LONDON (Reuters) - Battle lines are being drawn as the first gene therapy for an inherited condition nears the U.S. market, offering hope for people with a rare form of blindness and creating a cost dilemma for healthcare providers.

FILE PHOTO: A DNA double helix is seen in an undated artist's illustration released by the National Human Genome Research Institute to Reuters on May 15, 2012. REUTERS/National Human Genome Research Institute/Handout/File Photo

Spark Therapeutics ONCE.O, whose Luxturna treatment has been recommended for U.S. approval, told investors last week there was a case for valuing it at more than $1 million per patient, although it has yet to set an actual price.

However, the U.S. Institute for Clinical and Economic Review (ICER) said this week “at a placeholder price of $1,000,000, the high cost makes this unlikely to be a cost-effective intervention at commonly used cost-effectiveness thresholds”.

The ICER analysis did concede Luxturna was likely to be more cost-effective for younger patients.

The expected U.S. approval of Luxturna by Jan. 12 is seen as kick-starting the sector, following disappointing sales of the first two gene therapies in Europe.

More treatments based on fixing faulty genes using viruses to carry DNA into cells are coming from companies like Bluebird Bio BLUE.O, BioMarin BMRN.O and Sangamo SGMO.O.

Spark’s Chief Financial Officer Stephen Webster said on Thursday that gene therapy was upending conventional thinking by offering a one-time cure, rather than years of repeat prescriptions, but health systems were struggling to keep pace.

“Gene therapy creates an unusual conundrum because we are fitting a round peg in a square hole ... it’s tough,” he told a Jefferies healthcare conference in London.

Spark would like to say “if it works, pay us, and if it stops working, stop paying us”, Webster told the meeting.

But for Luxturna, which cost some $400 million to develop, such an offer was impractical, given the mechanics of the U.S. system and a reluctance by big health plans to move away from upfront payments for rare disease drugs.

Longer-term, pay-for-performance models could be adopted for haemophilia, where the benefits of one-time treatment can be weighed against the huge cost of regular infusions of blood-clotting factors, Webster said.

A one-off treatment would slash the need for such expensive care. But there are also indirect costs and quality of life benefits - especially in a condition like blindness - that manufacturers argue should be recognized.

Nightstar Therapeutics NITE.O CEO David Fellows, whose company is also developing gene therapies for eye disorders, said calculating gene therapy's true value was not easy.

“Trying to capture all this into some sort of price algorithm is very challenging. But we are trying to quantify the emotional impact, the care-giver impact, the effect on careers and so on,” he told the conference.