Cured, but at what cost?

30 April 2018 (Last Updated April 30th, 2018 11:40)

Earlier this month a note authored by an analyst at Goldman Sachs acknowledged the fact that the pharmaceutical industry is currently set up to treat diseases over a long period instead of providing a cure.

Cured, but at what cost?

Earlier this month a note authored by an analyst at Goldman Sachs acknowledged the fact that the pharmaceutical industry is currently set up to treat diseases over a long period instead of providing a cure.

This has reignited an old conspiracy theory regarding whether or not pharmaceutical companies are focusing on developing drugs that treat the symptoms of a diseases instead of treating the underlying condition, in order to benefit financially.

Conspiracy theories aside, the fact is that both the pharmaceutical and healthcare industry need to overcome a number of challenges to deliver curative (rather than symptomatic) drugs.

The two most crucial of these are high upfront costs and atypical revenue forecasts.

High initial costs

Regardless of whether a country has an insurance-based healthcare model or a national healthcare model, the price of drugs, and particularly curative drugs, is a contentious issue.

Drugs such as Gilead’s Sovaldi, a cure for hepatitis C, listed at a price of $1,000 per pill in the US, highlight the extent of this problem.

Gilead claimed that the price of Sovaldi matched the price of the current standard of care while providing greater efficacy.

However, the company was forced to offer significant discounts following considerable pressure from pharmacy groups and insurers.

Gilead stated that the decision to lower the price of Sovaldi was necessary to address the burden faced by payers when hundreds of thousands of patients required immediate treatment, but it seems likely that the move was also intended to limit damage to the company’s reputation.

Atypical revenue forecast

Over the last couple of decades pharmaceutical companies have been able to rely on revenue from their products ramping up significantly in the initial five years following approval, after which point it would increase only moderately until the company lost market exclusivity and revenue began to decline.

Curative treatments will initially have a large pool of eligible patients, but over time as more patients are treated the overall patient population will decrease, resulting in lower annual revenues.

This is a particular concern for communicable diseases, where the introduction of a cure can significantly reduce the number of patients with the condition, limiting the long-term market for the drug.

A new approach

Until recently there have been very few true cures for diseases, which has allowed pharmaceutical companies and healthcare providers to avoid addressing these issues.

However, following recent advances in gene and cell therapies it is expected that the number of curative therapies on the market will increase significantly, creating the need for innovative solutions both in terms of pricing and long-term strategic planning.

In 2017 Spark Therapeutics’ Luxturna became the first gene therapy to be approved for the treatment of an inherited disease, and priced at $425,000 per eye it is also one of the most expensive drugs on the market.

To overcome the barriers to market faced by such an expensive therapy, Spark is considering a pricing structure based on guaranteeing payers will only pay if the treatment is successful, and using a deferred payment plan to ensure payments are distributed across a longer period of time.