What Bluebird Bio Gets Wrong In Pricing For Its $1.8 Million Drug




Beta thalassemia is a blood disorder that reduces the production of hemoglobin, the key iron-containing protein essential for the transport of oxygen to cells throughout the body. The diminished flow of oxygen causes weakness, fatigue, slow growth, bone abnormalities, and other serious complications. Affected individuals with severe symptoms require frequent blood transfusions in order to maintain a reasonable quality of life.

There is now hope for these patients. Bluebird Bio recently received European regulatory approval for its beta thalassemia gene therapy, Zynteglo, for patients 12 and over. A first of its kind treatment, Zynteglo has been shown to allow patients to go up to 56 months without the need for a blood transfusion - terrific news for these individuals. Approval of Zynteglo by the FDA is anticipated.

However, the major attention that has been focused on Zynteglo has not been on the fact that it’s a medical breakthrough but rather on its price. Given that it’s a one-time treatment that might actually cure the disease, Bluebird Bio has set a price of $1.8 million making Zynteglo the second most costly treatment in history. Interestingly, despite this high price, Wall Street analysts expressed disappointment as they felt that Bluebird Bio could have justified a much higher price.


Here’s how Bluebird Bio rationalized Zynteglo’s price. It will be paid $355,000 when a beta thalassemia patient receives the infusion of the gene therapy. The remaining payments will be made to Bluebird Bio in four equal installments over the next four years as long as the patient is still free of getting blood transfusions, thus adding up to $1.8 million. Actually, Bluebird Bio feels that it is selling its gene therapy at a 15% discount in that it believes that Zynteglo has an “intrinsic” value of $2.1 million when one considers that it is delivering 22 quality-adjusted life years (QALYs) for the most successful treatment patients. In calculating the price of Zynteglo, the company specifically excluded the savings from the cost of treatment that Zynteglo replaces – which other companies have routinely included as part of the justification for such expensive therapies.

As would be expected, Zynteglo’s price was not immediately embraced by the healthcare community. Dr. Peter Bach, director for the center for health policy and outcomes at Memorial Sloan Kettering Cancer Center told STAT: “Outcomes arrangements like these are an acknowledgement that the therapy is of uncertain durability, and while on their face they look like a good deal, they are actually a free option for the company to make a premium if the treatment works while not having to expend the funds to prove it works durably before selling it.”

Bach is correct. But in fairness to Bluebird Bio, conducting long term studies to demonstrate durability are not trivial and, if these were a preapproval condition, would have delayed getting this gene therapy to patients in need. However, there are some steps that Bluebird Bio could take to help address Bach’s concern and that would help justify the cost of Zynteglo.

1) No payment should be made until the patient is shown to have a medical benefit. - This is what Novartis has done with its CAR-T based cure for childhood acute lymphoblastic leukemia and which should be emulated for all gene therapies. This would delay initial revenues for Bluebird Bio, but presumably it has sufficient confidence in its breakthrough that not getting paid until the gene therapy is proven to work is acceptable.

2) Bluebird Bio should commit to re-treating patients at a 50% discount should the therapy wear off. – This addresses Bach’s issue. Right now, we don’t know if Zynteglo is a cure. If it isn’t and if a “booster” might be needed at some point, a premium price should not be paid for additional treatments.

3) Bluebird should limit price increases. – Inevitably, biopharma companies will turn to price increases on their drugs to help grow revenues. Gene therapies won’t be exempt from this practice. However, annual price increases of 8% for $1.8 million gene therapies aren’t sustainable. It would be great if Bluebird Bio would pledge to tie price increases for Zynteglo to inflation.

Expensive gene therapies are now a reality in healthcare and curing diseases via these treatments is becoming more common. As all parts of the healthcare system struggle to come up with equitable ways to reward innovators and provide incentives for R&D in this crucial area of medicine, pricing strategies must take into account the impact such prices have on the public’s perception of fairness and ethics. By enacting the above suggestions, Bluebird Bio can show that it is confident in its product, that it will only get paid if the product works, that it will adjust costs if there is a need for future treatments and that it won’t be opportunistic in taking annual price hikes. Furthermore, these considerations should be taken into account for any such expensive therapy that emerges from biopharma.

(Since posting this piece, Bluebird Bio has reached out to say that have pledged to keep any price increases for Zynteglo below the CPI. That's a great commitment and a practice that other manufacturers of expensive gene therapies should follow.)