Kaylee Price, the baby profiled in the above video, has spinal muscular atrophy, a genetic muscle disease that is fatal if untreated. Novartis has developed a gene therapy, Zolgensma, that can restore the gene product Kaylee is missing and cure her of the disease in a single dose. Sounds miraculous, right? As you saw in the video, Kaylee’s family agrees! There’s just one catch — Zolgensma’s price is $2.1 million dollars!
If $2.1M sounds more like a life-changing lottery prize to you than a feasible price tag for a drug, you’re not alone. $2.1M is a massive amount of money. And this is partially why people get their hackles up when talking about drug pricing. This is a baby’s life we’re talking about, right? And this company has decided that its lifesaving medication will only be available to a family who can pay $2.1M? Who on earth has $2.1M to spare?! That’s unconscionable! Drug prices are way too high!
Kaylee’s family doesn’t have $2.1M. But importantly, they didn’t need to come up with that money themselves. They have health insurance, which paid for the drug and saved Kaylee’s life without decimating her parents’ financial life. Insurance is intended to be a pooled savings mechanism that buys all of us peace of mind. We pay into the system so that those pooled resources will be there to cover us if the unexpected happens. (Here at RA Capital, we are of the mind that this is the way insurance should operate. Unfortunately, not all health insurance plans actually act like insurance — more on this in Chapter 5. We also believe everyone should be insured and receive subsidies to buy insurance if necessary, but that is sadly not the case at present.)
Your experience playing with the Net Present Value (NPV) models in Chapter 3 hopefully illustrated that new drugs must necessarily be expensive in order to incentivize continued investment in innovation. Later, we’ll shed even more light on why. But that brings us to our driving question: “Expensive to whom?” The answer shouldn’t be — and doesn’t have to be! — individual patients or their families. Health insurance is intended to spread the cost of expensive therapies over large segments of the population.
Would you accept a few dollars’ increase to your health insurance premium if you knew that it meant more babies like Kaylee would get access to Zolgensma? Doesn’t it make you feel better knowing that drug is out there?