The US Food and Drug Administration in 2017 issued its first approval for a gene therapy and since then interest in innovative treatments has boomed. Pharmaceutical companies are investing heavily in research and development with hopes of bringing breakthroughs to market. As of early March, the FDA had approved 23 cell and gene therapies. And the pipeline is overflowing — there are 3,483 cell, gene, and RNA therapies in development, from the preclinical to pre-registration stages, the American Society of Gene + Cell Therapy reported.
The potential for long-term growth is attracting a wave of investment. In fact, the sector brought in a staggering $22 billion in 2021, up from around $7 billion in 2017, according to the Alliance for Regenerative Medicine. Another $341 million was raised for tissue engineering. Venture capital sparked most of the interest, pumping in $9.8 billion last year.
But with this growth comes challenges. Cell and gene therapies are disrupting the traditional pharmaceutical business model because they diverge from normal revenue streams that rely on recurrent dosing, requiring a larger upfront sum for a onetime treatment. They are also altering care pathways, and commercial healthcare models are not equipped to capture the potential value of CGT.
Scaling cell and gene therapy to drive value across a range of therapeutic areas will require building a new infrastructure at a systems level. We’ve highlighted a series of gradual evolutions in business and regulatory models that could eventually spawn a revolution:
- Companies need to rethink their go-to market models. Successfully launching cell and gene therapy requires a high-touch model with early activation and close collaboration with key external stakeholders to prepare the system. There is a need to co-create the value with key customers and share the risk along the journey. This is not entirely new to the industry, but when a capability that is in the periphery becomes central to the business model it can create significant challenges. Companies need to carefully consider how they can start to mitigate any capability and resource gaps and rethink their engagement model with health systems, policy makers and payers. We explore these key business considerations in more detail in this white paper: Cell and Gene Therapy Business Models: Evolution or Revolution?
- The regulatory, treatment delivery, and payer systems need to evolve and be fit for capturing value. The ability to diagnose, treat, follow-up, and measure therapeutic impact will become increasingly important regardless of the treatment modality. The efficacy of traditional products has typically been demonstrated in large clinical trials, but in the cell and gene therapy setting, it is not feasible to run trials over a duration of 10 years to perfect the product and demonstrate value. This requires a new regulatory and compensatory model that is yet to be defined. To enable the evolution of health systems, industry needs to collectively think about what capabilities are key differentiators that are worth investing in at a company level and what should be developed at an ecosystem level through partnerships with health systems and other peer companies.
- Related to evolving payment models is the need to capture real-world data. Most cell and gene therapies come to the market with limited data and a promise for future accrual of health benefit — termed as “cure” or “long-term transformation.” Payers and healthcare systems around the world are not aligned on how they are assessing and measuring value. Shocked by the sticker price, they are requiring companies to provide heavy discounts and engage in outcomes-based agreements. A key challenge towards successfully implementing those, however, is the data infrastructure to collect evidence on patient outcomes in the real world. We’ll continue to be limited in translating these innovations into patient therapy until stakeholders develop new methods for developing new metrics and capturing data. We provide more analysis of outcomes-based contracting in this white paper: Unlocking the Full Potential of Outcomes-based Contracting for Cell and Gene Therapies.
- The pace of scientific innovation needs to be fueled with ample and ongoing investment. Companies cannot rest on a single product to maintain and sustain a position. Doing so will result in a relatively short runway on market until a new improved v2.0 enters the market. This continual improvement, although challenging to manage from a financial point of view, is critical towards reaching the north star of cell and gene therapy being truly revolutionary for many patients. In some cases, for example ultra-rare diseases, there is a need to look for public private partnerships to incentivize innovation and investment, almost in the form of a social contract. Companies and health systems need to jointly tackle these challenges and evolve their mindset to play for the long haul.
Gradual shifts can in some ways, be more difficult to manage than more radical shifts. With radical shifts, companies can see their extinction ahead of them, but gradual shifts give a false sense of time to action. Industry leaders should look beyond typical planning horizons and develop a vision to identify key differentiators and strategies to successfully bring these transformative therapies to patients.
Maya Khurana Principal, Health and Life Sciences, Oliver Wyman