FDA approves Novartis' $2.1 million gene therapy — making it the world's most expensive drug

Dr. Vasant Narasimhan, CEO of Novartis, speaking at the Healthy Returns conference in New York City on May 21, 2019.

Astrid Stawiarz | CNBC

The Food and Drug Administration on Friday approved Novartis' $2.1 million gene therapy for spinal muscular atrophy — making it the world's most expensive drug.

The therapy, Zolgensma, is a one-time treatment for spinal muscular atrophy, a muscle-wasting disease and leading genetic cause of infant mortality that affects one in every 11,000 births. Novartis had previously said it could price the treatment between $1.5 million to $5 million.

Novartis said the treatment will cost $2.1 million — or $425,000 a year spread out over five years. The company said it's "working closely with insurers to create 5-year agreements based on success of the treatment as well as other novel pay-over-time options." It's currently in "advanced discussions" with more than 15 insurers on payment options. Shares of Novartis were up nearly 4% late-afternoon Friday.

This marks a new era in medicine where new therapies can cure patients in a single treatment — but at a high price. Insurers and governments will need to figure out how to pay for these therapies and society will need to decide whether any drug, even lifesaving ones, are worth millions of dollars.

"Zolgensma is a historic advance for the treatment of SMA and a landmark one-time gene therapy," Novartis CEO Vas Narasimhan said a statement Friday. "Our goal is to ensure broad patient access to this transformational medicine and to share value with the healthcare system."

In rationalizing the expensive price, Novartis said the one-time treatment costs 50% less than the 10-year cost of current chronic management of the disease.

"We believe by taking this responsible approach, we will help patients benefit from this transformative medical innovation and generate significant cost savings for the system over time," said Narasimhan, who has called for new ways to pay for innovative gene therapies.

The Institute for Clinical and Economic Review, which evaluates drug prices, earlier this year said Zolgensma was worth up to only $1.5 million. On Friday, ICER said that after further studying the clinical results and the FDA's approval, it decided Zolgensma's price "falls within the upper bound of ICER's value-based price benchmark range."

"Insurers were going to cover Zolgensma no matter the price, and Novartis has spoken publicly about considering prices that approached $5 million," ICER President Steven Pearson said in a statement. "It is a positive outcome for patients and the entire health system that Novartis instead chose to price Zolgensma at a level that more fairly aligns with the benefits for these children and their families."

Another current treatment for spinal muscular atrophy for children and adults is Biogen's Spinraza, which has a list price of $750,000 for the first year and $375,000 annually thereafter. Biogen's stock was down more than 1% on Friday.

"As a global leader in the treatment of spinal muscular atrophy, a life threatening, devastating disease, Biogen welcomes additional therapeutic options to help individuals with this rare disease," Biogen said in a statement.

Acting FDA Commissioner Ned Sharpless lauded the approval, saying in a statement that it marked "another milestone in the transformational power of gene and cell therapies to treat a wide range of diseases. With each new approval, we see this exciting area of science continue to move beyond the concept phase into reality."

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