With $2.8M gene therapy, Bluebird sets new bar for US drug pricing

Bluebird bio’s new gene therapy, approved in the U.S. Wednesday, offers patients with an inherited blood disorder a one-time, potentially curative, treatment option.

But it will come at a price of $2.8 million, making the therapy the most expensive drug on a single-use basis in the U.S. and among the highest globally.

Bluebird defends its therapy’s worth, citing the clear benefit in clinical testing and the high lifetime costs of treatment for people with severe forms of the disease, called beta thalassemia, for which its drug is approved. At least one independent assessment of the drug, sold as Zynteglo, supports Bluebird’s case.

Still, the price sets a new bar by which other gene therapies in development might be compared. Bluebird’s success or failure in marketing the therapy is likely to be closely watched by other biotechnology companies nearing regulatory approvals for their own genetic medicines.

“This is a very important test for biotech, the payers and all other key stakeholders,” said Luca Issi, an analyst at RBC Capital Markets.

Zynteglo is the third gene therapy for an inherited disease to be cleared for use in the U.S., following a treatment for a type of genetic blindness and another for spinal muscular atrophy. The other two are also expensive, with list prices of $850,000 and $2.1 million, respectively. While sales of the blindness treatment haven’t amounted to much, the spinal muscular atrophy drug has become a blockbuster product for its maker, Novartis.

Zynteglo isn’t expected to match those commercial heights, even with its price tag. It is approved for people with beta thalassemia severe enough to require regular blood transfusions. Bluebird estimates there are between 1,300 and 1,500 patients in the U.S. who fit that criteria and, of those, about 800 to 850 who would be healthy enough to receive Zynteglo.

Tom Klima, Bluebird’s chief commercial and operating officer, estimates about a third of those eligible for treatment are eager to try gene therapy and might consider Zynteglo. Another third will likely wait and see, while the rest may be stable on their current treatment or uninterested in gene therapy, he said.

Given the small numbers of eligible and interested patients, U.S. insurers might not immediately balk at covering Zynteglo, even at its high cost.

“It’s not going to break the system,” Issi said. “I think this is going to be relatively well received by payers in the context of such a small, rare indication.”

Analyst predictions for peak annual sales vary widely, from SVB Securities’ forecast of $64 million to Raymond James’ estimate of about $200 million.

About three-quarters of eligible patients are on commercial health insurance, according to Bluebird, and most of the rest are covered under Medicaid. Bluebird will refund up to 80% of the treatment’s cost for two years afterwards if patients still need blood transfusions. In clinical testing, about 90% of study participants no longer needed them.

Over time, those blood transfusions can become costly. Patients with severe beta thalassemia often need transfusions every two to five weeks, as well as other medications to manage the iron overload the procedure can cause.  

Bluebird estimates that, over a patient’s lifetime, the cost of treatment and associated care will exceed $6 million, a factor Klima said it considered in setting Zynteglo’s price.

The potential for Zynteglo to offset some of those costs is real, according to David Rind, chief medical officer at the Institute for Clinical and Economic Review, or ICER, a nonprofit that’s become influential in the drug pricing debate.

But, “some of those costs are far in the future,” Rind said. “We don’t view costs 30 years in the future the same way we view $2.8 million today.”

In assessing Zynteglo’s value, ICER did find that the therapy could be considered cost effective at a price of $2.77 million, as long as certain benchmarks were used. But the group also modeled a scenario in which half of the lifetime savings provided by the drug were returned to society and came up with a price range of $1.3 to $1.8 million.

“If you think of the cost offsets for this expensive disease,” said Rind, “[Zynteglo’s price] is giving all of that to the manufacturer and none back to society.”

“I have trouble saying, ‘Gee, this is a terrible price,’” he added. “But this is 0% of the savings going back to society and I’m sad about that.”

Bluebird says it is in advanced negotiations with insurers as well as national pharmacy benefit managers about covering Zynteglo. “We’ve actually gotten positive feedback from payers on our pricing thinking,” said Klima.

The company has been here before. Three years ago, Bluebird won approval of Zynteglo in Europe and priced treatment there at $1.8 million, spread over five years.

But the company struggled to secure reimbursement, facing resistance from national payers. Drugs are often priced lower in Europe as countries there can more effectively negotiate with pharmaceutical companies.

After failing to reach agreements in Germany and elsewhere, Bluebird decided to withdraw Zynteglo from the market and later wound down its European business operations.

“In the U.S., value is received a little bit differently than in Europe,” said Klima. “What we’re seeing so far is payers and the treating community [here] recognize the value of a one-time treatment much differently than the Europeans do.”

Klima said Bluebird is focused only on the U.S., although he said the company would “keep its options open” for the future in other markets like Europe, where there are many more patients with transfusion-dependent beta thalassemia.

One of Bluebird’s chief challenges is its rapidly dwindling funds. The company has warned investors that it’s at risk of insolvency over the next year and, in April, laid off 30% of its workforce. To stay afloat, it is counting on selling special vouchers granted by the FDA for Zynteglo and, possibly, another gene therapy that’s now under review.

Bluebird’s financial jeopardy is a dramatic reversal in fortune from five years ago, when shares in the company were worth, at one point, 30 times as much as their current price of about $5.70 each.

“This is biotech in 2022, not biotech in 2017 or 2018,” said RBC’s Issi. “They’re cash constrained and they’ve got to make some calls.”

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