One Thing that Could Stop the Rise of Gene Editing: Insurance Companies

The gene-editing future of medicine is fast approaching—or at least it's beginning to feel that way—but one of the companies working on that future is openly wondering: When it gets here, is anyone going to be able to pay for it?

On Monday, a company called Intellia became the second pharmaceutical startup focused on using the CRISPR/Cas9 gene editing technique to announce its intentions to become publicly traded. CRISPR allows for the targeted modification or deletion of genes, which could eventually open up an entirely new branch of medicine.

In its public filing with the Securities and Exchange Commission, the company said it's currently working on four specific CRISPR therapies that can treat liver diseases in adult humans. Importantly, the company said it won't be able to return profits to investors if insurance companies don't agree to cover its therapies.

"The success of our product candidates, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors," the company wrote. "Because our product candidates represent new approaches to the treatment of genetic-based diseases, we cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, our product candidates or assure that coverage and reimbursement will be available for any product that we may develop."

Companies that file for IPOs with the SEC have to think of every possible reason why the business might fail—in its filing, one of Intellia's "risk factors" is that one of its employees "may engage in misconduct or other improper activities," for instance. But the idea that insurance companies might not pay for personalized gene-editing therapies seems like a real concern for both pharmaceutical companies and, more importantly, for the customers hoping to take advantage of personalized medicine. Editas Medicine, a CRISPR company that went public in January, listed similar concerns.

Thus far, no major insurance company has taken a specific stance on CRISPR therapies, and we are still years away from the prospect of CRISPR being done on an adult human for therapeutic purposes. But a look at the recent past suggests that insurance companies will be reticent to pay for what Intellia wants to sell.

There's been a lot of excitement about the development of personalized medicine which promises to tailor drugs to treat individuals based on their specific genetic makeups and personal medical situation, but early returns have been disappointing. Companies that develop drugs that treat rare diseases are selling those therapies at incredibly high prices, and insurance companies aren't automatically accepting that such therapies are actually necessary.

A Duke University study from 2012 found that only about half of all personalized medicine treatments and diagnostic tests were covered by insurance, in part because, by definition, it's hard to prove efficacy using clinical trials if there are only a few people to test the drug on.

A good example of this phenomenon is the cystic fibrosis drug Kalydeco, an effective therapy for a subset of the population with the incurable genetic disease. Kalydeco costs $300,000 per patient per year, mainly due to its high development costs. In some states, the drug has been withheld from people on Medicaid because it's too costly. United Healthcare refused to pay for Kalydeco for one man with cystic fibrosis because it determined it was "not medically necessary." Intellia notes in its filing that Medicare and Medicaid are "critical to new product acceptance" by third party insurers.

Kalydeco is literally a lifesaving drug for a disease that had previously only been manageable using a plethora of medicines and therapies that merely treated the symptoms of the disease, not its underlying cause. And yet some openly wonder whether Kalydeco's cost is "a price too high to pay."

One thing we can reasonably assume: CRISPR therapies will likely be very expensive at first. The CRISPR technique itself is not expensive and has rapidly come down in price. But drugs are priced according to their market and according to what it cost to actually develop them—a Kalydeco pill doesn't cost appreciably more than any other type of pill, but developing it cost millions of dollars, and the total patient market is believed to be around 1,200 people who have the specific defect that the drug treats.

"It's one of those deals where the second pill costs $5 to make, but the first pill cost $500 million to make," Brian O'Sullivan, a CF doctor at the University of Massachusetts Medical School, told me when I asked him about Kalydeco's price last year. "You divide hundreds of millions of dollars making it by the 1,200 patients who can use it, and you come up with the number you feel you need to make back from each patient."

According to its filing, Intellia is planning on taking years of losses before it ever comes close to developing a therapy that can be safely be used on humans. Last year, it received $70 million in funding, and it's going to have to, at some point, start showing returns for both those investors and the ones who buy into its IPO.

Intellia has years of research and Food and Drug Administration testing before it ever gets approved. It also has to win a cultural battle over whether editing of the human genome is moral. Those costs will be built into its therapies. And we're talking about personalized medicine here—it's possible that some CRISPR therapies will work on many different people with the same genetic defect, but more likely, treatment is going to require more expensive, individualized use of the technique.

One of the therapies Intellia is actively working on is one that would treat hepatitis B, a disease that is preventable with a vaccination. It's a terrible disease that kills 780,000 people per year (via complications such as cirrhosis and liver cancer), according to the World Health Organization. But roughly 240 million people worldwide have the disease. Are insurance companies going to pay for the likely very expensive treatment of a preventable disease that has a relatively low mortality rate? It's an important question—if they're not willing to foot the bill, then the personalized medicine revolution will be one for only the very rich.