ZURICH (Reuters) - Novartis’s price-setting muscle is about to be tested after it won European Union approval for a blindness-fighting gene therapy whose $850,000 list cost in the United States has been labeled too expensive by some groups.

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Luxturna, sold by Spark Therapeutics in the United States and by Novartis elsewhere after the Swiss drugmaker bought the rights, is a one-time treatment for a rare genetic disease that causes blindness in about 1 in 200,000 people.

“EU approval of the one-time gene therapy Luxturna marks a milestone in reimagining medicine and can bring real value to patients, their families and society as a whole,” said Paul Hudson, who heads up Novartis’s drugs division.

The therapy’s list price, however, has raised eyebrows and could face hurdles in Europe where authorities are taking a tough look at expensive medicines.

Earlier this year, a non-profit U.S. cost-effectiveness watchdog, the Boston-based Institute for Clinical and Economic Review (ICER), labeled Luxturna too expensive and suggested steep discounts to make it worth their while.

With European Union approval in hand, Novartis now must convince cost-conscious government price regulators across the bloc and in non-members such as Switzerland to pay up to start selling the drug.

Among others, Britain's National Institute for Health and Care Excellence (NICE) has been pushing back at companies demanding high prices, including a Vertex Pharmaceuticals cystic fibrosis drug and Biogen's BIIB.O $750,000 Spinraza treatment for spinal muscular atrophy (SMA).

“If you consider that this is a one-time treatment of a condition that otherwise leads to blindness, then it seems like the sum being demanded is acceptable,” Zuercher Kantonalbank analyst Michael Nawrath said.

PRICE CLAMPDOWN

“Even so, the price negotiations in Europe cannot be underestimated, because drug companies are focusing more and more on rare diseases, while the authorities are seeking to reduce incentives by clamping down on prices,” Nawrath said.

Novartis Chief Executive Officer Vas Narasimhan is banking on rare diseases to help transform the Basel-based company from a broad healthcare conglomerate into a specialized drug company.

In addition to his deal with Spark over Luxturna, Narasimhan has a stable of prospective gene therapies, including a one-time treatment for SMA due for approval in the first half of 2019.

That drug, AVXS-101, will likely be even more expensive than Luxturna, as Novartis has already pegged its value at between $4-$5 million for healthcare systems. Payers have already started putting up resistance.