Take gene therapies first. Seventeen single-dose therapies have been approved in America, with more than 80 expected by 2032. So far these treatments have targeted rare conditions, and many have the potential to be cures for serious or fatal conditions such as spinal muscular atrophy and sickle-cell disease.
Manufacturers are pricing these treatments at $3m-4m or more per patient in America, and €1m-2m ($1.1m-2.2m) in Europe. In some instances, even prices this high represent a likely cost saving compared with the cost of many years of standard treatments that would otherwise be needed. But some insurance systems may be too small to handle such a “lightning strike” of upfront costs, and even larger insurers, including those at the national level in Europe, are shuddering at the thought of the growing cumulative costs as these treatments spread, often without the prospect of competition that would help constrain pricing.
Remarkably effective new drugs for obesity, such as Wegovy and Zepbound, present their own opportunities and challenges. These drugs have already shown they can not only help people shed weight but also reduce over many years the risk of effects of obesity such as heart attacks.
Like gene therapies, obesity drugs come with affordability issues. The price per patient is relatively high (around $6,000-7,000 annually in America), but more consequential is the fact that these drugs must be taken indefinitely for their benefits to last—and even more consequential is the proportion of the population that is eligible for treatment. Some 40% of Americans, for instance, meet the threshold. Paying for even a small percentage of those who are eligible would swamp health-care budgets.
The easiest way to handle these financial shocks would be to avoid them, with insurance systems restricting or delaying access. But there is another way. New types of insurance vehicles and payment mechanisms could be combined to manage the upheaval and ensure fair access, while avoiding the creation of a two-tiered system in which only those who can afford the new treatments get them.
For gene therapies, simply focusing on sharply reducing the price is unlikely to work. These treatments are very expensive to develop, and drug companies need a high price for a single-time therapy to make an adequate return on investment. Instead, the answer lies in creating insurance pools that are large enough to absorb unexpected high costs by spreading the risks across many millions of patients.
There are two possible ways to get to these larger pools of patients. Private insurers may be able to create large enough pools through “subscription models”: for a set fee per covered individual, these would offer to cover all gene-therapy costs for many employers and smaller insurers. Alternatively, governments could mandate that all public and private insurers pay into large regional or national pools, offering a fully government-run insurance benefit for such therapies.
Gene-therapy makers have a role to play, too. They could help smooth out the budget impact of the new therapies by working with insurers to develop new payment plans structured to pay the full price for a gene therapy through instalments, with payments halted if the therapy stops working for the patient.
Managing the costs of obesity drugs will require similar creativity and long-term thinking. Governments and insurers will need to become more comfortable with the idea that spending to reduce obesity is an investment in a healthier workforce. Nonetheless, given the large size of the eligible population, drugmakers will need to accept prices far lower than the formal “value” per patient that traditional health economics would assign to such treatments. Drugmakers may be more willing to accept lower prices if they are offered long-term partnerships with insurers guaranteeing minimum revenue levels and preferential terms compared to drugs from competitors.
In addition, all parties, including the drugmakers, should work together to develop new programmes for lifestyle and diet management. The aim should be two-fold: to prevent obesity and to help people already taking the drugs to reduce doses or switch over to an aggressive diet and activity regime that enables them to get off the drugs entirely once they have reached their target weight.
Even with these adjustments, there may not be enough money to get on top of the global obesity challenge. Governments and insurers may need to consider reallocating resources from less productive parts of the health system or even from social spending. Robbing Peter to pay Paul is never politically comfortable, but if it can help address one of the most serious and fast-growing public-health crises of our time, it should be considered.
What’s clear is that without a major shift in how gene therapies and obesity drugs are valued, priced and paid for, governments and insurers will balk at funding them. That would dull drugmakers’ incentives to innovate and could lead to severe rationing of the new treatments, meaning access would be mostly limited to the rich.
Rarely have the potential health benefits of a new generation of treatments been so large. Never have the limitations of existing insurance and payment models been more evident. Finding a way around this problem will require creative, far-sighted leadership from those who run health systems and the insurance pools that support them. They need to show it now.
Steven Pearson is the founder of the Institute for Clinical and Economic Review, which analyses the cost-effectiveness of medical treatments, tests and procedures.
© 2024, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com