Watch out, Gilead—Novartis got the FDA nod it needs to steal your CAR-T market

Novartis won a second FDA approval last night for its CAR-T cancer treatment, Kymriah, potentially expanding the market for a product that has disappointed analysts so far. Kymriah, which was approved last year to treat young patients with leukemia, now has a green light to treat adults with relapsed large B-cell lymphoma—a nod that puts it in direct competition with Gilead Sciences' Yescarta.

If the competition comes down to price, it will be a close race: Yescarta has a list price of $373,000 and Novartis is matching that price in the lymphoma market, according to a Novartis spokeswoman. That could compound an already challenging ramp-up for Novartis’s CAR-T treatment, a one-time therapy that involves removing immune-boosting T cells from patients, engineering them to recognize and kill cancer cells, and reinfusing them.

Novartis anticipated the pricing discussion in its Tuesday announcement. The company is continuing to work with the Centers for Medicare and Medicaid Services (CMS) on a "value-based pricing approach" to Kymriah, which is priced at $475,000 in the leukemia market. When the product was first approved last summer, Novartis struck a deal that requires CMS to make full payment for patients who respond within the first month after receiving the personalized treatment.

Still, Kymriah has been a disappointment on Wall Street so far. The product brought in only $12 million in sales in the first quarter of this year—making it a long shot for Novartis to meet the $159 million in 2018 sales analysts are hoping for, even with the new approval.

During Novartis’s first-quarter earnings call last month, Liz Barrett, CEO of Novartis Oncology, said sales were in line with expectations and that insurance reimbursement is "going very smoothly." The slow launch, Barrett said, stemmed from the logistical challenges of getting hospitals set up to provide the CAR-T therapy. The company has 35 sites rolling so far and "it will take time for these centers to get up and running and used to this new therapy," she said.

But those logistical challenges are no doubt complicated by payer pushback. Steve Miller, the outspoken chief medical officer of pharmacy benefits manager Express Scripts, set the tone right after Kymriah was approved last year, griping in a blog post that the CAR-T’s price was "dramatically higher than other specialty drugs." At the time, a Novartis spokesperson said that in addition to striking the pay-for-performance arrangement with CMS, the company was working closely with private payers as they developed reimbursement plans. The company also established an access program to help patients who are underinsured or uninsured.

In deciding to match Gilead's price in lymphoma, Novartis performed a cost-effectiveness analysis, and it took into account the different indications and patient populations, the spokeswoman said.

RELATED: Is Gilead’s new CAR-T overpriced or is payer bureaucracy to blame for slow pickup?

As for Gilead, its executives don’t seem concerned about the new competitive threat. "I think the first-mover advantage is important," said John McHutchison, chief scientific officer of Gilead, during a first-quarter earnings call with analysts Tuesday night. "We have the relationships. We have the experience now in the community, particularly in the U.S., which will obviously extend elsewhere."

Perhaps, but even Gilead’s lower-priced Yescarta has run into payment hurdles. In December, Gilead had to explain why there was a large and growing waiting list for the therapy. Most payers had confirmed they would cover it, the company said at the time, but some didn’t have billing procedures in place, forcing hospitals to shoulder inpatient costs of more than $500,000 per patient while they waited to get paid.

Meanwhile, the debate over whether CAR-T is worth the price persists. The most recent analysis, published in Health Affairs, suggested Novartis could price Kymriah at $160,000 and still make a decent profit margin. Cost watchdog ICER, on the other hand, came out on the side of Novartis and Gilead, concluding that the prices of both products make sense in light of "clinical benefits over a lifetime time horizon."

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