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Towards sustainability and affordability of expensive cell and gene therapies? Applying a cost-based pricing model to estimate prices for Libmeldy and Zolgensma

  • Author Footnotes
    ⁎ These authors contributed equally to this work.
    Frederick W. Thielen
    Correspondence
    Correspondence: F. W. Thielen, Erasmus School of Health Policy and Management (ESHPM), Erasmus University Rotterdam, Rotterdam, The Netherlands.
    Footnotes
    ⁎ These authors contributed equally to this work.
    Affiliations
    Erasmus School of Health Policy and Management (ESHPM), Erasmus University Rotterdam, Rotterdam, The Netherlands

    Erasmus Centre for Health Economics Rotterdam (EsCHER), Erasmus University Rotterdam, Rotterdam, The Netherlands
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  • Author Footnotes
    ⁎ These authors contributed equally to this work.
    Renaud J.S.D. Heine
    Footnotes
    ⁎ These authors contributed equally to this work.
    Affiliations
    Erasmus School of Health Policy and Management (ESHPM), Erasmus University Rotterdam, Rotterdam, The Netherlands

    Erasmus Centre for Health Economics Rotterdam (EsCHER), Erasmus University Rotterdam, Rotterdam, The Netherlands
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  • Sibren van den Berg
    Affiliations
    Medicine for Society, Platform at Amsterdam UMC—University of Amsterdam, Amsterdam, The Netherlands

    Department of Endocrinology and Metabolism, Amsterdam UMC—University of Amsterdam, Amsterdam, The Netherlands
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  • Renske M. T. ten Ham
    Affiliations
    Department of Healthcare Innovation & Evaluation, Julius Center for Health Sciences and Primary Care, University Medical Center Utrecht, Utrecht, The Netherlands
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  • Carin A. Uyl-de Groot
    Affiliations
    Erasmus School of Health Policy and Management (ESHPM), Erasmus University Rotterdam, Rotterdam, The Netherlands

    Erasmus Centre for Health Economics Rotterdam (EsCHER), Erasmus University Rotterdam, Rotterdam, The Netherlands
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  • Author Footnotes
    ⁎ These authors contributed equally to this work.
Open AccessPublished:October 07, 2022DOI:https://doi.org/10.1016/j.jcyt.2022.09.002

      Abstract

      Background aims

      Drug prices are regarded as one of the most influential factors in determining accessibility and affordability to novel therapies. Cell and gene therapies such as OTL-200 (brand name: Libmeldy) and AVXS-101 (brand name: Zolgensma) with (expected) list prices of 3.0 million EUR and 1.9 million EUR per treatment, respectively, spark a global debate on the affordability of such therapies. The aim of this study was to use a recently published cost-based pricing model to calculate prices for cell and gene therapies, with OTL-200 and AVXS-101 as case study examples.

      Methods

      Using the pricing model proposed by Uyl-de Groot and Löwenberg, we estimated a price for both therapies. We searched the literature and online public sources to estimate (i) research and development (R&D) expenses adjusted for risk of failure and cost of capital, (ii) the eligible patient population and (iii) costs of drug manufacturing to calculate a base-case price for OTL-200 and AVXS-101. All model input parameters were varied in a stepwise, deterministic sensitivity analysis and scenario analyses to assess their impact on the calculated prices.

      Results

      Prices for OTL-200 and AVXS-101 were estimated at 1 048 138 EUR and 380 444 EUR per treatment, respectively. In deterministic sensitivity analyses, varying R&D estimates had the greatest impact on the price for OTL-200, whereas for AVXS-101, changes in the profit margin changed the calculated price substantially. Highest prices in scenario analyses were achieved when assuming the lowest number of patients for OTL-200 and highest R&D expenses for AVXS-101. The lowest R&D expenses scenario resulted in lowest prices for either therapy.

      Conclusions

      Our results show that, using the proposed model, prices for both OTL-200 and AVXS-101 lie substantially below the currently (proposed) list prices for both therapies. Nevertheless, the uncertainty of the used model input parameters is considerable, which translates in a wide range of estimated prices. This is mainly because of a lack of transparency from pharmaceutical companies regarding R&D expenses and the costs of drug manufacturing. Simultaneously, the disease indications for both therapies remain heavily understudied in terms of their epidemiological profile. Despite the considerable variation in the estimated prices, our results may support the public debate on value-based and cost-based pricing models, and on “fair” drug prices in general.

      Key Words

      Introduction

      Cell and gene therapies (CGTs) are a heterogeneous group of innovative therapies. This group includes gene therapy, somatic cell therapy, and tissue-engineered products and in Europe is formally regulated as advanced therapy medicinal products [

      Regulation (EC) No 1394/2007 of the European Parliament and of the Council of 13 November 2007 on advanced therapy medicinal products and amending Directive 2001/83/EC and Regulation (EC) No 726/2004 (Text with EEA relevance). OJ L vol. 324 (2007).

      ]. CGTs are expected to bring considerable health benefits, particularly for indications with a high unmet medical need and diseases previously deemed untreatable. High clinical development activity is observed, and it is expected that 10–20 CGTs per year will undergo assessment for market authorization in the years to come [
      • Eder C.
      • Wild C.
      Technology forecast: advanced therapies in late clinical research, EMA approval or clinical application via hospital exemption.
      ]. Given their high reported prices, these novel therapies may pose substantial budget impact and affordability challenges [
      • Enrique S.-V.
      • Vaishali S.
      • Rosa R.-M.
      Innovation and competition in advanced therapy medicinal products.
      ].
      Spending on pharmaceuticals is increasing continuously in Europe and elsewhere [
      • Jakovljevic M.
      • Lazarevic M.
      • Milovanovic O.
      • Kanjevac T.
      The New and Old Europe: East-West Split in Pharmaceutical Spending.
      ,
      • Aitken M.
      • Berndt E.R.
      • Cutler D.
      • Kleinrock M.
      • Maini L.
      Has The Era Of Slow Growth For Prescription Drug Spending Ended?.
      ,
      • Berman A.
      • Lee T.
      • Pan A.
      • Rizvi Z.
      • Thomas A.
      Curbing unfair drug prices: A primer for states.
      ]. In most countries, it is the responsibility of policymakers to implement strategies to control prices of medicines and to ensure that they are accessible and affordable [
      World Health Organization
      WHO guideline on country pharmaceutical pricing policies.
      ]. In addition to the high prices, health technology assessment bodies and payers have expressed concerns about the timing of payment to impact affordability [
      • Hollier-Hann G.
      • Cork D.
      • Ralston S.
      • Curry A.
      Health Technology Assessment of Gene Therapies for Inherited Genetic Disorders in the US and Europe.
      ]. The curative potential for chronic indications asks for an upfront payment of costs, which are otherwise spread over multiple years. And, unlike treatment regimens for chronic conditions, one-time therapies cannot be stopped when effects do not match expectations, nor can the costs be recouped.
      Two examples of expensive treatments are CGTs such as OTL-200 (brand name: Libmeldy) for the treatment of early-onset metachromatic leukodystrophy (MLD) and AVXS-101 (also known as onasemnogene abeparvovec-xioi, brand name: Zolgensma) for the treatment of spinal muscular atrophy (SMA). Currently, OTL-200 holds centralized marketing authorization in the European Union (EU), but official list prices are not publicly available [

      European Medicines Agency. Libmeldy. European Medicines Agency https://www.ema.europa.eu/en/medicines/human/EPAR/libmeldy (2020).

      ]. In a corporate presentation from the manufacturer (Orchard Therapeutics, hereafter: ORTX), a price range between 2.5 and 3.0 million Euro (EUR) per treatment, however, is anticipated [

      Orchard Therapeutics. Orchard Therapeutics Corporate Presentation August 2020. https://ir.orchard-tx.com/static-files/a8aefd1a-836b-41d9-baab-ee60f0710647 (2020).

      ]. In 2021, AVXS-101 holds marketing approval in the United States, Japan, and the EU, with quoted list prices of 2.1 million US dollars (USD, approximately 1.8 million EUR), 167 million Japanese yen (approximately 1.3 million EUR), and 1.9 million EUR (in Germany) per treatment. Such highly priced drugs are a concern, as they can jeopardize the affordability of health care systems. And, indeed, for some countries the affordability of novel and expensive therapies is already at risk [

      Nederlandse Zorgautoriteit. Monitor geneesmiddelen in de medisch-specialistische zorg 2020. 49 http://puc.overheid.nl/doc/PUC_305909_22 (2020).

      ,
      • Gurwitz J.H.
      • Pearson S.D.
      Novel Therapies for an Aging Population: Grappling With Price, Value, and Affordability.
      ,
      • Tarín-Arzaga L.
      • et al.
      Impact of the affordability of novel agents in patients with multiple myeloma: Real-world data of current clinical practice in Mexico.
      ,
      • Flume M.
      • et al.
      Approaches to manage ‘affordability’ of high budget impact medicines in key EU countries.
      ].
      To safeguard affordability of new therapies, Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] suggested a novel pricing model for such therapies in which the price is based on costs of research and development (R&D), drug manufacturing, sales, marketing, the eligible patient population and a profit margin for the industry. However, until now, the model has not been applied in the literature and its feasibility has not been determined. Therefore, we used this model to estimate prices for CGTs, and likewise to determine whether the model can be used with currently available evidence. To this end, we took OTL-200 and AVXS-101 as case studies. The results of our calculations may be used in reimbursement negotiations for these therapies. In addition, they may support the public debate on value-based and cost-based pricing models, and on “fair” drug prices in general.

      Methods

      Pricing model

      The cost-based pricing model described by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] was used to estimate the prices of two CGTs using OTL-200 and AVXS-101 as case studies. The model combines the costs of R&D (Crd), the number of patients (Np) who can benefit from the new drug during the time in years left of patent protection, the costs to manufacture the drug (Cman) and a profit margin (Mp) to calculate a price for the novel therapy (Ctx, see Eq. 1).
      Ctx=(CrdNP+Cman)*(1+Mp)
      (1)


      To adhere to the original model methodology, the perspective of this study is set to the “more developed regions” as defined by the United Nations (UN) Department of Economic and Social Affairs (i.e., Europe, Northern America, Australia/New Zealand, and Japan) [

      United Nations, Department of Economics and Social Affairs. Definition of Regions. https://population.un.org/wpp/DefinitionOfRegions/.

      ].
      Input parameters for the pricing model were extracted from the literature and public online sources. All prices and costs are stated in 2020 EUR and were inflated with the Dutch Consumer Price Index using the R package cbsodataR [

      de Jonge, E. cbsodataR: Statistics netherlands (CBS) open data API client. https://github.com/edwindj/cbsodataR (2020).

      ], when necessary. For eventual currency conversions (i.e., in case costs or prices were stated in a currency other than EUR) the R package priceR was used to retrieve (historical) exchange rates [

      Condylios, S. priceR: Economics and pricing tools. https://github.com/stevecondylios/priceR (2021).

      ].
      In the following sections, we briefly describe the general methodology used to estimate the model inputs, outline the key assumptions and state values for the model base-case analysis (see also Table 1) [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ,
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      ,
      • van Rappard D.F.
      • Boelens J.J.
      • Wolf N.I.
      Metachromatic leukodystrophy: Disease spectrum and approaches for treatment.
      ,
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      ,
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      , ]. More information on all input parameters can be found in the Appendices.
      Table 1Base case values from the literature to estimate model input parameters.
      TypeDescriptionValue in useReference
      Development phase-specific success ratePre-clinical to approval13.8%Same assumption as Wouters et al. (2020)
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      Phase 1 to approval13.8%Wong et al. (2019)
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      Phase2 to approval35.1%Wong et al. (2019)
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      Phase 3 to approval59.0%Wong et al. (2019)
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      Submission for marketing authorization to approval83.2%Wong et al. (2019)
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      Global lump sum costs for R&D phases (all capitalized and risk adjusted)Pre-clinical
      Already capitalized and risk adjusted in original source, hence no out-of-pocket could be stated.
      209 439 080 EURWouters et al. (2020)
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      Phase 1
      Out-of-pocket: 45 690 948 EUR.
      337 615 565 EURWouters et al. (2020)
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      Phase 2
      Out-of-pocket: 88 778 214 EUR.
      252 929 385 EURWouters et al. (2020)
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      MLDAverage incidence rate1.6 per 100 000 newbornsVan Rappard et al. (2015)
      • van Rappard D.F.
      • Boelens J.J.
      • Wolf N.I.
      Metachromatic leukodystrophy: Disease spectrum and approaches for treatment.
      SMAPercentage of patients with SMA with up to three SMN2 gene copies (used to calculate patients in Europe)94.66%Calucho et al. (2018)
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      One copy of SMN2 gene0.34%Calucho et al. (2018)
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      Two copies of SMN2 gene16.55%Calucho et al. (2018)
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      Average incidence rate: SMA type I5.77 per 100 000 newbornsVerhaart et al. (2017)
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      Average incidence rate: SMA type II5.89 per 100 000 newbornsVerhaart et al. (2017)
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      Average prevalence rate: SMA type I0.17 per 100 000Verhaart et al. (2017)
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      Average prevalence rate: SMA type II1.78 per 100 000Verhaart et al. (2017)
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      Patent durationRemaining regulatory or intellectual protection: AVXS-10110 yearsNovartis SEC form: ‘2020 20-F’
      Remaining regulatory or intellectual protection: OTL-20010 yearsAssumption
      Profit marginProfit margin20%Uyl-de Groot and Löwenberg (2018)
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      MLD, metachromatic leukodystrophy; SMA, spinal muscular atrophy; R&D, research and development; SEC, Securities and Exchange Commission.
      a Already capitalized and risk adjusted in original source, hence no out-of-pocket could be stated.
      b Out-of-pocket: 45 690 948 EUR.
      c Out-of-pocket: 88 778 214 EUR.

      Estimating costs for R&D (Crd)

      For this analysis, we sought to estimate expenses for R&D for OTL-200 and AVXS-101 as precisely as possible. To this end, we followed an approach similar to recently conducted study by Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ], which received the highest “suitability score” (81 of a maximum of 96) in the review by Schlander et al. [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ]. The suitability score framework was designed by the authors of the review to assess how comprehensively the included studies identified and incorporated appropriate factors to estimate R&D expenses. This framework includes 16 factors, classified into three domains, with a high suitability score indicating that studies considered and addressed a wider range of factor. Detailed information in this framework can be found in the Appendix of the original publication [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ].
      In a first step, we reviewed publicly available financial reports from all companies involved in the R&D process of the case studies. Such reports mainly included filings of financial statements that public companies are required to submit to the US Security and Exchange Commission (SEC). Publicly traded firms submit either quarterly of annual filings to the SEC (Forms 10-Q and 10-K, respectively). From these filings, information on R&D expenses were extracted, starting from the year a particular product was first mentioned in the SEC filings or company reports. We refer to all costs taken from the SEC filings and other not already adjusted costs as “out-of-pocket.” Furthermore, we distinguished between several stages of pharmaceutical drug development that both therapies underwent until their first marketing approval, namely (i) pre-clinical phase, (ii) phase 1 clinical and (iii) phase 2 clinical. Similar to previous studies, we considered phase 1/2 studies as phase 2 [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ,
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      ]. In case R&D expenses for these stages could not be deduced or approximated from the SEC filings, we used lump sum estimates per stage as estimated by Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ].
      R&D efforts for OTL-200 and AVXS-101 were done by different companies. OTL-200 was initially researched by GlaxoSmithKline (GSK) and transferred to Orchard Therapeutics plc. (ORTX) through an asset purchase in the third quarter of 2018 []. AVXS-101 was first developed by AveXis (AVXS) and added to the product portfolio of Novartis International AG (Novartis) in the second quarter of 2018, after a company acquisition [].
      While bigger companies usually do not report R&D expenses stratified by therapeutic area or even on product level, smaller manufacturers often do so. Indeed, both ORTX and AVXS reported expenditures on R&D in their filings to the SEC. These expenditures included costs for (i) any type of overhead, (ii) employees (i.e., salary, benefits, stock-based compensations), (iii) consultations (i.e., fees, stock-based compensations), (iv) material (i.e., acquisition, developing, manufacturing), (v) studies (i.e., pre-clinical studies, clinical studies), (vi) licenses (up-front payments) and (vii) any type of regulatory approval [,]. Following these definitions, we assumed that all relevant R&D expenses for the therapies of two case studies were included. An overview of the sources used to estimate R&D expenses for both case studies is depicted in Figure 1.
      Figure 1
      Figure 1Overview of sources used to estimate R&D expenses for (A) OTL-200 and (B) AVXS-101. R&D, research and development. (Color version of figure is available online).
      Second, we accounted for so-called “abandoned” drugs or “failed projects” [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ,
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ]. Similar to Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ], we used development phase-specific success rates published by Wong et al. [
      • Wong C.H.
      • Siah K.W.
      • Lo A.W.
      Estimation of clinical trial success rates and related parameters.
      ] to correct for this (see Table 1). Third, we considered a real cost of capital rate of 10.5%, as done in previous studies [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ,
      • DiMasi J.A.
      • Grabowski H.G.
      • Hansen R.W.
      Innovation in the pharmaceutical industry: New estimates of R&D costs.
      ]. Since lump sums reported by Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ] already included a success rate adjustment and cost of capital for pre-clinical stages, we adjusted R&D lump sums for phase 1 and phase 2 accordingly.

      R&D costs for OTL-200

      Estimated R&D expenses for OTL-200 were based on costs made by GSK and ORTX. Since GSK only reported global figures on R&D expenses in all their SEC filings, we assumed lump sum costs for both the pre-clinical phase and phase 2 for GSK (see Table 1) [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ]. Expenses for phase 1 were not considered because both safety and efficacy of OTL-200 (formally known as GSK-2696274), were assessed in a phase 1/2 clinical study (NCT 01560182). Lump sum costs for phase 2 were corrected with a cost of capital for the time between the start of clinical trial in April 2010 and the transferal of rights from GSK to ORTX in the third quarter of 2018 (i.e., 8.3 years) [

      European Medicines Agency. EMA/584450/2020. CHMP assessment report. Libmeldy. https://www.ema.europa.eu/en/documents/assessment-report/libmeldy-epar-public-assessment-report_en.pdf (2020).

      ]. This resulted in total assumed R&D expenses of 488.93 million EUR when capitalized and risk adjusted (sum of pre-clinical and phase 2, out-of-pocket expenditures were 298.22 million EUR), incurred by GSK [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ].
      Although OTL-200 was already in its registrational phase, we considered further R&D expenses made by ORTX, assuming that R&D efforts continued until first marketing approval was issued. For these expenses, we relied on ORTX's SEC filings. In the annual SEC filings (i.e., 10-K form), ORTX reported R&D expenses for therapeutic areas (i.e., neurometabolic disorder, primary immune deficiencies, blood disorders, as well as other research and pre-clinical programs under development) for the years 2018–2020. For this analysis, we used reported R&D expenses for the therapeutic area of neurometabolic disorders starting from the last quarter in 2018 (i.e., after ORTX had acquired OTL-200 form GSK) until its first marketing approval by the European Medicines Agency (EMA) [

      Orchard Therapeutics. Pipeline. Orchard Therapeutics https://www.orchard-tx.com/approach/pipeline/(2021).

      ]. Consequently, we assumed total capitalized and risk adjusted R&D expenses for ORTX of 51.28 million EUR (16.29 million EUR out-of-pocket). A detailed calculation can be found in Appendix A (Table 3 and Table 4). [

      Orchard Therapeutics. Orchard Therapeutics Corporate Presentation August 2020. https://ir.orchard-tx.com/static-files/a8aefd1a-836b-41d9-baab-ee60f0710647 (2020).

      ,

      Orchard Therapeutics. Our Story. Orchard Therapeutics https://www.orchard-tx.com/about/our-story/(2021).

      ].Combining all capitalized and risk-adjusted R&D expenses of GSK and ORTX resulted in a total of 540.2 million EUR for OTL-200 (314.51 million EUR out-of-pocket).
      Table 3Reported expenses for OTL-200 by Orchard therapeutics plc.
      YearExpenses in USDExpenses in 2020 EUR (converted and indexed)Source
      201887 243 00076 838 07210-K form 2019
      201939 042 00035 317 57810-K form 2019
      202017 714 00015 939 20510-K form 2020
      EUR, Euro (currency); NA, not applicable; R&D, research and development; USD, United States dollars.
      Table 4Estimated R&D expenses for OTL-200 based on SEC filing and share on ORTX's neurometabolic disorder portfolio.
      YearExpenses i n EURAssumed share of OTL-200Risk rate adjustmentCost of capitalExpenses adjusted for share, time, risk and cost of capital
      2018
      Here we consider only costs for the last quarter (i.e., three months) of the total R&D expenses made in 2018 because ORTX acquired OTL-200 in that time.
      19 209 5180.2535.1%10.5%15 118 602
      201935 317 5780.2535.1%10.5%27 796 242
      202015 939 2050.1735.1%10.5%83 63 163
      EUR, Euro (currency); ORTX, Orchard Therapeutics; R&D, research and development.
      a Here we consider only costs for the last quarter (i.e., three months) of the total R&D expenses made in 2018 because ORTX acquired OTL-200 in that time.

      R&D costs for AVXS-101

      Assumed R&D expenses for AVXS-101 were based on costs made by AVXS and Novartis. In the 2015 annual filing (10-K) to the SEC, AVXS stated that it did not begin R&D activities of AVXS-101 until the year 2013 []. Furthermore, all 10-K filings for the years 2015–2018 stated that substantially all of the company's R&D expenses “have been associated with AVXS-101” []. Based on this statement, we assumed that all reported R&D expenses by AVXS could be attributed to AVXS-101. AVXS defined R&D expenses similar to ORTX, and a total of 2.87 billion EUR when capitalized and risk adjusted (out-of-pocket expenditure were 0.41 billion EUR) could be attributed to this therapy []. An overview of all R&D expenses reported by AVXS can be found in Appendix B (Table 5).
      Table 5Research and development expenses for AVXS-101 by AveXis.
      YearStated expenses in USDExpenses in 2020 EUR (corrected for success rate and including cost of capital)Clinical phaseRemarkSource
      2013362 6092 388 304Pre-clinical10-K form 2015
      201413 550 422168 273 624Pre-clinical, phase 1Phase 1 started in April 201410-K form 2015
      201527 493 460213 224 709Phase 110-K form 2015
      201658 891 667456 597 399Phase 110-K form 2016
      2017150 391 0001 513 385 481Phase 2, phase 2Phase 2 started in September 201710-k form 2017
      2018199 709 000513 779 724Phase 210-Q form ended March 31, 2018
      EUR, Euro (currency); USD, United States dollars.
      To estimate the remaining R&D expenses for AVXS-101 between AVXS’ last SEC filing and the first marketing approval of the product in the United States (May 2019), we estimated average monthly R&D expenses based on the last available SEC filing (AVXS 2018 10-Q form, see Appendix B) []. This was done because Novartis acquired AVXS and detailed R&D expenses by product or therapeutic area could no longer be retrieved. In addition, lump sum estimates for a registrational phase were not available from Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ]. In total, we added capitalized and risk adjusted R&D expenses of 323.42 million EUR (266.84 million EUR out-of-pocket) for the period between March 2018 and May 2019 to the total R&D expenses, reported by AVXS. This led to a total estimate of R&D expenses of 3.19 billion EUR for AVXS-101 when capitalized and risk adjusted (678.77 million EUR out-of-pocket).

      Number of eligible patients during patent protection (Np)

      The number of eligible patients during the remaining patent protection of both products was calculated using incidence and prevalence rates from the literature for MLD (OLT-200) and SMA (AVXS-101). Prevalence rates were multiplied with the population estimation from the 2019 UN Revision of World Population Prospects [

      United Nations, Department of Economics and Social Affairs. World Population Prospects - Population Division - United Nations. https://population.un.org/wpp/.

      ]. These data were taken from the R package wpp2019 [

      Division, U. N. P. wpp2019: World population prospects 2019. http://population.un.org/wpp (2020).

      ]. Incidence rates (or more precisely: “birth prevalence rates” in these cases) were multiplied with the estimated number of newborns in the UN more-developed regions. These data were based on yearly interpolated births from the year 2020 onwards (time of marketing approval for OTL-200 and AVXS-101) [

      Our World in Data. Number of births and deaths per year. Number of births and deaths per year, More Developed Regions https://ourworldindata.org/grapher/births-and-deaths-projected-to-2100 (2021).

      ].

      Estimating the duration of remaining patent protection

      In contrast to Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ], we extended the definition of the “number of patent years after registration” to also include all applicable intellectual property protection (IPP) such as patent protection, or regulatory protection (RP) such as data protection, or market exclusivity (whichever comes last). []
      For OTL-200, we could only find information on RP with regard to the granted orphan market exclusivity period ending on December 18, 2030 [

      European Commission. Union Register of medicinal products for human use. Product information. Libmeldy. Union Register of medicinal products https://ec.europa.eu/health/documents/community-register/html/h1493.htm (2020).

      ]. Reliable figures on further IPP coverage could not be found. For AVXS-101, we retrieved pertinent data from the 2020 SEC filings by Novartis (see Appendix C [Table 6]), stating that the latest regular data protection would be somewhere in 2031 []. We assumed that both OTL-200 and AVXS-101 would be covered by IPP or RP for at least 10 years.
      Table 6Current intellectual property or regulatory protection for AVXS-101 (by Novartis AG).
      Type of protectionYear of expirationCountry/region
      Patent on vector2024US
      Patent on vector2024US
      Patent on vector2026US
      Patent on method of treatment2028US
      Patent on method of treatment2028US
      ODE for SMA2026US
      RDP2031US
      Patent on vector2024EU
      Patent on vector2028EU
      Patent on method of use2028EU
      Patent on method of use2028EU
      ODE for SMA2030EU
      RDP2030EU
      EU, European Union; ODE, orphan drug exclusivity; RDP, regular data protection; SMA, spinal muscular atrophy; US, United States.

      Estimating incidence of patients with MLD

      In line with current marketing approval of OTL-200 in the EU [

      European Medicines Agency. Libmeldy. European Medicines Agency https://www.ema.europa.eu/en/medicines/human/EPAR/libmeldy (2020).

      ], we only considered an MLD incident population with an average incidence rate of 1.6 per 100 000 newborns, based on the study of van Rappard et al. [
      • van Rappard D.F.
      • Boelens J.J.
      • Wolf N.I.
      Metachromatic leukodystrophy: Disease spectrum and approaches for treatment.
      ]. Furthermore, we restricted the patient population, eligible for OTL-200, to one third because previous studies with comparable therapies in this indication demonstrated that only a fraction of diagnosed patients are eligible for therapy [
      • van Rappard D.F.
      • et al.
      Efficacy of hematopoietic cell transplantation in metachromatic leukodystrophy: the Dutch experience.
      ]. This choice was validated with clinical experts (see the Acknowledgments). Consequently, we estimated a total of 683 patients with MLD eligible for OTL-200 over a period of 10 years. More details can be found in the Appendix D (Table 7, Table 8, Table 9, Table 10, Table 11).
      Table 7Total assumed eligible incident population for OTL-200.
      RegionTotal eligible patients based on meanTotal eligible patients based on minTotal eligible patients based on max
      Europe378.31331.02425.60
      Other (more developed)304.34266.30342.39
      Total682.66597.33767.99
      Table 8Total prevalent SMA Type I cases in the UN ‘more developed’ region based in mean, min, and max prevalence rates (PR).
      SMABased on mean PRBased on min PRBased on max PR
      Type I217212493494
      Table 9Estimated patients with SMA type I eligible for AVXS-101 in 10 years.
      RegionSMA TypeBased on mean incidence rate (IR)Based on min IRBased on max IR
      EuropeI401325036812
      Other (more developed)I322920135480
      Table 10Total eligible SMA type II cases in 10 years, younger than the age of two years in the UN “more-developed” region based on mean, min and max prevalence rates (PR).
      RegionBased on mean PRBased on min PRBased on max PR
      Europe370119761
      Other (more developed)27588566
      Table 11Estimated patients with SMA type II eligible for AVXS-101.
      RegionBased on mean IRBased on min IRBased on max IR
      Europe19005923487
      Other (more developed)16485143024

      Estimating incidence and prevalence of patients with SMA

      Marketing approval for AVXS-101 differs between the United States, Japan and the EU. While in the United States and Japan AVXS-101 was approved for patients with SMA younger than the age of two years, the EMA did not indicate any age restrictions. Nevertheless, it is mentioned that “[…] there is limited experience in patients 2 years of age and older […]” [

      European Medicines Agency. Libmeldy. European Public Assessment Report. Annex I - Summary of product characteristics. https://www.ema.europa.eu/en/documents/product-information/libmeldy-epar-product-information_en.pdf (2020).

      ]. Based on this statement and for this analysis, we assumed that patients above the age of two years, would not receive AVXS-101 in Europe.
      Assuming a general age restriction of two years, we considered patients with type I or II SMA to be eligible for AVXS-101. This categorization was based on the literature, and more detail can be found in Appendix D [
      • Poorthuis B.J.H.M.
      • et al.
      The frequency of lysosomal storage diseases in The Netherlands.
      ,
      • Munsat T.
      International SMA consortium meeting.
      ,
      • Zerres K.
      • Rudnik-Schöneborn S.
      Natural history in proximal spinal muscular atrophy: clinical analysis of 445 patients and suggestions for a modification of existing classifications.
      ,
      • Prior T.W.
      • Nagan N.
      • Sugarman E.A.
      • Batish S.D.
      • Braastad C.
      Technical standards and guidelines for spinal muscular atrophy testing.
      ,
      • Lunn M.R.
      • Wang C.H.
      Spinal muscular atrophy.
      ,
      • Lefebvre S.
      • et al.
      Identification and characterization of a spinal muscular atrophy-determining gene.
      ,
      • Hahnen E.
      • et al.
      Molecular analysis of candidate genes on chromosome 5q13 in autosomal recessive spinal muscular atrophy: evidence of homozygous deletions of the SMN gene in unaffected individuals.
      ,
      • Coratti G.
      • et al.
      Clinical Variability in Spinal Muscular Atrophy Type III.
      ]. While in theory, the age of onset for SMA type IIIa could be before two years of age, we did not include these patients in our analysis, because a recent study suggested that the minimum age of onset for this type might in fact be later [
      • Coratti G.
      • et al.
      Clinical Variability in Spinal Muscular Atrophy Type III.
      ].
      For our analysis, we relied on SMA-type specific prevalence and incidence rates as summarized in a recent systematic literature review [
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      ]. Consequently, we assumed average prevalence rates of 0.17 per 100 000, and 1.78 per 100 000, for SMA type I and II, respectively. Average assumed incidence rates were 5.77 per 100 000 newborns and 5.89 per 100 000 newborns for SMA type I and II, respectively. These data were used to calculate the total number of patients.
      However, due to the explicit age restrictions in the United States and Japan, and the assumed similar age restriction in the EU we only included patients with SMA type II younger than the age of two years. Since no information on the age distribution of patients with SMA type II was available, we approximated this distribution by calculating the proportion of individuals younger than the age of two years in the general population of the UN “more-developed region,” which was 3% [

      United Nations, Department of Economics and Social Affairs. World Population Prospects - Population Division - United Nations. https://population.un.org/wpp/.

      ].
      To be consistent with the current marketing approval in the United States and Japan, we considered SMA type I and type II for these regions and did not stratify by SMN2 copy involvement. For Europe, we considered all patients with SMA type I and all patients with SMA type II with up to three copies of the SMN2 gene, according to the EMA approval. Information on the distribution of SMN2 copies was taken from the literature [
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      ]. For all other countries fulfilling the more-developed region criteria, we assumed eligible patients similar to the definition of the United States and Japan. The total eligible patient population for AVXS-101 for the base-case analysis were 13 607 patients over a period of 10 years.

      Costs of drug manufacturing

      Manufacturing costs specific to OTL-200 or AVXS-101 were not available from the SEC filings or the literature. Therefore, we assumed those costs to be similar to the production costs of an adeno-associated virus–mediated factor IX gene therapy. Costs for the latter were estimated through a micro-costing (ingredient list) approach, for a recently published cost-effectiveness analysis [
      • Bolous N.S.
      • et al.
      The Cost-effectiveness of Gene Therapy for Severe Hemophilia B: A Microsimulation Study from the United States Perspective.
      ]. Hence, we assumed 63 477 EUR for the production costs of OTL-200 and AVXS-101 per therapy for one patient. Since manufacturing cost estimates were derived from an academic facility, our model considers an additional 30% margin for sales and marketing costs in addition to the production costs, as suggested by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ].

      Profit margin (Mp)

      Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] suggested that a reasonable profit margin would ideally be linked to the level of clinical benefit. To this end, they suggested profit margins of 20%, 30% and 40% for marginal, moderate and high levels of clinical benefit, respectively. However, such a benefit cannot yet fully be determined for either therapy because clinical (long-term) evidence for these treatments is lacking. Therefore, we used an arbitrary profit margin of 20% for the base-case analysis. The impact of a wider range of profit margins (i.e., between 10% and 60%) on the calculated price was examined in the deterministic sensitivity analyses. An overview of base case values for the cost-based pricing model per therapy can be found in Table 2 [
      • ten Ham R.M.T.
      • et al.
      What does cell therapy manufacturing cost? A framework and methodology to facilitate academic and other small-scale cell therapy manufacturing costings.
      ,
      • Ledley F.D.
      • McCoy S.S.
      • Vaughan G.
      • Cleary E.G.
      Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies.
      ].
      Table 2Base-case and scenario input values for OTL-200 and AVXS-101.
      OTL-200AVXS-101
      R&D expenses (Crd) in EUR
       Base-case540 204 0573 191 067 181
       Scenario 1
      Estimated from a truncated normal distribution assuming the base-case R&D estimate per drug as the mean; standard deviation and upper/lower bounds are based on Schlander et al. [25] (see Appendix E)
      227 778 4641 624 092 896
       Scenario 2
      Estimated from a truncated normal distribution assuming the base-case R&D estimate per drug as the mean; standard deviation and upper/lower bounds are based on Schlander et al. [25] (see Appendix E)
      2 207 848 4013 959 441 065
      Eligible number of patients during patent protection (Np)
       Base-case68313 607
       Scenario 3
      Based on minimum reported incidence and prevalence rates (see Appendix D)
      5977077
       Scenario 4
      Based on maximum reported incidence and prevalence rates (see Appendix D)
      76823 626
      Cost of drug manufacturing (Cman) in EUR
      This does not include a 30% margin for sales and marketing, which is added in the model calculations
       Base-case63 47763 477
       Scenario 5
      Based on the minimum reported value in ten Ham et al. (2020) [49]
      23 03323 033
       Scenario 6
      Based on maximum reported value (53,683 EUR) in ten Ham et al. (2020) and adding the absolute difference between lowest and highest reported values (i.e. 30,650 EUR) because ten Ham et al. argued that the maximum value was likely to be an underestimation of the real costs
      84 33384 333
      Profit margin (Mp) in %
       Base-case2020
       Scenario 700
       Scenario 8
      Based on maximum reported value in Ledley et al. (2020) [50]
      76.576.5
      Cman, cost of drug manufacturing; Crd, cost of research and development; EUR, Euro (currency); Mp, profit margin Np, number of patients; R&D, research and development.
      a Estimated from a truncated normal distribution assuming the base-case R&D estimate per drug as the mean; standard deviation and upper/lower bounds are based on Schlander et al.
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      (see Appendix E)
      b Based on minimum reported incidence and prevalence rates (see Appendix D)
      c Based on maximum reported incidence and prevalence rates (see Appendix D)
      d This does not include a 30% margin for sales and marketing, which is added in the model calculations
      e Based on the minimum reported value in ten Ham et al. (2020)
      • ten Ham R.M.T.
      • et al.
      What does cell therapy manufacturing cost? A framework and methodology to facilitate academic and other small-scale cell therapy manufacturing costings.
      f Based on maximum reported value (53,683 EUR) in ten Ham et al. (2020) and adding the absolute difference between lowest and highest reported values (i.e. 30,650 EUR) because ten Ham et al. argued that the maximum value was likely to be an underestimation of the real costs
      g Based on maximum reported value in Ledley et al. (2020)
      • Ledley F.D.
      • McCoy S.S.
      • Vaughan G.
      • Cleary E.G.
      Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies.

      Deterministic sensitivity and scenario analyses

      To test the impact of the different model input parameters and assumptions on the price calculations, we varied parameters in deterministic and scenario analyses. In the deterministic sensitivity analysis, we re-calculated the price for OTL-200 and AVXS-101 by stepwise increasing and decreasing all model input parameters (i.e., Crd, the number of patients who can benefit from the new drug during the time in years left of patent protection, costs to manufacture the drug and Mp) by five steps between the minimum value from the scenario analysis (see below paragraph) and the base-case value, and five steps between the base-case value and the maximum value in from the scenario analysis. The value for each step was calculated by dividing the difference between the minimum (or maximum) value and the base-case value by five.
      In scenario analyses, we varied model input parameters for which upper and lower bound estimates could be informed by the literature. For this, we used the base-case estimates as reference points and varied each input parameter step by step, while keeping all other parameters similar to the base-case (see Table 2). In this way, we were able to show a range of realistic cost-based prices for both products. In the absence of reliable R&D expenses for CGTs specifically, we used minimum (i.e., 146 million EUR; 161 million USD) and maximum (i.e., 4.11 billion EUR; 4.54 billion USD) estimates reported in a review by Schlander et al. [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ] However, using these ranges directly would inflate the margins disproportionally. This is because the review included costly phase 3 trials, many different therapeutic classes and a large variation of drug sample inclusion periods, among other factors. In addition, since both OTL-200 and AVXS-101 were approved based on phase 2 trials with fewer than 25 participants [

      European Medicines Agency. Libmeldy. European Medicines Agency https://www.ema.europa.eu/en/medicines/human/EPAR/libmeldy (2020).

      ,
      European Medicines Agency
      ,
      • Novartis AG.
      AveXis receives FDA approval for Zolgensma®, the first and only gene therapy for pediatric patients with spinal muscular atrophy (SMA).
      ,
      • Novartis AG.
      Novartis receives approval from Japanese Ministry of Health, Labour and Welfare for Zolgensma® the only gene therapy for patients with spinal muscular atrophy (SMA).
      ], employing the 4.11 billion EUR estimate for R&D expenses of both products would be too high. Therefore, we chose to determine both minimum and maximum R&D estimates for each therapy based on the 0.05 and 0.95 percentile of a truncated normal distribution. The distribution's mean was the base-case R&D estimate of the respective therapy, whereas values for standard deviation and upper/lower bounds were based on the total range reported by Schlander et al. [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ]. Hence, by varying only the mean, we received different R&D estimates for each drug, reflecting the relative uncertainty around the base-case estimates (see Appendix E for more information [
      • Paprocka I.
      • Kempa W.M.
      • Ćwikła G.
      Predictive Maintenance Scheduling with Failure Rate Described by Truncated Normal Distribution.
      ,
      • Ramirez A.
      • Cox C.
      Improving on the Range Rule of Thumb.
      ]). The number of eligible patients for OTL-200 and AVXS-101 was based on minimum and maximum incidence and prevalence rates found in the literature (see Appendix D). Lower estimates for drug manufacturing costs were approximated with a study by ten Ham et al. [
      • ten Ham R.M.T.
      • et al.
      What does cell therapy manufacturing cost? A framework and methodology to facilitate academic and other small-scale cell therapy manufacturing costings.
      ] on cell manufacturing costs. Since higher bound estimates for drug manufacturing costs were reported to be underestimations, we added the absolute difference between lower and higher reported estimates to the highest estimate. This resulted in maximum costs for drug manufacturing of 84 333 EUR. Finally, we assumed no profit margin (i.e., 0%) for the lowest possible estimate and 76.5% as highest value, based on Ledley et al. [
      • Ledley F.D.
      • McCoy S.S.
      • Vaughan G.
      • Cleary E.G.
      Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies.
      ].

      Results

      With the input values presented in Table 2, the model proposed by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] (Eq. 1) results in an estimated base-case price of 1 048 138 EUR and 380 444 EUR per treatment and patient, for OTL-200 and AVXS-101, respectively. The results of the deterministic sensitivity analysis are summarized in Figure 2. The deterministic sensitivity analysis showed that the variation of the model input parameters had different effects on the calculated total price of either case study. For instance, assuming higher R&D expenses for OTL-200 resulted in a substantial increase of the calculated price, whereas increasing assumed R&D expenses for AVXS-101 had a relatively smaller effect on the price. In addition, it can be seen that R&D expenses have the most impact on the price calculated for OTL-200, whereas for AVX-101 increasing the assumed profit margin causes the highest price increase, followed by assuming less-eligible patients. All input parameters and the results of the deterministic sensitivity analysis can be found in Appendix F (Table 12).
      Figure 2
      Figure 2Results of the deterministic sensitivity analysis.
      Table 12Results of the deterministic sensitivity analysis.
      TherapyModel input parameter changedValue in usePrice in EURAbsolute difference from base-case price in EUR
      OTL-200Cost of research and development227 778 464499 221–548 917
      290 263 583609 004–439 134
      352 748 701718 788–329 350
      415 233 820828 571–219 567
      477 718 938938, 355–109 783
      873 732 9261 634 133585 995
      1 207 261 7952 220 1281 171 990
      1 540 790 6632 806 1231 757 985
      1 874 319 5323 392 1182 343 980
      2 207 848 4013 978 1142 929 976
      Number of patients5971 184 861136 723
      6141 154 454106 316
      6311 125 70377 565
      6491 098 47750 339
      6661 072 65724 519
      7001 025 088–23 050
      7171 003 131–45 007
      734982 192–65 946
      751962 200–85 938
      768943 093–105 045
      Cost of drug manufacturing23 033985 045–63 093
      31 122997 664–50 474
      39 2111 010 283–37 855
      47 2991 022 901–25 237
      55 3881 035 520–12 618
      67 6481 054 6456507
      71 8191 061 15213 014
      75 9911 067 65919 521
      80 1621 074 16626 028
      84 3331 080 67332 535
      Profit margin0%873 448–174 690
      4%908 386–139 752
      8%943 324–104 814
      12%978 262–69 876
      16%1 013 200–34 938
      36%1 187 890139 752
      52%1 327 642279 504
      68%1 467 393419 255
      84%1 607 145559 007
      100%1 746 897698 759
      AVXS-101Cost of research and development1 624 092 896242 253–138 191
      1 937 487 753269 891–110 553
      2 250 882 610297 529–82 915
      2 564 277 467325 167–55 277
      2 877 672 324352 806–27 638
      3 344 741 958393 99713 553
      3 498 416 734407 54927 105
      3 652 091 511421 10240 658
      3 805 766 288434 65454 210
      3 959 441 065448 20767 763
      Number of patients7077640 112259 668
      8383555 815175 371
      9689494 244113 800
      10 995447 29966 855
      12 301410 32229 878
      15 611344 318–36 126
      17 615316 412–64 032
      19 618294 216–86 228
      21 622276 125–104 319
      23 626261 103–119 341
      Cost of drug manufacturing23 033317 351–63 093
      31 122329 970–50 474
      39 211342 588–37 856
      47 299355 207–25 237
      55 388367 825–12 619
      67 648386 9516507
      71 819393 45813 014
      75 991399 96519 521
      80,162406 47226 028
      84,333412 97932 535
      Profit margin0%317 037–63 407
      4%329 718–50 726
      8%342 400–38 044
      12%355 081–25 363
      16%367 763–12 681
      36%431 17050 726
      52%481 896101 452
      68%532 622152 178
      84%583 348202 904
      100%634 073253 629
      EUR, Euro (currency).
      The results of the different scenario analyses (see Figure 3 and Appendix G [Table 13]) show that the highest price for both OTL-200 (i.e., 3 978 114 EUR) and AVXS-101 (i.e., 640 112 EUR) were achieved when assuming the highest R&D expenses for OTL-200 and assuming the lowest number of patients for AVXS-101. Furthermore, the lowest price for OTL-200 (i.e., 499 221 EUR) and AVXS-101 (i.e., 242 253 EUR) resulted from assuming the lowest R&D expenses.
      Figure 3
      Figure 3Results of the scenario analyses. (Color version of figure is available online).
      Table 13Results of the scenario analyses for OTL-200 and AVXS-101.
      Scenario numberPrice for OTL-200 in 2020 EURPrice for AVXS-101 in 2020 EUR
      1499 221242 253
      23 978 114448 207
      31 184 861640 112
      4943 093261 103
      5985 045317 351
      61 080 673840 781
      7873 448317 037
      81 541 636559 570
      EUR, Euro (currency).
      Considering both deterministic sensitivity and scenario analyses, the price range for OTL-200 was between 499 221 EUR and 3 978 114 EUR, with a base-case point estimate of 1 048 138 EUR. In comparison, the price range for AVXS-101 was narrower with prices between 242 253 EUR and 640 112 EUR, and a base-case point estimate of 380 444 EUR. When only out-of-pocket R&D expenses were considered, the estimated drug prices were 651 596 EUR and 158 885 EUR for OTL-200 and AVXS-101, respectively.

      Discussion

      In this study, we meticulously estimated all necessary input parameters to calculate drug prices for OTL-200 and AVXS-101 using the pricing model suggested by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ]. All model input parameters were based on publicly available evidence and R&D expenses were adjusted based on current methodological approaches. The calculated prices for OTL-200 and AVXS-101 were 1 048 138 EUR and 380 444 EUR per treatment, respectively. Lowest and highest prices in deterministic sensitivity and scenario analyses ranged between 499 221 EUR to 3 978 114 EUR per patient and treatment for OTL-200 and 242 253 EUR to 640 112 EUR for AVXS-101. Our deterministic sensitivity analyses demonstrated that a variation of the input parameters (i.e., increase or decrease) had distinct effects on the price outcome. Similarly, when assuming both minimum and maximum values of input parameters in scenario analyses, the estimated prices changed considerably. Nevertheless, most calculated prices in this study were substantially lower than the currently (proposed) list prices for either therapy (list price for OTL-200: between 2.5 and 3.0 million EUR; AVXS: approximately 1.9 million EUR).

      Cost of R&D (Crd)

      In recent years, several cost-based pricing models, such as the one from the International Association of Mutual Benefit Societies [

      International Association of Mutual Benefit Societies. A European drug pricing model for fair and transparent prices. https://www.aim-mutual.org/wp-content/uploads/2019/12/AIMfairpricingModel.pdf (2020).

      ], the “discounted cash flow” model [
      • Nuijten M.J.C.
      • Vis J.
      Economic comments on proposal for a novel cancer drug pricing model.
      ,
      • Nuijten M.
      • Capri S.
      Pricing of orphan drugs in oncology and rare diseases.
      ] or “rate of return pricing” [
      • Berdud M.
      • Drummond M.
      • Towse A.
      Establishing a reasonable price for an orphan drug.
      ] have been suggested to estimate prices for novel drugs. Model input parameters across these models vary but all include at least R&D expenses. This demonstrates the relative importance of this input parameter to all models. While most of these cost-based pricing models use lump sum estimations, we sought to estimate each model input parameter, and particularly R&D expenses, as precisely as possible for two reasons. First, because the original published model by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] also used actual costs rather than lump sums for their example calculations. Second, the two selected case studies (i.e., OTL-200 and AVXS-101) were partly developed at smaller companies that reported their R&D expenses rather detailed in their pertinent SEC filings.
      The deterministic sensitivity analysis showed that the assumed R&D expenses can have a tremendous impact on the calculated price, especially when the number of eligible patients is low. This exhibits the relative importance of knowing the true value of the R&D expenses when using the pricing model. Since both ORTX and AVXS (partly) reported R&D expenses (for OTL-200 and AVXS-101, respectively) in their SEC filings, we believe that we indeed could approximate the total expenses precisely.
      Our estimated R&D expense estimations for OTL-200 (i.e., 540 million EUR) and AVXS-101 (i.e., 3.19 billion EUR) fall within the range of expenses reported in the literature. In a recent systematic review of the literature, Schlander et al. (2021) reported that R&D expense estimates ranged between approximately 146 million EUR (161 million USD) to 4.11 billion EUR (4.54 billion USD) [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ,
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ,
      • DiMasi J.A.
      • Hansen R.W.
      • Grabowski H.G.
      • Lasagna L.
      Research and development costs for new drugs by therapeutic category. A study of the US pharmaceutical industry.
      ]. Even the most extreme values explored in our deterministic sensitivity analysis are covered by this range. Nevertheless, all assumed R&D expenses of the base-case, remain at a the low- to mid-range of the reported spectrum in the literature. This may be due to diverging definitions of R&D expenses in the literature and those used by ORTX and AVXS for the SEC filings. For the latter two for instance, it seems that costs for abandoned drugs were not included. In our analysis, R&D estimates for OTL-200 included a success rate adjustment of costs of capital for the pre-clinical phase at GSK. This is because the used lump sum estimates for this development period, estimated by Wouters et al. [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ], already included these items. While there is no reliable way to precisely estimate additional costs for abandoned drugs [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ], we believe that such costs are not applicable to AVXS-101. This is mainly because AVXS was founded in the same year it started researching AVXS-101 (i.e., 2013) and had devoted all of its R&D expenses to this therapy at least until 2018 [].
      Accounting for cost of capital and applying a success rate adjustment to the R&D expenses found in the SEC filings or the literate increased the original expenses substantially. While this has an equally large influence on the calculated cost-based price, it is reasonable to include this adjustment because manufacturers and investors also account for those in their day-to-day business and investment decisions. Estimating a cost-based price without such parameters would not yield a realistic result that can be used for policy purposes in a competitive market. For instance, a report from 2019 calculated that industry-wide, 53% of spending on R&D is lost in cost of capital, 40% on out-of-pocket failure costs and only 7% on out-of-pocket success costs [

      Gupta Strategists. The cost of opportunity. A study on pharmaceutical R&D costs. https://gupta-strategists.nl/storage/files/The-cost-of-opportunity-Gupta-Strategists.pdf.

      ]. Without risk and cost of capital adjustments, prices for OTL-200 and AVXS-101 would nearly be half the currently estimated prices (i.e., 651 596 EUR and 158 885 EUR, respectively).
      It needs to be noted that all assumed R&D expenses in this study neglect other indirect public (financial) contributions towards the development of OTL-200 and AVXS-101. This choice was made because the proposed pricing model does not define how to account for these contributions and because estimating those will add additional uncertainty to the numbers employed in this analysis. Other studies have found that such public investments may significantly impact the total assumed R&D expenses and even exceed the manufacturer's investment by a factor of 1.5–5.1 [
      • Gotham D.
      • McKenna L.
      • Frick M.
      • Lessem E.
      Public investments in the clinical development of bedaquiline.
      ]. To estimate the total value of public investments for the orphan drug bedaquiline, Gotham et al. [
      • Gotham D.
      • McKenna L.
      • Frick M.
      • Lessem E.
      Public investments in the clinical development of bedaquiline.
      ], for instance, considered orphan drug tax credits (ODTCs), priority review vouchers (PRVs), drug-donation programs and publicly funded clinical trials.
      Under the US Orphan Drug Act, manufacturers may be eligible for an ODTC for up to 25% (or 50% before the year 2017) of qualified clinical testing expenses. Claiming the ODTC tax credit affects the company's eligibility for (parts of) the regular R&D tax credits and hence the incremental gain of using an ODTC will be lower than 25%. In addition, the impact of ODTCs on lowering costs for developing new treatments for rare diseases seems to be affected by the type of company claiming the ODTC. Especially newer, pre-market developers without previous drug approval will not be able to use ODTCs until they have tax liability that could be reduced by the credit, which can take more than 12 years [

      Biotechnology Innovation Organization. Impact of the Orphan Drug Tax Credit on treatments for rare diseases. [Report] Prepared for the Biotechnology Industry Organization and the National Organization for Rare Disorders.https://www.bio.org/sites/default/files/legacy/bioorg/docs/EY%20BIO%20Orphan%20Drug%20Tax%20Credit%20Report%202015%2006%2016.pdf (2015).

      ]. However, since ODTCs are transferrable, pre-market companies owning ODTCs may be more attractive for potential mergers and acquisitions with established companies [

      Biotechnology Innovation Organization. Impact of the Orphan Drug Tax Credit on treatments for rare diseases. [Report] Prepared for the Biotechnology Industry Organization and the National Organization for Rare Disorders.https://www.bio.org/sites/default/files/legacy/bioorg/docs/EY%20BIO%20Orphan%20Drug%20Tax%20Credit%20Report%202015%2006%2016.pdf (2015).

      ,

      Allen, E. J. The Information Content of the Deferred Tax Valuation Allowance: Evidence from Venture Capital Backed IPO Firms. (2012) https://doi.org/10.2139/ssrn.2161340.

      ]. Gotham et al. [
      • Gotham D.
      • McKenna L.
      • Frick M.
      • Lessem E.
      Public investments in the clinical development of bedaquiline.
      ] estimated total ODTC (using a 50% rate) value of 22 million USD to 36 million USD for a duration of seven years and across 15 trials. Hypothetically deducting these costs from our estimated R&D expenses would be covered by the range calculated in scenario 1.
      On the contrary, if the value of PRVs would need to be deducted from the total R&D expenses could affect the results more significantly. Depending on several factors (e.g., approval acceleration in months and fifth-year sales of the therapy), values of PRVs were estimated to range between 28 million USD to 691 million USD [
      • Ridley D.B.
      • Régnier S.A.
      The Commercial Market For Priority Review Vouchers.
      ]. However, accounting for such PRVs remains a methodological choice associated with quite some uncertainty. First, companies may use acquired PRVs on different, future Food and Drug Administration (FDA) submissions. Second, PRVs can be sold at any time to other companies. Hence, redeeming or selling PRVs would theoretically decrease R&D expenses, which would lead to a lower price. As of 2021, ORTX did not possess a PRV for OTL-200, although one may be granted upon future FDA approval []. For AVXS-101, the FDA did issue a PRV to AVXS in 2019, but it is unclear how this was or will be used []. Finally, regarding drug-donation programs and publicly funded trials, we could neither find information on those for OTL-200 nor for AVXS-101.
      For the development phase-specific success rate factors, we relied on previously published aggregate data. Generally, these success rates increase with advanced clinical phases, and phase 3 trials are conducted before marketing approval. Consequently, the latest conducted phase (i.e., mostly phase 3) also presents with the most favorable success rate of more than 50%. However, in the case of OTL-200 and AVXS-101, the latest conducted phases before marketing approval were phase 2 studies (and not phase 3 studies). If, from the start of drug development, it could have been anticipated that a phase 2 study is sufficient for marketing approval, using a success rate of 35.1% for both case studies might be an underestimation of the true success rate. With an increasing success rate, the R&D expenses for this phase would decrease, which would in turn lead to a decrease in the estimated price for the therapy.
      Earlier research suggested that development costs for orphan drugs can differ from development costs for non-orphan drugs [
      • Jayasundara K.
      • et al.
      Estimating the clinical cost of drug development for orphan versus non-orphan drugs.
      ]. This could warrant an adjustment of the assumed global lump sum costs of clinical studies here. However, this was not done because the average cost estimates used in this study were based on a sample that already contained a large proportion of orphan drugs [
      • Wouters O.J.
      • McKee M.
      • Luyten J.
      Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.
      ].

      Number of eligible patients during patent duration

      The total number of eligible patients in the model is related to the remaining duration of IPP or RP. With a longer-lasting IPP or RP, more patients become eligible. Prices for OTL-200 and AVXS-101 were calculated for the study year 2021, which impacted the estimated time remaining with IPP or RP. The deterministic sensitivity analysis showed that an increase in the number of eligible patients had a substantial impact on the calculated price, particularly when the patient population is rather small (as for MLD). The magnitude of this effect was different for both therapies. For instance, increasing the patient population eligible for OTL-200 by 200% resulted in a price decrease of 46%, while for AVXS-101 the same increase of patients resulted in a price decrease of 4%.
      Making a clear distinction between patents and other protection such as orphan drug designation as well as data and market exclusivity might become of particular importance for CGTs. This is because many therapies rely on the same fundamental technologies (i.e., vector or lentiviral technology) and licensing such patent becomes increasingly common. While underlying patents of such technologies seem to be heavily under attack from several parties using the European Patent Office's opposition procedure, legally challenging an orphan drug designation is much more complicated [

      Hollywood, J. & Denney, F. The rise of patent wars in Europe's gene therapy space. https://www.cms-lawnow.com/ealerts/2019/12/the-rise-of-patent-wars-in-europes-gene-therapy-space?cc_lang=en (2019).

      ].
      Generally, information on IPP or RP duration is difficult to retrieve. Even databases such as “DrugPatentWatch” did not include information on the therapies studied here [

      Friedman, Y. DrugPatentWatch. Deep knowledge on small-molecule drugs and the global patents covering them (2021).

      ]. Simultaneously, original patent holders seem to be reluctant to share information on which patents are licensed for particular products or therapies [
      • Boman L.
      UPenn, Nationwide Children's Hospital refuse to disclose which patents they licensed to Novartis for Zolgensma.
      ].
      For the model calculations, the number of eligible patients also was determined by the epidemiological data used in this study. While epidemiological studies on disease incidence and prevalence generally provide a reliable overview, data for indications targeted by CGTs are scarce. Many indications for CGTs are complex and not yet fully understood. For instance, most epidemiological studies on SMA types are considered outdated, as they typically relied on clinical rather than genetic disease diagnosis [
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      ].
      Incidence and prevalence rates based on genetic screening would most likely reveal an underestimation of total assumed eligible cases for our analysis. Consequently, an increase in the patient population would lead to decrease in the estimated price of AVXS-101 based on the pricing model. In some European countries such as the Netherlands, SMA carrier screening as part of a newborn screening are currently planned but not yet implemented [

      Gezondheidsraad. Neonatale screening op spinale spieratrofie [Newborn screening of spinal muscular atrophy]. Nr.2019/15. file:///Users/frederick/Downloads/neonatale-screening-op-spinale-spieratrofie.pdf (2019).

      ]. Once newborns will routinely be tested, patients can be diagnosed and treated earlier. This would increase the total eligible patient population for many genetic conditions.
      For this analysis, we did not consider factors such as market penetration rates and the possibility that novel, more effective drugs for the same indication might be launched before the IPP or RP expires. Such scenarios would impact the number of eligible patients but are not part of the original pricing model. Including assumptions on market penetration such as 45% in the first and 90% in the second year [

      Quinn, C., Young, C., Thomas, J. & Trusheim, M. Estimating the Clinical Pipeline of Cell and Gene Therapies and Their Potential Economic Impact on the US Healthcare System. Value in Health 22, 621–626.

      ,
      • Heine R.
      • et al.
      Health Economic Aspects of Chimeric Antigen Receptor T-cell Therapies for Hematological Cancers: Present and Future.
      ], may increase the calculated prices through lowering estimates of the patient population. CGTs will most likely never reach 100% coverage due to reasons such as the availability of non-CGT products, individual preferences of using or prescribing novel therapies, or payer-imposed access restrictions [

      Quinn, C., Young, C., Thomas, J. & Trusheim, M. Estimating the Clinical Pipeline of Cell and Gene Therapies and Their Potential Economic Impact on the US Healthcare System. Value in Health 22, 621–626.

      ]. Currently, the price model does not correct for this. If and when novel, more-effective therapies will enter the market prior to the IPP or RP expiration cannot be known reliably. Since the aim of this study was to apply the model by Uyl-de Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ] using currently available evidence, we based our estimates on the number of eligible patients on the literature. We did not speculate on scenarios that would limit or extend this number based on an arbitrary time before or after patent expiration. Hence, the pricing model cannot precisely account for such scenarios.

      Cost of drug manufacturing (Cm)

      Compared with more conventional medicinal products, such as small molecules and biologics, the manufacturing of CGTs is a complicated process with distinct challenges [
      • Iancu E.M.
      • Kandalaft L.E.
      Challenges and advantages of cell therapy manufacturing under Good Manufacturing Practices within the hospital setting.
      ]. This complexity can be attributed to their specific characteristics. For instance, batches often are personalized for individual patients, manufacturing processes are often manual and starting materials are scarce as well as costly [
      • ten Ham R.M.T.
      • et al.
      Estimation of manufacturing development costs of cell-based therapies: a feasibility study.
      ,
      • Rivière I.
      • Roy K.
      Perspectives on Manufacturing of High-Quality Cell Therapies.
      ,
      • Campbell A.
      • et al.
      Concise Review: Process Development Considerations for Cell Therapy.
      ,
      • Moutsatsou P.
      • Ochs J.
      • Schmitt R.H.
      • Hewitt C.J.
      • Hanga M.P.
      Automation in cell and gene therapy manufacturing: from past to future.
      ]. In addition, upfront investment and risk associated with designing and maintaining Good Manufacturing Practice facilities for the production of CGTs are significant [
      • Digiusto D.L.
      • Melsop K.
      • Srivastava R.
      • Tran C.-A.T.
      Proceedings of the first academic symposium on developing, qualifying and operating a cell and gene therapy manufacturing facility.
      ]. Although biomedical researchers and developers acknowledge the importance of cost and economic consequences of strategic decisions in manufacturing development, little information is available on the cost of CGT manufacturing itself. This, in part can be explained by political sensitivity of publicly disclosing such information. Few studies are available that share lump-sum cost of parts of manufacturing development of very heterogenic CGTs. In needs to be noted that these studies were conducted in public settings such as academia or hospitals [
      • ten Ham R.M.T.
      • et al.
      What does cell therapy manufacturing cost? A framework and methodology to facilitate academic and other small-scale cell therapy manufacturing costings.
      ,
      • Abou-El-Enein M.
      • et al.
      Good Manufacturing Practices (GMP) manufacturing of advanced therapy medicinal products: a novel tailored model for optimizing performance and estimating costs.
      ]. It is likely that the actual manufacturing cost of the two case studies differ substantially. For instance, manufacturing costs may decrease over time due to technological advancements. In addition, manufacturers with an extensive CGT portfolio may already have Good Manufacturing Practice facilities at their disposal that can be upscaled or further decentralized [
      • Ran T.
      • Eichmüller S.B.
      • Schmidt P.
      • Schlander M.
      Cost of decentralized CAR T-cell production in an academic nonprofit setting.
      ,
      • Harrison R.P.
      • Zylberberg E.
      • Ellison S.
      • Levine B.L.
      Chimeric antigen receptor–T cell therapy manufacturing: modelling the effect of offshore production on aggregate cost of goods.
      ]. To assess the impact of change in manufacturing costs, we varied the model input parameters to account for a wide range (i.e., –50% to +200%). The sensitivity analysis showed that a further decrease in manufacturing costs might lead to a substantial decrease in the estimated drug price and vice versa.

      Profit margin (Mp)

      Setting a profit margin for the base case analysis was a highly debated item throughout this research. Following the example calculations of Uyl de-Groot and Löwenberg [
      • Uyl-de Groot C.A.
      • Löwenberg B.
      Sustainability and affordability of cancer drugs: a novel pricing model.
      ], we used the arbitrary profit margin of 20%. We want to highlight that this choice does not reflect any judgment about an acceptable or even “fair” profit margin for the pharmaceutical industry. The selected margin rather reflects the lower spectrum of the actual profit made in this industry. Recently, Ledley et al. [
      • Ledley F.D.
      • McCoy S.S.
      • Vaughan G.
      • Cleary E.G.
      Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies.
      ] studied the profitability of 35 large pharmaceutical companies compared with other large public companies between the years 2000 and 2018. Gross profit and EBITDA (earnings before interest, taxes, depreciation, and amortization) margins as a percentage of revenue were 76.5% and 29.4%, respectively [
      • Ledley F.D.
      • McCoy S.S.
      • Vaughan G.
      • Cleary E.G.
      Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies.
      ].

      Final remarks and conclusion

      This study adds to the existing body of literature on cost-based pricing models by showing how the needed model input parameters could be estimated and what their impact is on the calculated price. In addition, the input parameters used and stated here may facilitate the calculation of cost-based prices for OTL-200 and AVXS-101 with other models to compare their results.
      Furthermore, our analysis showed that evidence for most of the model input parameters are scarce and associated with considerable uncertainty. Since variation of each parameter can impact the calculated price substantially, research efforts should focus on eliciting their true values when using this model. While the number of eligible patients can be revealed through epidemiological studies, evidence on R&D expenses and manufacturing costs heavily depend on the information provided by the pharmaceutical industry. There seems to be movement in this debate and the World Health Organization has recently pushed for clearer drug pricing [

      WHO agrees watered-down resolution on transparency in drug costs. Reuters (2019).

      ,]. But although the demand for more transparency in setting drug prices and disclosing R&D expenses is growing, it might take years before reliable figures are available [
      • Chit A.
      • et al.
      Toward more specific and transparent research and development costs: the case of seasonal influenza vaccines.
      ,
      • Prasad V.
      • De Jesús K.
      • Mailankody S.
      The high price of anticancer drugs: origins, implications, barriers, solutions.
      ,
      • Kesselheim A.S.
      • Avorn J.
      • Sarpatwari A.
      The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform.
      ].
      With the current uncertainty in most model input parameters, the estimated prices varied considerably. Using the here-presented base-case estimates as benchmarks for OTL-200 or AVXS-101 should therefore only been done with great caution. Also, a setback of cost-based pricing models with the use of case-specific input parameters for R&D costs is that it does not reward efficiency during the R&D process. In this study, this applies more to AVXS-101 than to OTL-200 because for the latter, most R&D costs were estimated using lump sum assumptions from literature. Nevertheless, the results may support the (public) debate on value-based and cost-based pricing models, and on “fair” drug prices in general.

      Funding

      This study was commissioned by the Dutch Ministry of Health, Welfare and Sport (VWS). Any opinion reflected in this manuscript is the opinion of the authors and their interpretation and aggregation of the opinion of the individual thought leaders as members of the research group. It does not reflect the views of their employers or any organization they represent. Funding was received.

      Author Contributions

      Conception and design of the study: FWT, RJSDH, CAU. Acquisition of data: FWT, RJSDH. Analysis and interpretation of data: FWT, RJSDH, SB, RH, CAU. Drafting or revising the manuscript: FWT, RJSDH, SB, RH, CAU. All authors have approved the final article.

      Declaration of Competing Interest

      The authors have no commercial, proprietary or financial interest in the products or companies described in this article.

      Acknowledgments

      The authors thank E. Klein-Lankhorst, J. D. A. Kreeftmeijer, D. Rappange and T. de Jager, for their critical questions and review of the analysis, as well as N. I. Wolf and C. Hollak for providing critical feedback the incidence and prevalence of patients with MLD.

      Appendix A. Estimation of R&D expenses for OTL-200 by Orchard therapeutics plc

      An overview of the reported R&D expenses for neurometabolic disorders is presented in Table 3. The 2019 10-K report mentioned a total of nine products in the research pipeline, of which four (25%) targeted neurometabolic disorders [

      Orchard Therapeutics. Orchard Therapeutics Corporate Presentation August 2020. https://ir.orchard-tx.com/static-files/a8aefd1a-836b-41d9-baab-ee60f0710647 (2020).

      ]. In the 2020 10-K form, this share rose to six of 12 (17%) products [

      Orchard Therapeutics. Our Story. Orchard Therapeutics https://www.orchard-tx.com/about/our-story/(2021).

      ]. These proportions were used to estimate the R&D expenses share of OTL-200 of all neurometabolic disorders. In the absence of information for the years 2017-2019, we assumed the proportion for these years as for the year 2019 (i.e., 25%). Table 4 summarizes the assumed R&D expenses for OTL-200 in the group of neurometabolic disorders.

      Appendix B. Estimation of R&D expenses for AVXS-101 by AveXis

      Between 2013 and 2018, AveXis reported total R&D expenses of 2 867 649 241 EUR (including currency conversion, and adjustment for the consumer price index, success rate and cost of capital) in their SEC filings (see Table 5). These costs were used as input for the base-case analysis.
      Reported R&D expenses in AveXis’ SEC filings were only available until March 31, 2018 because the company entered into an Agreement and Plan of Merger with Novartis (see also Section 3.1.2) []. In addition, reported expenses for the first months of 2018 were rather high and had increased by 179 400 000 USD (approx. 158 004 083 EUR) when compared with the same three months in 2017. This increase was primarily due to 135 200 000 USD (approx. 119 075 541 EUR) of expenses recognized pursuant to licenses and agreements with REGENXBIO SMA and Généthon []. In addition, R&D expenses increased due to increased spending at the manufacturing facility on materials and supplies, salary and personnel (resulting from increased headcount), process and development (primarily laboratory testing), non-cash stock-based compensation expenses, fixed asset depreciation, payment made to support third party research, rent expense, utilities, and clinical trials.
      For this analysis, R&D expenses were considered up to and including the first of marketing approval of AVXS-101in the United States by the FDA in May 2019. Therefore, we extrapolated R&D expenses between the last AveXis SEC filing (i.e., Q-10 in 2018) until May 2019. To this end, we estimated monthly R&D expenses based on the latest available SEC filing of AveXis (i.e., Q-10 in 2018) [
      • van Rappard D.F.
      • Boelens J.J.
      • Wolf N.I.
      Metachromatic leukodystrophy: Disease spectrum and approaches for treatment.
      ]. This was necessary because after the merger (with Novartis AG), Novartis AG did not report R&D figures for AVXS-101separately. Monthly R&D expenses were calculated by subtracting the expenses recognized pursuant to the REGENXBIO SMA License and the Généthon agreement described above (i.e., a total of 135 200 000 USD) from the total R&D expenses for the first quarter in 2018 (i.e., 199 709 000 USD) and dividing this by three months. Monthly R&D expenses were hence estimated to be 21 503 000 USD (19 061 008 EUR). Adjusted with a success rate of 83.2% (because AVXS-101 was already in its registrational phase and a yearly cost of capital rate of 10.5%, monthly R&D expenses for this period were 23 101 281 EUR). Multiplied by 14 months, a total of 323 417 940 EUR for the time between March 2018 and May 2019 was added.

      Appendix C. Number of patent years remaining

      Number of patent years left for OTL-200

      No reliable figures on IPP could be retrieved for OTL-200. In their SEC filings, ORTX mentioned that they “[…] do not own any patents or patent applications that cover Libmeldy […]” []. Eventual IPP rights seem to be covered by license agreements with GSK. The European Union Register of medicinal products for human use states that the orphan market exclusivity for OTL-200 will expire on 18 December 2030 [

      European Commission. Union Register of medicinal products for human use. Product information. Libmeldy. Union Register of medicinal products https://ec.europa.eu/health/documents/community-register/html/h1493.htm (2020).

      ].

      Number of patent years left for AVXS-101

      The number of patent years left for AVXS-101was extracted from the 2020 20-F form to the SEC by Novartis AG. The reported patents can be fully owned, co-owned or exclusively in-licensed by Novartis AG and relate to at least one dosage strength of AVXS-101, the method of treatment, or its use as it is currently approved and marketed. The reported data on intellectual property or regulatory protection for AVXS-101 are summarized in Table 6. For the base case analysis, we assumed the maximum time for the patent expiration (i.e., the year 2031).

      Appendix D. Estimating incidence and prevalence rates

      Metachromatic leukodystrophy (MLD)

      MLD incidence rates (or birth prevalence rates) were reported to be between 1.4 and 1.8 per 100 000 [
      • van Rappard D.F.
      • Boelens J.J.
      • Wolf N.I.
      Metachromatic leukodystrophy: Disease spectrum and approaches for treatment.
      ,
      • Poorthuis B.J.H.M.
      • et al.
      The frequency of lysosomal storage diseases in The Netherlands.
      ]. For the base-case analysis, we assumed an average incidence rate of 1.6 per 100 000. The assumed incident eligible cases over a period of 10 years are summarized in Table 7.

      Spinal muscular atrophy (SMA)

      Childhood SMA is categorized into three clinical groups (i.e. type I to type III SMA), based on the age of onset and clinical course [
      • Munsat T.
      International SMA consortium meeting.
      ,
      • Zerres K.
      • Rudnik-Schöneborn S.
      Natural history in proximal spinal muscular atrophy: clinical analysis of 445 patients and suggestions for a modification of existing classifications.
      ]. While SMA can be classified according to these groups, it should be noted that the disorder demonstrates a continuous range of severity [
      • Prior T.W.
      • Nagan N.
      • Sugarman E.A.
      • Batish S.D.
      • Braastad C.
      Technical standards and guidelines for spinal muscular atrophy testing.
      ]. For this analysis we relied on SMA type specific incidence and prevalence rates summarized in a recent systematic literature review by Verhaart et al. [
      • Verhaart I.E.C.
      • et al.
      A multi-source approach to determine SMA incidence and research ready population.
      ].
      Current marketing approval for AVXS-101 also involves some stratification of the survival motor neuron (SMN) gene. This is because SMA is caused by homozygous disruption of the SMN gene by deletion, conversion or mutation [
      • Lunn M.R.
      • Wang C.H.
      Spinal muscular atrophy.
      ]. The SMN gene is present in multiple copies in the human genome: one SMN1 and several SMN2. In more than 98% of patients with SMA, SMN1 is homozygously disrupted by deletion, rearrangement or mutation, whereas at least one copy of SMN2 is typically retained [
      • Lefebvre S.
      • et al.
      Identification and characterization of a spinal muscular atrophy-determining gene.
      ,
      • Hahnen E.
      • et al.
      Molecular analysis of candidate genes on chromosome 5q13 in autosomal recessive spinal muscular atrophy: evidence of homozygous deletions of the SMN gene in unaffected individuals.
      ].
      Of those patients, we assumed that all patients with SMA type I or type II would be eligible for AVXS-101in the United States and Japan. For the region of Europe, we used the definition of the EMA approval in which all patients with SMA type I would be eligible and those patients with SMA type II with up to three copies of the SMN2 gene. The proportion of the latter was based in information provided in Calucho et al. [
      • Calucho M.
      • et al.
      Correlation between SMA type and SMN2 copy number revisited: An analysis of 625 unrelated Spanish patients and a compilation of 2834 reported cases.
      ] and was 94.66%.

      Type I SMA

      Included prevalent patients

      Since life expectancy of patients with SMA type I is usually less than the age of two years, we used the total prevalent population with SMA type I to calculate the eligible patient population for the first year of the analysis. The total SMA type I prevalent cases for the first year of the analysis that are considered eligible for AVS-101, are summarized in Table 8. This estimate considers that 98% of SMA cases present with a disrupted SMN1 gene and would therefore be eligible for therapy [
      • Lefebvre S.
      • et al.
      Identification and characterization of a spinal muscular atrophy-determining gene.
      ,
      • Hahnen E.
      • et al.
      Molecular analysis of candidate genes on chromosome 5q13 in autosomal recessive spinal muscular atrophy: evidence of homozygous deletions of the SMN gene in unaffected individuals.
      ].

      Included incident patients

      The total SMA Type I incident cases were based on all incident cases as from the first year of the analysis until patent expiration of AVS-101. The base-case assumes a patent expiration after 10 years. Based in this, the number of eligible SMA Type I patients are summarized in Table 9. This estimation accounts for 98% of patients presenting with a disrupted SMN1 gene and includes only patients with up to three copies of the SMN2 gene for the region of Europe.
      Total included SMA type I prevalent and incidence patients were thus 9414 patients, based on the mean reported prevalence and incidence rates over a 10-year period. Based on the minimum and maximum reported prevalence and incidence rates, this were 5765 and 15 786 patients, respectively over a ten-year period.

      Type II SMA

      Included prevalent patients

      Eligible prevalent patients for AVXS-101with SMA type II were estimated by calculating the SMA type II prevalent population (taking into account that 98% of the cases present with a disrupted SMN1 gene and only considering those patients with up to three SMN2 copies for the region of Europe) and considering only those 3% that were thought to be below the age of two years. These estimates are presented in Table 10.

      Included incident patients

      The total eligible incident SMA Type II population was based on all incident cases as from the first year of the analysis until patent expiration of AVS-101 (i.e., 10 years). The assumed cases are presented in Table 11.
      Total included SMA type I prevalent and incidence patients were thus 4193 patients, based on the mean reported prevalence and incidence rates over a 10-year period. Based on the minimum and maximum reported prevalence and incidence rates, this were 1313 and 7838 patients, respectively, over a 10-year period.
      In conclusion, the total eligible patient population for AVXS-101for the base-case analysis was 13 607 patients (9414 for type I and 4193 for type II), based on the mean reported incidence and prevalence rates.

      Appendix E

      For both therapies we had estimated R&D expenses for the base-case analysis. For the deterministic sensitivity and scenario analyses, we sought to increase and decrease these base-case estimates to cover a reasonable range of possible R&D values for each therapy separately. To this end, we based the minimum and maximum R&D values of each therapy on the 0.05 and 0.95 percentiles of a truncated normal distribution, respectively [
      • Paprocka I.
      • Kempa W.M.
      • Ćwikła G.
      Predictive Maintenance Scheduling with Failure Rate Described by Truncated Normal Distribution.
      ].
      Due to its symmetrical properties, the normal distribution was suitable because the probability of occurrence of values below and above the assumed mean (in this case the base-case R&D estimates) was sought to be similar [
      • Paprocka I.
      • Kempa W.M.
      • Ćwikła G.
      Predictive Maintenance Scheduling with Failure Rate Described by Truncated Normal Distribution.
      ]. In addition, truncation allowed limiting R&D expenses to positive values [
      • Paprocka I.
      • Kempa W.M.
      • Ćwikła G.
      Predictive Maintenance Scheduling with Failure Rate Described by Truncated Normal Distribution.
      ].
      The truncated normal distribution was parametrized as follows. For the mean, we used the base-case R&D estimate of each therapy (i.e., different estimate per therapy).
      The standard deviation (SD) was assumed to be equal to the SD of the R&D expense range reported by Schlander et al. (i.e., 146 million EUR to 4.11 billion EUR). Since Schlander et al. did not report the SDs for the 45 included unique estimates, we used the improved “range rule of thumb,” suggested by Ramirez and Cox [
      • Ramirez A.
      • Cox C.
      Improving on the Range Rule of Thumb.
      ].
      Lower and upper truncation bounds were based on minimum (i.e., 146 million EUR; 161 million USD) and maximum (i.e., 4.11 billion EUR; 4.54 billion USD) R&D values reported in a recent review [
      • Schlander M.
      • Hernandez-Villafuerte K.
      • Cheng C.-Y.
      • Mestre-Ferrandiz J.
      • Baumann M.
      How Much Does It Cost to Research and Develop a New Drug? A Systematic Review and Assessment.
      ].
      Consequently, the SD and lower/upper bounds (informed by the literature) were kept constant, while the mean of the truncated normal distribution was depending on the therapy.
      These calculations were done using R version 4.2.1 and the R package truncnorm (Version 1.08).

      Appendix F. Results of the deterministic sensitivity analysis

      Appendix G. Results of the scenario analyses

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