Gold-Plated Stem Cell Treatments, Multi-billion Dollar Benefits and Potential Industry Profits

One of the nation's leading regenerative medicine industry groups is touting multi-billion dollar savings that may be achieved with the type of stem cell and gene therapies that are being developed with cash from California's financially beleaguered stem cell program.

The industry group is the Washington, D.C.,-based Alliance for Regenerative Medicine (ARM). It is tackling one of the major issues facing development of commercial stem cell therapies -- sticker shock at their expected prices, running upwards of a $1 million or more.

Without a willingness from health care insurers to cover the costs and provide a pathway to profit, it is unlikely that the biotech industry will embrace production of the therapies.

In a study released last Friday, the group said,

"Advances in molecular biology and genetics are leading to new treatments for rare diseases that require new ways of assessing value. CGTs (cell and gene therapies) are directed at the underlying cause of a condition and offer durable, potentially curative, or near-curative benefits. These transformative therapies create challenges for current reimbursement frameworks as they (the therapies) require significant upfront costs but are expected to provide a lifetime of benefits. The recurring treatment costs of chronically-managed patients can be greatly reduced and even eliminated with a one-time administration or short course of these novel therapies. 

"As CGTs arrive on the market, payers need new models for assessing their value. These treatments could potentially end the patient’s burden of illness, resulting in cost offsets (eliminating or reducing the need for long-term treatment, hospitalizations, and other care) and productivity gains that span a lifetime. Manufacturers incur a high per-patient development cost for these therapies and payers who bear the cost of treatment may not realize the long-term financial benefits due to health plan switching."

The ARM study predicted cost savings of as much as $33.6 billion over about a decade in connection with three afflictions: sickle cell disease (SCD), multiple myeloma (MM) and hemophilia A (Hem A). 

California's stem cell agency was not mentioned in the study, but it has funded research in all three areas. The agency is a member of ARM.

The study, backed by ARM and performed by the Marwood Group, said,

"Access to CGTs for even a modest number of patients with MM, SCD, and Hem A each year can reduce overall disease costs by nearly 23% over a 10-year period. The savings from lowering healthcare costs and raising productivity are considerable, approaching $34 billion by 2029. Of the savings, $31 billion are from a reduction in healthcare costs and $3 billion are from productivity gains."

The model used by ARM assumed CGT prices as high as $2 million. The study said,

 "The model has tested more than 180 different prices across the three potential CGTs that ranged from a minimum test price of $150,000 and up to a maximum price test of $2,000,000. The prices entered into the model created 60 different cost savings curves for all three of drugs in this model. Prices were distributed with more than 50% of test prices in the $100,000-$600,000 price per administration range."

The discussion of the costs of stem cell therapies has special resonance in the Golden State where voters are likely to be asked next fall to give $5.5 billion more to its stem cell agency, known formally as the California Institute for Regenerative Medicine (CIRM).

The agency, funded with $3 billion in 2004, is down to its last $27 million. A new, proposed ballot initiative is focusing hard on affordability of stem cell treatments. The initiative has no specific solutions but stipulates that a new version of CIRM  -- if the ballot measure is approved -- should devise some ways to come up with answers for insurers who are not likely to warm easily to $1 million therapies.

Cost of a Stem Cell Therapy? An Estimated $900,000

What is the likely cost of a freshly minted stem cell therapy? Close to $900,000. That's at least by one current estimate.

In the United States, such calculations are rare. Researchers and biotech executives shy away from discussing in public such daunting figures.

The figure emerged last week, however, in news from Japan about groundbreaking research to treat macular degeneration with reprogrammed adult stem cells.

While stem cell insiders are not keen on discussing $900,000 therapies -- at least their cost -- the public, however, is deeply interested. Development of expensive therapies is also likely to play a role in the future of California's $3 billion stem cell agency, which expects to run out of cash in 2020. Voters may look askance at publicly financed therapies that appear to be out of reach.

Exorbitant health care costs are on the minds of many. Forty-seven percent of the public said in 2016 that cost and access are the nation's most urgent health care problems, according to a Gallup Poll. Of all the nearly 4,300 items published on the California Stem Cell Report over the last 12 years, the most widely read article deals with the cost of stem cell treatments.

As of this morning, the 2013 article had recorded 21,963 page views, a standard way of measuring readership on web sites. Another related document chalked up 27,699 views on Scribd, where it was also published by the California Stem Cell Report. The figures are roughly four and five times higher than other relatively well-read pieces.

Readers do not give reasons for choosing the articles. But it is likely that their pocketbooks and hopes of affordable therapies are driving their interest.

Affordability was a big issue in the creation of the stem cell agency via a ballot initiative in 2004, Proposition 71. The agency, formally known as the California Institute for Regenerative Medicine (CIRM), has not devoted any significant attention to the matter in the last few years.

But if the agency wants to secure additional public or even private funding, it will need to make the case that its work is more than just another entry in the medical arms race.

Just yesterday, OncLive,  an oncology news site, carried a report on the skyrocketing expense of cancer drugs alone, which cost the nation $16 billion annually in 2010 and jumped to $38 billion in 2015. As for individual cancer patients, they are looking at costs of more than $150,000 a year for drugs, figures that have generated a ruckus in the cancer treatment community.

Drug costs are a small part of the total health care bill for country. But they are a litmus test for policy makers and the public. The costs are relatively straight forward compared to some other health care measures. But they are readily understandable by most families, who usually have one member or more involved in prescription purchases.

 As efforts to repeal-and-replace the Affordable Care Act gain increasing attention over the next year, the public is likely to focus even more on the costs of treatments and drugs, whether it is a $19 aspirin or a $900,000 stem cell therapy.

The "good" news, however, last week out of Japan was that the $900,000 cost of the stem cell macular degeneration treatment could be reduced to below $200,000 as the kinks are worked out and the treatment becomes more common -- if it clears its clinical trials.

As for California, CIRM  has pumped $125 million into research dealing with blindness, including macular degeneration which afflicts 1.7 million Americans. Nearly one million Americans are blind from all causes and another 2.4 million suffer significant visual impairment. More information on the state research can be found here. A CIRM video on vision issues is below.

Big Pharma's $100 Million Spending Plan for the Golden State

Big Pharma is going to be spending $100 million in California this year for a special effort, but none of the cash will be going for stem cells or, for that matter, any research purpose whatsoever.

The target of the spending is a ballot measure, the same sort of initiative that created the California stem cell agency. In this case, however, the proposal on the November ballot would limit prices that state agencies can spend for prescription drugs.

Writing in the Los Angeles Times this weekend, columnist Michael Hiltzik explored a bit of the ins and outs of the measure, He said,

"The so-called California Drug Price Relief Act would cap the price any state agency or healthcare program could spend on prescription drugs at the level paid by the U.S. Dept. of Veterans Affairs, which customarily receives the largest discounts of any government agency. Turning the VA’s prices into a benchmark for California could cost Big Pharma billions of dollars a year in profits, especially if the discounts were later demanded by other states or even private insurers."

Hiltzik reported that as of April 29, the opposition to the measure has amassed $68 million -- six months before the election. He said that experts estimate that at least $100 million will be spent to defeat the proposal. That could make the campaign among the most expensive in California history.

Fueling the debate are the skyrocketing prices of some drugs. The issue has surfaced in the presidential campaigns with both Donald Trump and Hillary Clinton taking on the drug industry. Trump even talked about squeezing "$300 billion" out of Big Pharma. All of which means that the California battle is likely to attract considerable national attention.

Meanwhile the hooha has helped to dampen the outlook for the industry this year, which does not necessarily bode well for some of California's ambitious plans to push stem cell therapies into the marketplace. Expectations of lower revenues may well suppress industry's enthusiasm for such things as the stem cell agency's proposal to create a $150-million, public-private stem cell "powerhouse."

Stem Cell Cures: Who is Going to Pay?

Money and the FDA were on the agenda today over at The Stem Cellar.

The Cellar is the blog of the $3 billion California stem cell agency, whose minions were on the scene in Atlanta for the World Stem Cell Summit.

Kevin McCormack, the agency’s senior director for communications, wrote about the FDA, only a couple of weeks after the agency took on the FDA for slowness and excessive caution. Don Gibbons, who also works in communications for the agency, wrote about the minor matter of money -- just who is going to pay for stem cell therapies.

First, the money bit, since as Gibbons points out,

“The bottom line: stem cell therapies will never be widely available if insurers won’t pay for them”

Gibbons wrote about a panel dealing with that dubious euphemism -- “reimbursement:”

“Elizabeth Powers of the IMS Consulting group suggested the audience pay close attention to the cancer market.  She said insurers and other payers of health care services are tired of paying for ‘statistically significant’ improvements in survival that only translate to a few weeks on average. She said payers are moving away from just whether a new therapy is different from prior therapies and want to be shown true value.”

Use of the word “reimbursement” is Big Pharma’s way of NOT saying that profits must be made if treatments are going to be produced. Unfortunately, the use of the term ill serves the industry by creating the impression among the public that they are being hornswoggled with jargon. The word smacks of entitlement, as if someone should guarantee the drug companies billion-dollar earnings.

McCormack focused on what he called a “clarion call” by Robert Califf, the deputy commissioner for the Food and Drug Administration (FDA), who has been with the FDA only eight months. Califf called for deeper patient involvement in drug development decisions.

McCormack also wrote,

“(Califf) says the first goal of the FDA has to be to protect the public, and that it’s hard to balance safety and innovation. ‘That’s an issue we struggle with every day.’”

McCormack did not link to the strong language concerning the FDA found in his agency’s new plan for spending $900 million over the next few years in search of a stem cell therapy.

Underlying both pieces on The Stem Cellar are two issues for the CIRM board to consider next week as it eyes the future. Does the agency, which will cost the California public roughly $6 billion including interest, want to fund research that is likely to lead to enormously expensive treatments that insurers and the federal government (via Medicare and Medicaid) will be reluctant and even refuse to pay for.

The usual argument is that prices will ultimately come down. However, we have already seen strong evidence to the contrary. The concerns have risen to the level of presidential politics and are not likely to vanish, regardless of the hopeful expectations of industry.

As for the FDA, when safety is the all-pervasive driving force of the FDA, it naturally will lead to slower action and caution on new treatments.  California’s stem cell agency, however, is looking for significant results in the next five years. Its money is running out. Cash for new awards will vanish in 2020. And the possibility of raising significant new funds is bleak if the agency cannot show major results after what will be 16 years of effort.

A $6 Billion Question: Affordability of California's Stem Cell Therapies

Imagine this headline popping up on the Internet and in the New York Times in about four years:

“$6 Billion for ‘Price Gouging' Stem Cell Therapy” 

The possibility of such a news story is not all that fanciful -- given the growing tension and anger over exorbitant drug prices being set by a variety of Big Pharma firms. The likelihood of such a report and its impact is a matter for careful consideration by the 29 directors of the $3 billion California stem cell agency.

They are presiding over an effort that will cost the Golden State’s taxpayers roughly $6 billion by 2020.  Nominally, the agency is giving out $3 billion in research awards. However, the cost is approximately doubled because the state is borrowing money to finance the research, a move approved by voters in 2004.

No therapies for widespread use have yet emerged from the agency, formally known as the California Institute for Regenerative Medicine (CIRM). But the agency is pushing hard. It could have a therapy on the market within four years. The question is whether it will be something that is perceived as affordable or something available only to the wealthy few.

CIRM is now expecting to be involved in 65 clinical trials by 2020. One of those trials is currently in phase three, which puts the proposed treatment on the cusp of commercialization.

A second phase three trial – with a $20 million taxpayer investment -- is all but certain to be approved tomorrow during the CIRM directors meeting. The session also includes a strategic discussion about how the agency will spend its last $890 million – for basic research, clinical trials, infrastructure and so forth.

Not on the table, however, is what those therapies are likely to cost consumers. The spending plan does not address the question of whether a publicly financed agency should back development of therapies that could cost, for example, $512,000. (See here and here.) Or whether it should focus on more affordable treatments.

The issue of high cost of drug therapies has roiled the medical community and the public for some years. The matter has now moved to a higher level and is not likely to vanish during the next five years, as it has in the past. It is tied to the income inequality debate and the upsurge in patient advocacy. (See here and here.)

The issue surfaced this week in the presidential campaign. Democratic aspirant Hillary Clinton used words like “gouging” and “outrageous,” causing biotech stock prices to drop. Republican presidential candidates used the problem to attack Obamacare. Folks in the scientific community said they were “shocked.” 

This afternoon, a Google search on the term “high drug prices” turned up 33.7 million results. “Outrage,” “huge spike,” “4,000 percent” and “insanely high” were some of the words in the headlines.

The affordability question is not new to the California stem cell agency. It popped up in the ballot campaign that created the agency in 2004 but has largely died down in recent years. (See here, here and here.)

It could surface again in the California legislature and elsewhere as lawmakers see a public desire to curb perceived greedy pharmaceutical companies that prey on the weak and afflicted.

It is not a prospect that would be pleasant for the California stem cell agency. And it would put a major damper on efforts to continue funding of the agency from both public and private sources.

As they consider their strategic direction, the CIRM directors of the agency may be well advised to move earlier rather than later on the question of high prices and affordability. As Ben Franklin’s medical homily goes,

"An ounce of prevention is worth a pound of cure."

Cost of a Stem Cell Therapy? An Estimated $512,000

(Editor's note: Updated figures on costs can be found in this 2017 item.)

The likely costs of potential stem cell therapies and cures receive almost no attention in the media as well as publicly from scientists and the biotech firms.

Usually any public discussion is obliquely framed in the context of “reimbursement,” as if industry is owed something instead of making a business decision about what will make a profit. Euphemisms and jargon cloak unpleasant realities such as astronomical patient costs. But what reimbursement really involves are, in fact, pricing decisions and profit margins along with lobbying campaigns for inclusion of therapies in normal coverage of health insurance and Medicare. 

And today a singular figure – $512,000 for one stem cell treatment – appeared in the Wall Street Journal . The story by Kosaku Narioka and Phred Dvorak dealt with what would be the first-ever human study of a treatment that uses reprogrammed adult stem cells.

They reported that the study received preliminary approval on Wednesday from a key panel of the Japan Health Ministry. The treatment involves a form of age-related macular degeneration, which has also been targeted by the California stem cell agency with different approaches.

Buried deep in the Wall Street Journal article, with little other discussion, was this sentence:

“One eventual obstacle, even if tests go well, could be cost: (Masayuki) Yamato (of Tokyo Women's Medical University) says initial estimates for the treatment run around ¥50 million ($512,000) per person."

The subject of costs for potential stem cell treatments has rattled around in the background for years without much deep public discussion. One reason is that high costs of treatments are controversial and can trigger emotional debate. Another reason is that it is very early in the therapy development process and estimates are not likely to be entirely reliable.

A few years ago, however, the California stem cell agency commissioned a study involving costs of stem cell therapies. The UC Berkeley report said,

“The cost impact of the therapy is likely to be high, because of a therapy’s high cost per patient, and the potentially large number of individuals who might benefit from the therapy. This expense would put additional stress on the Medicare and Medicaid budgets, cause private insurance health premiums to increase, and create an incentive for private plans to avoid covering individuals eligible for a therapy.”

The findings did not seem to be exactly welcomed. The agency sat on the 2009 study for seven months until it was uncovered by the California Stem Cell Report in April 2010. Then the agency was careful to say that the study did not reflect the view of CIRM management or board leadership.

Their wariness of being out in front on the issue could be well-advised. The pharmaceutical industry received some unpleasant attention this spring when more than 100 influential cancer specialists from more than 15 countries publicly denounced the cost of cancer drugs that exceed more than $100,000 a year.

Nonetheless pricing is critical to both patient accessibility and therapy development. If companies cannot make a profit on a possible therapy, it is virtually certain not to appear in the marketplace.

While the subject remains in the background, it does not mean there is a lack of interest. The copy of the Berkeley stem cell cost study that was posted online by the California Stem Cell Report has been read 11,701 times since it was made available in April 2010 on scribd.com.

(For a 2015 look at costs for non-government approved procedures, see this item.)

A copy of the Berkeley study can be found below.

Stem Cell Therapy Costs by DavidJensen