A biotech is proposing a plan to pay for its pricey rare disease treatment the same way you'd buy a TV or dishwasher - here's the inside story

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Nick Leschly, CEO of Bluebird Bio, proposed a major change to how medical treatments are paid for at a healthcare conference in San Francisco this week.

• Biotech Bluebird Bio proposed on Tuesday at a major healthcare conference a five-year installment plan for its pricey gene therapy.
• The company hasn't put out a price tag for the experimental product, which hasn't yet been approved in the US, but capped it at $2.1 million per treatment.
• Bluebird CEO Nick Leschly told Business Insider the inside story of how the plan came about and what challenges it could face.

Installment plans are used for big-ticket items like dishwashers and TVS - and now, for medical treatments?

That's exactly what the biotech Bluebird Bio is suggesting for its cutting-edge, experimental gene therapy, which is intended as a one-time treatment for a rare blood disorder.

The idea works like this: Patients get its treatment, called LentiGlobin, which aims to fix the underlying cause of the disease, beta thalassemia.

Bluebird would then get paid by their health insurer or employer over five years. The company hasn't yet said how much the treatment will cost, but capped it at $2.1 million.

A key difference, though, is that Bluebird only gets paid in years two through five if the treatment works for patients. Medicines are usually paid for as the patient takes them - whether or not the drug work.

It's a bold proposal, one that puts substantial financial risk on Bluebird itself, and there are still any number of problems left to be ironed out, CEO Nick Leschly acknowledged in an interview late Tuesday with Business Insider.

But the decision was ultimately about the nearly 30-year-old Cambridge, Massachusetts-headquartered biotech's principles, and its belief in doing the right thing, Leschly said. In that sense "the die was cast long ago," he said.

In developing the model, he told employees "'Don't limit yourself to what the system can't digest,'" Leschly said. "Do not feel that we should be penalized because we came up with something that provides value over time."

Metallica and caffeine

Bluebird's Leschly put the new pricing proposal out on Tuesday at the JPMorgan Healthcare Conference, the biggest industry event of the year.

Presenting before a packed room, Leschly psyched himself up beforehand with four cups of coffee and by listening to Metallica, he told Business Insider.

LentiGlobin won't cost more than $2.1 million, according to Bluebird- the amount of value that the biotech estimates its treatment should provide to patients, by allowing them to live longer and with a better quality of life.

The plan has evolved significantly over time, Leschly said. The biotech originally considered a 10-year payment timeline, he said, but decided against it as because of the heavy administrative burden. Health insurers could also choose to distribute their payments over a shorter period of time, like three years, he said.

Read: From the gene therapy that spurred a $9 billion acquisition to a CBD medication for rare types of childhood epilepsy, here are the 12 promising drugs to watch in 2019

The plan will meet with serious challenges, including: What happens if a patient switches insurers? What if the individual becomes uninsured?

But Leschly is confident that Bluebird can get through them. For one, beta thalassemia, which is caused by a genetic mutation and can require regular blood transfusions and lifelong medical care, according to the National Organization for Rare Disorders - affects about 1 in 100,000 individuals, a relatively small patient population.

Individuals with "very severe conditions like this have a tendency to not change payers as often," Leschly said.

Pat Greenhouse/The Boston Globe via Getty Images

Bluebird Bio scientist Lauryn Christiansen works on lentiviral gene delivery into stem cells in a Cambridge, Massachusetts lab.

Payers can also check in to see if the treatment is working by looking at their claims data to see if say, the patient suddenly needed new blood transfusions, he said.

Another key part of the plan is that Bluebird won't make any price increases beyond a measure of inflation, an interesting commitment that comes at a time when pharmaceutical price increases have prompted controversy.

See: Trump may have shamed Pfizer for increasing drug prices, but that isn't stopping drugmakers from doing more of the same

Bluebird has, however, been criticized for not yet disclosing its price tag.

Asked about this, Leschly told Business Insider that there's "more work to be done on what the price exactly ought to be."

LentiGlobin also hasn't been approved. The company expects a decision in Europe this year and could get a decision in the US as early as next year.

Gene therapies challenge health system

Gene therapies like LentiGlobin are challenging the status quo and the limits of what the medical system both can and will pay for.

To large extent, that's because the sums talked about when it comes to gene therapy are astronomical.

See: Bill Gates warns that nobody is paying attention to gene editing, a new technology that could make inequality even worse

Drugmakers say that's because their products are for rare, often deadly conditions with few or no other options. Moreover, they say, gene therapies could have lifelong benefits for patients, and are expected to save the medical system significantly on things like hospitalizations.

That hasn't lessened the sticker shock: Swiss drug giant Novartis' suggestion that its new gene therapy for a deadly rare disease would be cost-effective at $4 million to $5 million per patient encountered substantial resistance last fall, for example.