Rethinking the Business of Cures

The advent of one-time potentially curative treatments has brought up questions around price that bluebird bio has taken very seriously. The biotech company, which develops gene therapies, has rolled out a model for paying for one-time products that can cure patients of their disease.

Nick Leschly, chief executive officer of bluebird, discussed the model at the JP Morgan Healthcare Conference, and he highlighted that the company is rolling the model out now, despite not having any approved drugs yet, because it wants to be upfront and transparent.

“We have hopes of an approved drug, but we want time and energy to engage with all stakeholders to make sure that we’re doing this in a way so we can understand all the challenges and work through them in time to make sure that we get to as many patients that can benefit from our treatments,” he said.

He added that figuring out a payment model for one-time curative treatments is not easy because the healthcare system is not a good fit for such a model. Instead, the healthcare system is built around a chronic disease model, where patients get something and are treated for it the rest of their lives.

Bluebird believes in funding and rewarding innovation, but it also wants to make sure the value brought to patients and the health system is real. What bluebird did is look at a fair value for treatments by looking at lifetime effectiveness, and the model spreads payments out for a treatment over 5 years in equal installments. The first payment is a sort of access fee, but the rest of the installments are at risk. According to Leschly, under the model, bluebird shares risk with up to 80% of the price at risk based on success of the treatment.

In addition, bluebird is committing now that it will not increase prices over the Consumer Price Index.

“We’re committing to it because we think it’s important,” Leschly said. “And it’s also an acknowledgment that not only should you be sharing risk here, but you should be sharing value with the totality of the stakeholders involved.”

With the payment model committed to a 5-year payment plan, the health system gets to reap the rewards after that. Under the current model, costs stack up for a patient being treated. For a drug that costs $300,000 a year, costs quickly rack up to over $1 million after 5 years and potentially up to $13 million over a lifetime. Under the bluebird model, the cost is capped with no more payments after the 5 years end.

Leschly provided an example with bluebird’s LentiGlobin, which is being developed for a rare and potentially debilitating blood disorder. Under the model, bluebird determines the all-inclusive value of the treatment based on quality of life, life extension, cost offsets, and societal value. Under the traditional model, the cost of the treatment might be $3 million to $4 million. The company would remove cost offsets and societal value from the equation and give that value back to the health system. Based on quality of life and life extension, the intrinsic value of the treatment is $2.1 million, and bluebird will price accordingly.

“We are looking at a price that is somewhere south of this intrinsic value,” Leschly said.

There are, of course, challenges with the model. For instance, tracking outcomes is very important and has to be worked out with payers. In the United States, where there is no single-payer system, there is the issue of portability if patients switch health plans. Plus, best price rules are an impediment since many patients receiving the treatments are likely to get different prices depending on how they do.

However, Leschly and bluebird believe these challenges can be worked through and that it is important to make this new model work. He said that the innovation of the payment model is just as important as the science and the medicine, because it determines whether there is adoption of the treatment.

“This is an opening volley from bluebird that we’re very excited about,” Leschly said.