Cell Therapy Commercialization: Look for Headroom

Author: Mark Curtis, 04/30/14


Of all the formidable challenges that a biotechnology company will stumble upon in its quest to commercialize, perhaps there is none more frustrating than a failure to get a product reimbursed by payers.

After years of navigating the gauntlet of risk that is biotechnology development, and sinking what is likely hundreds of millions of dollars into preclinical and clinical research activities, a company finally gets to enjoy the success of regulatory approval for marketing only to discover a year later that the product has failed to earn reimbursement.

Unfortunately, without reimbursement there is no adoption, and without adoption there are no sales. A technology is dead in the water.

Given the often astronomical cost of goods associated with cell therapy products, this therapeutic class is particularly prone to reimbursement issues, and will continue to be until cell manufacturing is scaled to the point that costs can be driven down.

While the advent of large-scale, closed system, ‘turn-key’ bioreactors will eventually allow the cell manufacturing industry to achieve the economies of scale and efficiencies necessary to temper costs, until then we must be vigilant when selecting cost-effective cell therapy technologies to advance into the clinic to ensure funding is spent on therapies that have the greatest chance of securing reimbursement.

A recent example of reimbursement woes in the space is found in Dendreon Corporation’s Provenge, a patient-specific cell-based immunotherapy for treating prostate cancer. The therapy is administered three times over the course of a month for a total cost of $93,000. At such a high cost-density (other prostate cancer therapies, while expensive, are spread over many months), doctors want to know they will be reimbursed rapidly after making the purchase. This hasn’t been the case.

As a result of this and other criteria that have prohibited its adoption (complexity of administration and logistical issues), Provenge has struggled post-approval. The therapy’s price tag has also been a matter of contentious debate among oncologists, many of whom disagree that the median four-month extension on survival it offers is worth the money. According to FiercePharma, 57% of doctors said the maximum amount they would be willing to pay for a therapeutic that performs to Provenge’s ability is ~$30,000. Apparently many physicians just don’t see the value in terms of increased health benefit to the patient.

So, how can we strategize to sway the odds in favour of reimbursement success? Therapeutic headroom is a good beginning.

Therapeutic Headroom

In a nutshell, therapeutic headroom is the scope for improvement on a patient’s quality of life resulting from a treatment, relative to other potential treatments for the same indication. To illustrate this concept, I’ll go through some ‘back of the envelope’ calculations pertaining to two indications – acute myocardial infarction (AMI) and severe sepsis.

AMI (a heart attack) is an indication that is being pursued aggressively in the clinic by the cell therapy industry despite providing very little therapeutic headroom. Let’s quantify this.

The average age of an AMI patient is 67. An individual of this age and of average health who has never experienced an AMI has a quality of life score of 0.80, while an individual of the same age who has experienced AMI has a quality of life score of 0.76 (actual numbers supported by the literature); a marginal difference of 0.04. If the individual who has AMI was treated with a cell therapy and returned to normal health, and then went on to live out his or her full life expectancy (83 years of age according to Statistics Canada), the overall health benefit that patient would receive as a result of treatment is an increase of 0.64 quality-adjusted life years (QALYs), or 234 days (0.04 x 16 years).

The current willingness-to-pay (WTP) by reimbursement providers is $50,000/QALY, which supports a cost of intervention of $32,000 for a cell therapy to treat AMI ($50,000 x 0.64 QALYs).

The dilemma here is that investigational stem cell therapy interventions are currently running at approximately $100K – $200K per patient. Well above the WTP for AMI. Despite this, there are currently ~280 innovative stem cell technologies in clinical development to address cardiovascular health. Without a significant reduction in the cost of these therapies, it is questionable whether they will succeed in getting reimbursement support.

Now let’s look at severe sepsis, a condition characterized by complex systemic pro-inflammatory responses and complications to multiple organ systems. Until recently, the mortality rate of patients with severe sepsis was thought to be ~45%. A study published in the New England Journal of Medicine this year (ProCESS trial) provided data showing that improvements in patient management alone have reduced mortality to ~18%. Irrespective of this, this still provides significant scope to show improvement in patients with severe sepsis. Let’s walk through another calculation.

The average age of a severe sepsis patient is 61. Using the same logic as above, if the patient went on to achieve his or her full life expectancy, then the increase in quality of life provided to the patient by treatment would be 3.94 QALYs (18% mortality x 22 years). The expected loss of quality of life from severe sepsis is then 3.17 QALYs (0.80 mean quality of life x 3.94 QALYs). So, the WTP or headroom for a curative therapy for sepsis is $158,500 ($50,000 x 3.17 QALYs), which is to say there is a lot of headroom for treating sepsis.

Surprisingly, cell therapy for sepsis has not been pursued to a great degree in the clinic, even though the headroom for this indication is five times greater than that of AMI. The immunomodulatory nature of mesenchymal stem cells makes them an interesting candidate for treating sepsis.

Disease Burden

Now that we’ve established what headroom is, let’s pair this concept with disease burden, a metric commonly used to establish whether or not there exists a significant market opportunity for a therapeutic.

In terms of the patient population, disease burden is simply the product of the number of patients with a given indication and the impact that indication has on a patient’s life.

In a visual that plots disease burden against therapeutic headroom to roughly gauge the odds of reimbursement success (see below), reimbursement ‘heaven’ is the point on the chart where both factors are maximized (the upper right quadrant).

Disease Burden by Mark Curtis

In the figure above, I have plotted a handful of indications to give examples of those that would be viewed positively from a reimbursement perspective, and others that cell therapy developers would be best to avoid based on what I have discussed in this post.

Triple-negative breast cancer – when a patient’s cancer cells do not express any of the three receptors targeted by current therapeutics – is a great example of an indication that would likely garner considerable reimbursement support. It has a high degree of mortality (23% in the five years following diagnosis) and a patient population of ~60,000 in the U.S. annually, which puts it in the top-right quadrant along with sepsis.  Note that AMI falls in the lower right quadrant as it has a large disease burden, but very little headroom.

It is imperative that developers have a long-term strategy while commercializing cell therapies. Too often we get caught up in the science without considering the practicalities of getting a therapeutic to the patient’s bedside, and getting it there cheap. This is not to say that interesting science and complex therapies should be overlooked, but if they come at significant cost they better have significant clinical results. Considering therapeutic headroom in selecting indications to target with cell therapies should more closely align treatment cost and willingness to pay, leading to fewer disappointments when it comes time to seek reimbursement.

The author would like to thank to Dr. Chris McCabe, University of Alberta, who recently came to CCRM to give a presentation, which was the inspiration for this post. The calculations above on headroom and severe sepsis were derived from his talk on reimbursement, and its implications on commercialization in the area of cell therapy and regenerative medicine.

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Mark Curtis

Mark Curtis

Mark is a Business Development Analyst at the Centre for Commercialization of Regenerative Medicine (CCRM), where he collaborates with the team to help evaluate the commercial potential of regenerative medicine and cell therapy technologies. He began his career at Princess Margaret Hospital studying cellular reprogramming of human skin cells. Following this project, he left the laboratory and took on a role with Bloom Burton & Co., a healthcare-focused investment dealer. While there he supported the advisory team in carrying out scientific diligence on early-stage biotechnology companies. Prior to joining CCRM he was a consultant to Stem Cell Therapeutics, a Toronto-based biotechnology company focused on developing therapeutics targeting cancer stem cells. Mark received a Master’s degree from the University of New South Wales in Sydney, where he studied the directed differentiation of embryonic stem cells, and a Bachelor’s degree in Biology, from Queen’s University. Follow Mark on Twitter @markallencurtis
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4 Responses

  1. Lee Buckler says:

    Hi Mark,

    Interesting analysis and an important window through which therapeutic development must be viewed.

    It’s not critical to your analysis or conclusions but I’m concerned about your statement that “investigational stem cell therapy interventions are currently running at approximately $100K – $200K per patient. Do you have data to support this? I find the numbers very surprising and not supported by any other analysis or data I’ve seen.


    • Mark Curtis says:

      Hi Lee,

      Thanks for the note. This range was provided to me by Dr. Chris McCabe at University of Alberta, which is based on his research over a range of different cell therapy technologies in clinical development. However, based on an allogeneic cord blood-derived cell therapy that CCRM is currently developing for hematological cancers, I can confirm that the range provided in the post is consistent with our estimation of cost in the clinic, which is at the upper end of this on an all-in basis.

      It is important to note that this is not cost of goods/manufacturing; this range reflects the total cost, which also includes administering the therapy and covering the patient’s stay in the hospital during recovery.

      Cheers, Mark

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