(Bloomberg) -- A potential cure for a lethal childhood disorder -- the first of its kind in the U.S. -- is hitting the market at a cost of $2.1 million, paving the way for more therapies that bring dramatic benefits for patients, along with challenges for health-care systems.

The U.S. Food and Drug Administration on Friday approved Novartis AG’s Zolgensma, a gene therapy targeting children under two years old who have a severe illness called spinal muscular atrophy. The Swiss drugmaker said it’s offering novel payment options, including spreading out the costs over time, refunds for patients whose treatment fails and discounts for insurers that provide swift coverage.

Zolgensma, the first drug in the U.S. to cross the $1 million mark, is an important test for the field as a wave of gene therapies advances toward the market offering huge promise -- fixing a disease’s root cause with a treatment given just once. The FDA predicts as many as 20 cell and gene therapy approvals each year by 2025.

“We are on a path where we hope one day we will be able to bring SMA almost to the point of elimination,” Novartis Chief Executive Officer Vas Narasimhan told reporters on a call. “Zolgensma should be the foundational therapy for children under two.”

About 400 children in the U.S. are diagnosed with spinal muscular atrophy each year, according to David Lennon, president of the Novartis unit that developed the therapy. The current population of patients eligible for Zolgensma is about 1,100, he said. UBS Group analysts have projected peak annual sales of about $1.8 billion.

Acute, serious liver injury can occur with Zolgensma, and liver function must be monitored for at least three months after infusion, Novartis said.

Alternative to Spinraza

Despite high initial costs, gene therapies are expected to save health-care systems money by eliminating the need for lifelong treatment. While manufacturers propose spacing out bills over time, governments and insurers are still trying to figure out how to pay for the treatments and wrestling with uncertainty over their benefits and safety in the long run.

Novartis’s treatment offers an alternative to Biogen Inc.’s Spinraza, which was launched about two years ago and must be given at least every four months for a patient’s lifetime. Zolgensma’s price is about half of the 10-year cost of Spinraza, roughly $4.1 million.

Biogen fell 2.1% in New York after Zolgensma’s approval. In an email, the company said that it welcomes additional options for patients with the disease and that Spinraza continues to be the only treatment available for a broad age range of patients with SMA.

Novartis had earlier estimated that Zolgensma could be cost-effective at prices of as much as $4 million to $5 million.

Novartis has a partnership with insurer Cigna Corp.’s Accredo unit to provide a pay-over-time option, which may be a help to U.S. states, self-insured companies and other small payers that would otherwise struggle to cover such an expensive drug. Under their agreement, Novartis will receive the full payment and Accredo will work with the payer to get reimbursement, which could take as long as five years. Novartis tapped specialty pharmacy CuraScript to distribute the medicine.

Novartis’s plan to offer refunds for patients who die or require permanent ventilation after getting Zolgensma may be complicated by a requirement that the U.S. Medicaid program always gets the lowest price. The rule known as the best price available means refunds or discounts have to apply to all Medicaid patients, even those who benefit from Zolgensma. The drugmaker has discussed with U.S. health officials ways to overcome the hurdle, said Lennon, the Novartis executive.

Flurry of Deals

Research on gene therapies has been fast-moving in recent years. A scientific milestone was reached in late 2017 when the U.S. FDA approved Spark Therapeutics Inc.’s treatment for an inherited form. The drug, Luxturna, helps stave off blindness in patients with a specific genetic mutation and was priced at $850,000 for both eyes.

Advances in the lab sparked a series of deals. Novartis bought AveXis Inc., the developer of Zolgensma, for $8.7 billion last year. Roche Holding AG followed with a deal to acquire Spark this year. Biogen agreed in March to buy gene therapy developer Nightstar Therapeutics Plc for $877 million, and Pfizer Inc. acquired a stake in closely-held gene-therapy company Vivet Therapeutics.

Absent Gene

Spinal muscular atrophy occurs when babies are born with a flawed or absent gene needed to make a protein key to the nerve cells’ survival. Untreated babies suffer progressive weakness, paralysis and often death before the age of two, and the condition is the leading genetic cause of infant mortality.

Zolgensma replaces that flawed or missing gene with a healthy copy. It represents the first gene therapy in the U.S. aimed at curing a disease through a one-time treatment, according to the Alliance for Regenerative Medicine.

Novartis is encouraging screening of newborns for SMA, Lennon said. “Our belief is that every newborn who has SMA should get treated with gene therapy.”

The gene therapy field got off to an inauspicious start. UniQure NV’s Glybera, the first gene therapy approved for use in Europe, was withdrawn in 2017 because of limited use of the $1 million treatment for a dangerous blood-fat condition, and GlaxoSmithKline Plc had few takers for Strimvelis, the second gene therapy for an inherited disease to gain approval.

--With assistance from Rebecca Spalding.

To contact the reporters on this story: James Paton in London at jpaton4@bloomberg.net;Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, Cécile Daurat

©2019 Bloomberg L.P.

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