Why Do Gene Therapies Cost So Much?

29th May 2024
Posted by: Breige McBride
Category: Cell and Gene Therapy

Image shows a syringe, with a double helix inside it, and the syring has a price tag with money bags on it. These elements together combine to demonstrate that gene therapies are expensive. The image also has text which reads " Why do gene therapies cost so much?"

As more gene therapies enter the market, they are gaining publicity not only for their potential in alleviating disease, but also their relatively high cost. With typical price tags north of one million US dollars (at the low end of the scale) many people are questioning why gene therapies are so expensive. The short answer is that there are many factors which influence the cost of gene therapies to make them commercially viable. The long answer, detailing each of these factors, is below.

Research and Development Costs

One of the first factors companies will consider when pricing their gene therapies is their level of research and development investment. Research and development costs include preclinical research costs, clinical trial costs and regulatory approval, all of which cost considerably more than one might expect.

Preclinical Research Costs

Preclinical research costs are the costs associated with the discovery phase. These include the costs for laboratory work, preclinical studies and research to identify potential therapeutic targets and develop gene therapy vectors.

Costs Associated with IND Applications

Once preclinical research is complete, the gene therapy will undergo clinical trials. However, before clinical trials can begin, the therapy developer will need to submit an Investigational New Drug (IND) application to the relevant regulatory body. IND applications include data from the preclinical research and from manufacturing studies (to demonstrate that manufacturing processes would comply with regulatory standards). These manufacturing studies also incur costs. What’s more, many companies will hire consultants to write IND applications, incurring further costs. Finally, there are the administrative costs of the IND process, including an IND submission fee.

Clinical Trial Costs

If the IND application is successful, clinical trials can begin. The costs for clinical trials, which usually have three phases, are substantial. The average cost of phase 1, 2, and 3 clinical trials across therapeutic areas is around US$4, 13, and 20 million respectively.¹

Regulatory Approval Costs

If clinical trials show that the gene therapy is safe and effective, it will then need regulatory approval to enter the market. In the USA this requires a Biologics License Application (BLA), while in Europe it requires a Marketing Authorization Application (MAA). In 2024, the submission fee for a BLA requiring clinical data is over US $4 million² However, most gene therapies are intended to treat rare diseases, and prescription drug products designated as a drug for a rare disease or condition under section 526 of the FD&C Act are not subject to an application fee unless the application includes an indication for anything other than a rare disease or condition.³

Alternatively, the fee for an MMA to the European Medicines Agency (EMA) varies based on specifics of the application. In 2024, the fee for a standard MMA for a human medicine is approximately €357,600.⁴

Recouping the Cost of Failures

Combining all of these costs above, it is evident that therapeutic research and development is a costly business. With this being the case, it is necessary for companies to recoup the costs of unsuccessful R&D activities when they do finally develop a gene therapy that gains regulatory approval. Therefore, recouping the cost of failures will also factor into the final price for a successful gene therapy.

Manufacturing Costs

Explained above are all the costs associated with developing a gene therapy and getting regulatory approval to enter the market. However, to market a gene therapy, companies first need to manufacture it. Currently, manufacturing processes for gene therapies are more complex and costly than those for traditional pharmaceuticals.

For example, working with viral vectors to make gene therapies is more complex than working with the chemicals used in typical pharmaceutical small molecule drug manufacturing. Also, the technologies that companies use to make gene therapies are still relatively new. For perspective, commercially approved gene therapies are less than ten years old in the US and Europe⁵, which is not a great length of time in terms of technological advancement. The costs of these new technologies have not yet been significantly lowered by economies of scale, market competition and the factors at play in concepts such as Wright’s law⁶ and Roger’s theory.⁷What’s more, most gene therapies are currently manufactured by hand⁸, which is a slow, laborious and costly process.

Gene Therapy Manufacturing Costs vs Traditional Drug Manufacturing Costs

The combination of the above factors results in particularly high manufacturing costs for gene therapies. These are significantly higher than the costs for manufacturing traditional drugs. In fact, research published in BMJ Global Health in 2018 found that the cost of transforming raw ingredients into pharmaceutical products (tablets) during the preceding 10 years, ranged from US$0.0002 to US$0.013 per tablet.⁹ In contrast, the cost of goods/manufacturing of a gene therapy can range from US$500,000 to US$1 million.¹⁰

The difference in manufacturing costs alone go a long way in explaining why gene therapies cost so much more than traditional small molecule drugs. In fact, all of the above helps to explain why the average cost of developing a traditional medicine is US$2.6 billion¹¹, while developing a gene therapy costs around US$5 billion.¹²

Market Demand

High Market Demand vs Low Market Demand

Paracetamol is one of the most widely used drugs worldwide¹³ and it is the most commonly used medication for pain and fever in both the United States and Europe.¹⁴ In fact more than 60 million Americans consume it on a weekly basis.¹⁵

This illustrates that paracetamol has high market demand. It is used by millions of people to treat pain and fever. When companies price a drug such as paracetamol, they take market demand into account. In short, they can divide costs of developing, manufacturing, and marketing paracetamol, between the millions of people who will use it. This means they can sell the drug at a low price (in the US, the cost of 100 paracetamol tablets is typically between US$2 and US$5 dollars¹⁶) and still make a return on their investment.

In contrast, individual gene therapies, generally have low market demand. This is because they typically cater to smaller target patient populations with rare orphan diseases.¹⁷ In fact, the total market for a gene therapy may only amount to hundreds of patients, and in some cases they are produced for a single patient.¹⁸

In summary, all the costs of producing a gene therapy mentioned above need to be recouped from a very small number of patients. But that’s still not the end of the story, as there can be further factors which influence the cost of gene therapy.

Gene Therapies Cost More Because They are Used Less

Consider how many times you have taken a drug like paracetamol in your life. It has probably been more than once. In fact, it is likely that you will take a drug like paracetamol many times throughout your lifetime. So, companies that create drugs like paracetamol can sell them to you more than once, which is reflected in their pricing.

Meanwhile, many gene therapies aim to permanently modify or correct a genetic defect with a single treatment. So, their target market is only intended to use the treatment once, meaning they will only need to buy them once. Therefore, the number of required doses is also reflected in gene therapy pricing.

Given all of the above, the high cost of gene therapies are not as shocking as they appear to be at first glance. The most expensive gene therapy available at the time of writing is Lenmeldy.¹⁹ It is used to treat children with metachromatic leukodystrophy (MLD) which results in a lifespan of between 5 and 8 years. Lenmeldy effectively cures MLD by correcting its genetic cause and providing the opportunity to live a long life. The prevalence of MLD is estimated at 1.1 cases per 100,000 live births in the EU²⁰ and the wholesale cost of Lenmeldy is US$4.25 million.²¹

Are Gene Therapy Costs Justified?

When companies spend millions upon millions researching and developing gene therapies, failing, starting again, and finally completing each of the costly stages of entering a therapy into the market, for it to only be suitable for a very small target market, who will likely only buy it once and be cured, is a price tag under US$5 million per dose unjustifiable?

Whether you think gene therapy prices are justifiable or not, most people would agree that they are prohibitively expensive. Therefore, it is crucial that companies developing gene therapies do all that they can to decrease costs. Costs will likely come down over time as technology advances, manufacturing processes are optimised and competition in gene therapy development increases. However, these are long term solutions that gene therapy developers have little control over. One thing they do have control over is making their research and development as cost-efficient as possible, and bioinformatics can help reduce costs at multiple stages of gene therapy research and development.

Reducing Gene Therapy Costs with Bioinformatics

Since bioinformatic analyses can support gene therapy development with everything from target identification to optimising therapeutic efficacy, they can have a significant impact on development costs. Strategic use of bioinformatics can speed up development timelines and help developers recognise impending development failures as quickly as possible, minimising lost resources. What’s more, when used early enough, bioinformatic analyses can sign-post new development directions, to avoid failures and increase the chance of developing effective therapies. If you would like to learn more about how bioinformatic analyses can improve your company’s gene therapy research, get in touch today! Our bioinformatics specialists are happy to advise on the most suitable analyses to advance different gene therapy research projects. Just complete the form below to get started!