How will the health care system pay for miracle cures?

Key Takeaway: Our healthcare financing system is not set up to reward investments in miraculous million-dollar cures, no matter how much those investments would return in the long run. We must restructure in fundamental ways to reap the benefits of new therapies.

Clockwise from top left: Paul Markovich, Blue Shield of California; Andrew Lo, MIT Sloan School of Management; Jackie Kosecoff, Moriah Partners; and Jean-Jacques Bienaimé, BioMarin

A chief irony of the 21st-century U.S. health care financing system is that it struggles to pay for cures. The biopharma pipeline is full of promising gene and stem cell therapies and other innovative approaches that may eventually free us of cancer, diabetes, sickle cell disease, Alzheimer’s disease, blindness, and a host of other deadly and debilitating conditions. These cures promise to make us healthier and save the health care system billions.

The catch is that someone has to pay for them. We’ve already cured everything that’s cheap and easy to cure. New cures are expensive and difficult to discover and test. Multiple drugs are now available to cure hepatitis C, with price tags in high five figures. CAR-T cell therapy treatments for some types of cancers have an impressive success rate—and a total cost of treatment approaching $1 million per patient.

Insurance companies are reluctant to lay out six or seven figures for a cure, knowing that they’ll never make it back in premium payments — especially if the cured patients move on to another insurer that reaps the benefit of their now excellent health. Patients certainly can’t afford to pay out of pocket, and government programs have limited budgets despite the potential for future savings.

In the Health Evolution Summit 2019 main-stage discussion “The Age of Curative Therapies —Moving Towards a Cost-Benefit Equilibrium?” (taking place Thursday April 11 at 9:30 am), participants will hear multiple points of view on how to evolve the health care business model to keep pace with drug discovery. The discussion leaders will include:

Paul Markovich, president and CEO of Blue Shield of California, a 4-million-member nonprofit health plan with more than $17 billion in annual revenue, that serves the state’s commercial, individual and government markets. Blue Shield extended its benefits in 2015 to cover Harvoni, a hepatitis C cure costing almost $100,000 at the time, prompting a federal judge to dismiss a class action suit over hep C drug denials.

Jean-Jacques Bienaimé, a veteran biotech executive who’s currently Chairman & CEO of BioMarin, Novato, Calif., which is developing a promising gene therapy for hemophilia. “We haven’t decided what we are going to price it at, but it’s going to be for sure north of $1 million,” he said in an interview with Reuters in November.  “We are not trying to introduce a new therapy that is going to cost substantially more per year,” he said, adding that the cost is comparable to the annual cost of transfusions, and if the drug cured the condition, it would quickly pay for itself.

Andrew Lo, Professor, MIT Sloan School of Management and Director, MIT Laboratory for Financial Engineering, who last year published a paper in Science Translational Medicine outlining a method of paying for expensive drugs with consumer loans. “Health care loans allow patients in both multi-payer and single-payer markets to access a broader set of therapeutics, including expensive short-duration treatments that are curative,” said Lo and his co-authors in the abstract of the paper. “HCLs also link payment to clinical benefit and should help lower per-patient cost while incentivizing the development of transformative therapies rather than those that offer small incremental advances.”

The panel will be moderated by Jackie Kosecoff, managing partner of the health services private equity firm Moriah Partners, Long Beach, Calif., who has held leadership roles in the health insurance industry and in drug development. She is also a recognized expert in the areas of clinical and health services research, quality of care and technology assessment, disease management, and organization of the health care delivery system, and has published extensively in leading journals. – Elizabeth Gardner