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Novartis' Struggle With Payers Over Zolgensma Is Overblown

Some Wall Street analysts are seeing coverage restrictions for $2.1 million gene therapy Zolgensma as a negative, but most of these restrictions are logical and no big deal

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Matt Winkler
Jul 08, 2019
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Health insurance companies are now beginning to tackle the question of how to cover Zolgensma, the world’s most expensive drug, and the initial signals appear bullish for Novartis AG (

NVS, Financial).

Zolgensma is a one-time curative treatment for spinal muscular atrophy. It works by replacing defective genes that cause the illness. It will compete with Biogen’s (

BIIB, Financial) Spinraza, which works by overlaying itself on top of the defective genes but not altering the genes themselves. Spinraza requires continuous treatment. Zolgensma does not.

Payers already covering Spinraza may be apprehensive about Zolgensma’s $2.1 million price tag, but the restrictions they are placing on coverage are not unreasonable, nor insurmountable.

Examples cited are Horizon Blue Cross of New Jersey, which has stated it will not cover the treatment for those previously treated with Spinraza. Nine others will not allow concurrent treatment with Spinraza. Another company, Health Net, will require any patient to prove disease progression with Spinraza before covering Zolgensma.

Analysts at Bernstein Research are interpreting these conditions as “surprisingly restricted,” but it is hard to see why. Not allowing concurrent treatment makes quite a bit of sense given that Zolegnsma is curative, which would render the Spinraza treatment superfluous. Covering one of the most expensive drugs in the world for no reason is the last thing any insurance company wants to do. Denying Zolgensma coverage for those previously treated with Spinraza also makes sense. Why enable patients to try both drugs at huge cost when they can try the curative treatment first and fix the condition for good? Certainly, having to prove disease progression with Spinraza before trying Zolgensma is logical. If Spinraza is working and insurance is paying for it, why cover a $2.1 million drug on top of that?

On the back of this verdict from Bernstein, the company consequently boosted sales forecasts for Spinraza. In the short term, this may be the case. These restrictions may slow initial sales for Zolgensma and maintain sales for Spinraza that would have otherwise been lost to the competing drug because patients being covered for Spinraza will be less likely to risk losing that coverage in order to try Zolgensma. However, new patients that have yet to be treated with either drug will still most likely try Zolgensma first precisely because of these restrictions. Over the long term, these “surprisingly restricted” conditions may prove restrictive for Spinraza rather than Zolgensma. Since they are structured to encourage trying Zolgensma first, that renders the Spinraza treatment superfluous.

One big concern, though, is that Bernstein’s survey reveals four insurers are refusing to treat presymptomatic patients. This is indeed restrictive, but the policy doesn’t make much sense. First of all, a genetic test can confirm 95% of all spinal muscular atrophy cases, and symptoms will soon develop anyway. Second, genetic testing is resorted to after the disease is suspected, meaning symptoms are already starting to develop anyway. The exception being if both parents know they are carriers and do an amniocentesis.

Refusal to treat presymptomatic patients looks more like a bargaining ploy than a concrete threat. These payers may be trying to get Novartis to lower the price tag before being fully cooperative, but we’ll see. Despite the indirect haggling here, Novartis still looks to have the upper hand because it is offering payers a guarantee on efficacy with an outcomes-based payment schedule of $425,000 a year for five years. This is cheaper than six years of the Spinraza therapy, so Novartis really is offering the better price anyway.

So while Bernstein may have a point that restrictions on the Zolgensma treatment from payers may boost Spinraza sales over the short term, longer term, Zolgensma still looks like it has the clear advantage.

Disclosure: No positions.

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