The shares of Swiss pharmaceutical company Novartis AG (NYSE: NVS) recorded a new 52-week high of $88.04 after the US Food and Drug Administration endorsed the world’s costly drug – $2.1 million gene therapy for spinal muscular atrophy. The approval marks a new beginning in curing diseases with a treatment that ends in a single sitting, but at an astronomical price.
Zolgensma is a one-time treatment for “spinal muscular atrophy, a muscle-wasting disease,” and the primary genetic reason for infant death that impacts one in every 11,000 births. Novartis has priced the treatment at $2.1 million, or $425,000 per year spread over a period of five years. Novartis had earlier stated that the treatment could cost between $1.5 million and $5 million.
Ned Sharpless, the acting FDA Commissioner, praised the endorsement by the FDA and said that it signifies “another milestone in the transformational power of gene and cell therapies to treat a wide range of diseases. With each new approval, we see this exciting area of science continue to move beyond the concept phase into reality.”
Commenting on the approval, Novartis CEO Vas Narasimhan said: “Zolgensma is a historic advance for the treatment of SMA and a landmark one-time gene therapy. Our goal is to ensure broad patient access to this transformational medicine and to share value with the healthcare system.”
Novartis justified the amount to be spent on treatment by saying that the cost of one-time treatment is half of the amount that would be spent on the prevailing chronic treatment of spinal muscular atrophy.
The company stated that it is “working closely with insurers to create 5-year agreements based on the success of the treatment as well as other novel pay-over-time options.”
Novartis also disclosed that it is in “advanced discussions” with over 15 health insurance companies to create a feasible payment option.
Narasimhan, who has suggested the creation of unique methods for the payment of innovative gene therapies further stated that “We believe by taking this responsible approach, we will help patients benefit from this transformative medical innovation and generate significant cost savings for the system over time.”
The Institute for Clinical and Economic Review (ICER), which appraises the prices of drugs, had stated earlier this year that the maximum cost of Zolgensma could be only $1.5 million. However, on Friday, ICER cleared the Novartis price tag by saying that the price “falls within the upper bound of ICER’s value-based price benchmark range.” ICER has made this decision after studying the results of clinical tests in detail. The final decision was taken after the FDA approved the therapy.
Insurance companies and governments will have to figure out a way to pay for such kind of therapies and society will have to determine whether any such drug, even the ones saving lives, is worth that much amount.
ICER President Steven Pearson offered his thoughts about covering the cost of treatment. Pearson said, “Insurers were going to cover Zolgensma no matter the price, and Novartis has spoken publicly about considering prices that approached $5 million. It is a positive outcome for patients and the entire health system that Novartis instead chose to price Zolgensma at a level that more fairly aligns with the benefits for these children and their families.”
The market is expected to react positively to the FDA approval news.
Technically, the stock is trading above its 50-day moving average. The MACD indicator is making new highs. As a result, the stock is expected to move up in the short-term.
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