The world’s most expensive medicine is about to hit the market.
A one-time treatment for a devastating infant muscle-wasting disease won approval from the U.S. Food and Drug Administration Friday. Its maker Novartis AG NVS 3.65% says the gene therapy will cost $2.125 million.
The therapy, called Zolgensma, treats an inherited disease called spinal muscular atrophy, or SMA, whose victims typically die before the age of two if untreated. It is the latest gene therapy—a technique that introduces new DNA into the body to correct a faulty gene—to win approval.
Gene therapies promise the chance to cure diseases whose diagnoses were death sentences, but the prices for the first few to be greenlighted raise concerns about whether they can be afforded by governments and health insurers that have been struggling to control health spending.
Zolgensma’s price tag makes it the world’s most expensive medicine by a large margin, with the next most expensive drug a gene therapy called Luxturna that is priced at $850,000. However, some drugs that are taken repeatedly would cost more over the lifetime of a patient.
To allay concerns over the cost, Novartis said it would offer insurers the option to pay for the treatment in equal, annual installments over five years. The company also pledged to issue partial refunds if the treatment doesn’t work.
Novartis also defended the overall price by comparing it to a treatment already on the market. David Lennon, head of Novartis’s AveXis unit that developed Zolgensma, said in a call with reporters it would cost half that of the current standard treatment, Spinraza, over a 10-year period.
Biogen Inc. priced Spinraza, which patients would have to take for a lifetime, at $750,000 for the first year and then $375,000 for each year after that.
Dr. Lennon also pointed to a revised cost-effectiveness analysis by the independent nonprofit Institute for Clinical and Economic Review, which said the treatment could justify a price tag of up to $2.1 million.
ICER had previously said Zolgensma should cost no more than $1.5 million, but updated its analysis after new clinical trial data showed promising results in very young babies treated before the symptoms of SMA set in.
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Zolgensma “is highly cost effective and represents a product at a fair and reasonable price,” Dr. Lennon said.
Spinal muscular atrophy is the most common genetic cause of death in infants, affecting 400 to 500 children born in the U.S. each year, around 300 of whom have the most severe version that kills by age 2. It lacked drug treatment until the FDA approved Spinraza in 2016.
All 12 babies treated in Zolgensma’s first clinical trial have passed their second birthday, with most hitting key milestones like holding up their heads, eating by mouth and sitting unaided, according to the FDA’s announcement. The therapy’s long-term effects aren’t known yet.
“Today’s approval marks another milestone in the transformational power of gene and cell therapies to treat a wide range of diseases,” acting FDA Commissioner Ned Sharpless said in a statement.
The prospect of more expensive gene and cell therapies hitting the market concerns insurers. The FDA expects to approve 10 to 20 gene and cell therapies a year by 2025.
“The big plans can handle [Zolgensma] financially,” said Steve Miller, chief clinical officer at Cigna Corp. “They are more worried about the precedent it sets than the impact on cash flow.”
Novartis had been trying to lay the groundwork for Zolgensma’s price tag by talking publicly about a multimillion-dollar figure and playing up the therapy’s effectiveness.
Michael Sherman, chief medical officer of health plan Harvard Pilgrim Health Care, said Novartis’s pricing was fair. “We’re comfortable that it’s within the pricing we would deem appropriate,” Dr. Sherman said, pointing to the updated ICER analysis.
He said Harvard Pilgrim is finalizing a deal with Novartis to get some money back if Zolgensma proves ineffective.
Drugmakers’ plans to offer such “value-based agreements” have been stymied by the pricing rules of the U.S. federal government’s Medicaid health-insurance program, which place an upper limit of around 17% on any rebate that drugmakers can offer for pediatric drugs.
To get around the roadblock, Novartis will get paid in full upfront by a middleman, the specialty pharmacy Accredo owned by Cigna, which will then manage the installment payments.
Write to Denise Roland at [email protected]