it prepares to launch Zolgensma, the spinal muscular atrophy (SMA) gene therapy developed by Novartis subsidiary AveXis Inc. The 24 May approval makes it the second gene therapy to clear the US FDA, and the largely expected price of about $2m makes it the most expensive drug in the world.
Novartis anticipates that some payers will agree to an annuity-like model under which Zolgensma (onasemnogene abeparvovec-xioi) will cost $425,000 annually for five years, but such agreements may be difficult to implement. The company also will negotiate value-based agreements, but executives from Novartis and AveXis said during a media call that they couldn't provide any details about those confidential discussions.
Novartis CEO Vas Narasimhan and AveXis president David Lennon commented on such pricing and reimbursement models at Novartis’ 22 May investor event, noting they expected limited uptake of the payment plan model.
Zolgensma is indicated for SMA patients under 2 years old with bi-allelic mutations in the survival motor neuron 1 (SMN1) gene, including pre-symptomatic infants and patients with SMA types 1-3. The FDA approved the gene therapy under priority review and a week ahead of the user fee deadline.
About 450-500 infants are born with SMA in the US each year. Type 1 SMA is the most serious form of the disease, preventing infants from being able to walk or talk or sit up on their own. Patients with this severe form of the disease eventually will require permanent ventilation and are not likely to live past 2 years old.
Zolgensma delivers a functional copy of the human SMN gene to provide for sustained SMN protein expression and interrupt disease progression from loss of neurons. The treatment is a one-time, weight-based intravenous infusion, but an intrathecal injection is in development to allow for the treatment of older patients, including those with the less severe SMA types 2 and 3.
The IV version of the gene therapy was approved based on the Phase I START and Phase III STR1VE studies of infants with SMA type 1. Zolgensma allowed patients to achieve milestones – such as rolling over, sitting on their own or even walking – and to live longer than SMA natural history would suggest.
Accounting For Cost, Efficacy Of Novel Treatment
When announcing the approval, Narasimhan noted it will launch Zolgensma immediately with product shipping within the next two weeks. AveXis will market the gene therapy and operate the OneGene Program that will help patients' parents with health insurance coverage questions and provide financial assistance to families that are uninsured or need help paying out-of-pocket costs for the gene therapy.
The Novartis CEO said Zolgensma is priced at 50% less than multiple value-based pricing benchmarks and pointed out that the $2.125m price tag is within the cost-effective price range determined by the Institute for Clinical and Economic Review (ICER).
Upon approval of Zolgensma for all three types of SMA in infants, ICER amended its estimate of pricing that would be within a US cost effectiveness threshold of $100,000-$150,000 per quality-adjusted life year (QALY), saying that a price of $1.1m to $1.9m would be appropriate. However, the nonprofit drug price assessor also said on 24 May that a value-based threshold of $100,000-$150,000 per life year gained (LYG) would suggest an appropriate price range of $1.2m to $2.1m.
ICER previously said $900,000 was a cost-effective price for infantile-onset SMA type 1 based on the $100,000-$150,000 per QALY threshold.
Narasimhan pointed out that Zolgensma is priced at about 50% of the cost of chronic treatment with Biogen's Spinraza (nusinersen), which can cost $4.1m over a 10-year period. Spinraza is an antisense oligonucleotide developed in partnership with Ionis Pharmaceuticals Inc.; it's approved to treat all types of SMA regardless of age.
Novartis/AveXis also maintained the gene therapy costs half or less of the estimated $4.4m-$5.7m cost of treating ultra-rare pediatric genetic diseases for 10 years.
Negotiations are under way with payers to reimburse the cost of Zolgensma over a period of up to five years or to receive a rebate if the gene therapy doesn't work. AveXis is working with the specialty pharmacy Accredo to offer pay-over-time options of up to five years with a big focus on state Medicaid programs, small payers and self-insured employers, but large payers also are showing interest in spreading out the gene therapy's cost over time.
Steve Miller, chief clinical officer for the pharmacy benefit manager (PBM) business within the health insurer Cigna Corp., said in an announcement about AveXis' pricing and reimbursement strategy that the payer is engaged in discussions with the Novartis subsidiary about "unique solutions" for reimbursing Zolgensma's cost, including installment payments and outcomes-based agreements.
Outcomes-based or value-based agreements would entitle payers to a discount or rebate if outcomes are not as promised for patients treated with the gene therapy, i.e. if children require permanent ventilation or die within a given timeframe after Zolgensma infusion, Lennon said during the post-approval media briefing.
AveXis reported that advanced negotiations are under way with more than 15 payers and some have agreed to specific contract terms.
"We are thrilled to be able to offer our members access to this groundbreaking gene therapy, particularly in light of AveXis agreeing to place a portion of the cost at risk, contingent upon demonstrating continued performance over a five-year period," Harvard Pilgrim Health Care chief medical officer Michael Sherman said in the gene therapy maker's announcement, noting that Harvard Pilgrim covers treatment for a small number of newly diagnosed SMA type 1 patients each year.
AveXis also has launched an education program for payers called "Time is Neurons" to emphasize the importance of early diagnosis and treatment in SMA, since lost neurons cannot be regained.
Outside the US, Zolgensma is under review in the EU and Japan under priority registration programs. While those approvals are pending, AveXis is providing access to the gene therapy under its paid Managed Access Program through the third-party provider Durbin.
Limitations On Alternative Reimbursement Options
Narasimhan and Lennon noted in the briefings with reporters both before and after Zolgensma approval that negotiations for alternative reimbursement models with payers – particularly Medicaid – are limited by regulations that restrict outcomes-based agreements and installment payment plans. Rebates and discounts in particular are limited by Medicaid best price calculations.
"Payers understand the value proposition," Narasimhan said on 22 May. "They are already paying these prices to care for these patients. The value proposition we come with, whether it is an upfront payment of an annualized payment is very compelling to them. And, honestly, for large payers, the overall budget impact is not that large. We are talking about tens of patients that may exist in a plan."
Installment plans are of interest to – and may be most helpful for – small private payers and Medicaid, because of their budget constraints, the Novartis CEO added.
Medicaid covers about half of the SMA population in the US, so Zolgensma will test its flexible reimbursement capabilities. US Centers for Medicaid and Medicare Services (CMS) administrator Seema Verma said in a 22 May briefing on the cusp of the SMA treatment's approval that the agency is exploring various options for covering gene therapy costs. (Also see "New Payment Models For Curative Treatments Have CMS’ Attention, Verma Says" - Pink Sheet, 23 May, 2019.)
Competitive Impact May Be Limited Initially
Spinraza has become a blockbuster product for Biogen, which reported $518m in first quarter 2019 sales of the drug, since its approval at the end of 2016. (Also see "Biogen/Ionis’s Spinraza Approved; Second Antisense Drug For Neurodegeneration In 2016" - Scrip, 28 Dec, 2016.) It launched in early 2017 with a list price of $750,000 in the first year and $375,000 in subsequent years. (Also see "Biogen Forecasts Gradual Launch For Life-Transforming Drug Spinraza" - Scrip, 26 Jan, 2017.) The antisense drug is administered with four loading doses over the first two and a half months of treatment then quarterly for as long as patients live after that.
Analysts said in notes on 24 May that while Zolgensma is a threat to Biogen's Spinraza revenue and Ionis's royalties from the drug, initially with its infant-only indication the gene therapy will not cut too far into Spinraza's pediatric and adult SMA market.
"Although Zolgensma is indicated for all SMA types, we expect the initial impact on Spinraza likely to be small (about -5% impact) due to small number of newly diagnosed SMA patients each year," Jefferies analyst Eun Yang wrote in a note for Ionis investors. She estimated that only about 400 infants are newly diagnosed with SMA each year versus a prevalence of about 7,000 US patients with SMA across all types and ages, all of whom are eligible for treatment with Spinraza.
Yang and William Blair's Matt Phipps said the Roche/PTC Therapeutics Inc. SMA candidate risdiplam is a bigger threat to Spinraza given the similar patient populations for the medicines. Roche has indicated that it will file the drug for approval later this year with approval anticipated in 2020. (Also see "Roche Makes Case For Its Oral SMA Drug Risdiplam As Filings Beckon" - Scrip, 6 Feb, 2019.)
"In our current estimates for Biogen's Spinraza, we have assumed the number of newborn patients treated with Spinraza will decrease dramatically in the second half of this year given the approval of Zolgensma, with no newborns initiating Spinraza beginning in 2020," Phipps wrote. "However, we still believe Spinraza has potential to increase penetration in the near term in older type 2 and type 3 patients in the United States and continued growth outside the United States. Longer term, we see greater risk to the Spinraza franchise from the potential approval of PTC Therapeutics' risdiplam, given the similar mechanism of action and oral route of administration."
The share price for Novartis, which also saw the same-day approval of its potential breast cancer blockbuster Piqray (alpelisib), closed 3.7% higher at $87.52 per share on 24 May, while Biogen declined 0.9% to $227.06 and Ionis shares fell 3.6% to $64.72. Roche rose 0.7% to close at $34.