Gene Therapy’s Promising, but at a Price
What’s a cure for diabetes worth? How much would you pay for a single shot that forever frees you from ulcers? Should a pharmaceutical company be allowed to charge a fortune for an anti-cancer vaccine that only costs a few cents to “make”?
The emerging field of human gene therapy offers perhaps the most exciting possibilities for profound and painless treatment of human ills. Our growing ability to actually edit someone’s genetic code to suppress harmful genes and promote useful ones represents a fundamental revolution in healing. Once-chronic illnesses might be cured with a single shot.
“Gene therapy in the next century will be as important as immunization and antibiotics was in this,” declares Dr. William N. Kelley, who runs the University of Pennsylvania Medical Center and serves on the National Institutes of Health’s human gene therapy subcommittee.
But there’s absolutely no guarantee that medical breakthroughs will translate into cost-effective new treatments. The marketplace matters, and it’s not at all clear how basic economics will shape the evolution of human gene therapies.
“The real issue for all these technologies is, how are we going to pay for them?” says G. Steven Burrill, national director of the high-technology practice at the accounting firm Ernst & Young in San Francisco, “Where the biotech and pharmaceutical industries are naive is that they haven’t adequately thought out the pricing dynamics of the 1990s.”
Indeed, Burrill asserts, human gene therapy represents “a new paradigm--and that should argue for a new pricing paradigm, but there isn’t one that exists yet.” The new paradigm must strike a better balance between pharmaceutical profit and public health.
Gene therapy will create thorny economic questions for pharmaceutical companies basking in the cash flow of their most successful drugs. For example, Tagamet and Zantac are extraordinarily profitable anti-ulcer drugs. Suppose that researchers working on the Human Genome Initiative--a multiyear, multibillion-dollar project to map the human genetic code--discover a clear genetic link to ulcers. By crafting the appropriate suppressors, this ulcer-gene can be switched off. One shot of ulcer vaccine does it. In sufficient quantities, a single injection may cost only pennies to manufacture.
So what happens to Zantac and Tagamet? If you’re the drug company, what do you charge for that single shot? $1,000? $2,000? $10,000? Does the drug company get to charge what the shot is “worth” or what it costs to develop and manufacture?
Politics and societal expectations will shape that answer as much as economics. Burroughs-Wellcome, the British pharmaceutical house, was savaged for its monopolistic pricing practices surrounding AZT, its antiviral treatment for AIDS--which originally sold for $10,000 a year. The need to profitably recover one’s investment is understandable, but so is society’s desire that everyone have an affordable chance at good health.
“If these biotech companies do a good job presenting their case, then they have an industry,” says Ernst & Young’s Burrill. “If they do not, we won’t get these medical breakthroughs to market.”
“I’m concerned that progress in this field may not occur as fast as it would if the ability of the corporate world to recover its investment were more obvious,” says Pennsylvania’s Kelley, who believes that many gene therapies might ultimately qualify as “orphan drugs.”
“Generally speaking, if a drug represents a cure, it’s got less of a market than one that is chronically administered,” observes Joseph S. Lacob, a partner at Kleiner Perkins, the venture capital firm that initially funded Genentech. “It’s not as attractive financially.”
Given the current state of the technology and the economics, some researchers even question how the gene therapy industry will grow.
“I think there are very few economically appealing gene therapy targets that are both technically feasible and in the near term,” asserts Dr. Ronald C. Dorozio, a biotech entrepreneur who is starting up a gene therapy company whose first product will boost bone marrow resistance to aid chemotherapy. “It’s a tough market. I don’t think there will be many broadly based therapies for a while. “
Because it takes years and more than $150 million to bring even a conventional drug to market, it’s not clear how the traditional pharmaceutical companies will participate in this new technology. Gene therapy represents a fundamental challenge to their economics.
“This doesn’t fit their existing models of the business,” says Dr. Stephen Sherwin, who left Genentech to run Cell Genesys, a Foster City, Calif., biotech firm exploring various gene therapy technologies. It’s certainly unclear whether entrepreneurial gene therapy firms would have the stamina, resources and capital to bring new therapies to market.
Despite the media storm of excitement surrounding the NIH’s approval of clinical trials for human gene therapy, few organizations are coming to grips with the economic questions. The Health Care Finance Administration, which oversees Medicare reimbursement, hasn’t even begun to consider where gene therapy may fit in the health-care economy. It’s far too early to say whether gene therapy will boost our nation’s health-care spending or be a force that ultimately reduces costs.
Indeed, Kleiner Perkins’ Lacob and Pennsylvania’s Kelley point to the technologies underlying gene therapy and insist that there will be economies of scope and scale that will dramatically reduce costs over time. Knowledge from the Human Genome Initiative will provide targets for therapy. The real cost of producing gene-based therapies will decline.
What’s more, a vaccine that prevents--or cures--a condition is far cheaper than a drug that simply alleviates it. Even a vaccine that creates a one-time cost of thousands of dollars is cheaper than the cost of managing a chronic condition for decades.
The point is that human gene therapy could be as revolutionary in managing health-care cost pressures as it could be in eliminating disease. “The potential is almost unbelievable,” says Kelley.
Nevertheless, it is foolish to divorce the potential of the technology from the dictates of the marketplace. The NIH does the world a disservice when it exalts the wonders of gene therapy without mentioning the arduous and uncertain road to commercialization.
If we really want to reap the benefits of our multibillion-dollar investment in medical research, it’s time that the public and private medical establishment open up a dialogue about how best to manage the delicate intersection of investment, price and the public health.
