For decades now, the health-care industry, government and society have grown accustomed to a model for how diseases are treated. Scientists achieve a medical breakthrough, the biopharmaceutical industry develops a medicine, a doctor diagnoses a patient and the patient goes on a course of treatment that can last for years or a lifetime. This model has improved health dramatically across the globe over the last century. Yet we generally could not cure devastating diseases.

Today we are entering a new era in medicine with the emergence of highly effective and potentially curative cell and gene therapies. Cell and gene therapies present one of the greatest recent advances in modern medicine. We now have within our grasp medicines that can reverse congenital blindness, potentially cure some cancers and save children from certain death from genetic neurological conditions. These medicines are not just improving lives, they are saving them, and we are just at the beginning of the cell and gene therapy revolution in medicine. Yet, we face a fundamental challenge: how to pay for these therapies and make them available to patients in need.

Our health-care system today pays for most medicines over months and years because of the chronic nature of the diseases these medicines treat. Cell and gene therapies, however, are mostly one-time treatments. They are developed, manufactured, distributed and administered in fundamentally different ways from the medicines that preceded them, and we therefore need a new model that can support their continued development and ensure access for patients.

We think that the price for these one-time therapies should be based on four key measures of value – the improvements they offer to patients both clinically and in terms of their quality of life, and the benefits they offer to the health-care system and society more generally.

I recognize that the industry is divided on this approach. This is because for companies that do not have a strong record of real innovation or are focused only on providing patients with incremental improvements, a value-based model creates additional risk. However, to continue to fuel progress in promising therapies, we need to ensure we are incentivizing the delivery of benefits to patients and society as a whole.

The approach Novartis took for pricing Kymriah is an example of a value-based approach. Kymriah is a transformational personalized treatment for children and adults suffering from deadly blood cancers. We developed this lifesaving treatment in collaboration with an incredible team of researchers led by Dr. Carl June at the University of Pennsylvania. For the approximately 600 children in the United States with unresponsive b-cell acute lymphoblastic leukemia there are no other options for them or their families. Kymriah is a highly effective, one-time treatment with a follow-up that is far less frequent and onerous than traditional therapies.

The Institute for Clinical Economic Review — an independent expert body that assesses cost effectiveness of medical treatments — assigned a cost effectiveness value of up to $1,688,000 for Kymriah for its use in children. Considering the value this treatment offers across the four key measures, we set the Kymriah list price for pediatric use at $475,000, well below the cost effectiveness value set by ICER — and $373,000 for rapidly progressing adult cancers.

We know this price — and the price for other cell and gene therapies like it — far exceed the prices of medicines under the current paradigm. These treatments are a break from the past and must take into account the tremendous value they deliver. In many instances, these are one-time therapies that are potentially curative, extending patients' lives and delivering significant improvements in the quality of their lives. Kymriah, for example, saves lives, demonstrating an overall remission rate of 83 percent in a key clinical trial.

In addition, these therapies prove to be cost-effective for the broader health-care system, with patients requiring less frequent hospitalizations. From this perspective, Kymriah provides value given that the only other potentially curative option for these patients is a stem cell transplant from a matching donor. This costs $500,000 to $800,000 in the first year and may lead to higher future treatment costs. Lastly, these therapies have the ability to deliver tangible societal value, allowing family members and caregivers to return to work.

In addition to pricing based on value, we have entered into outcomes-based or pay-for-performance contracts, where there is no charge for the therapy unless patients meet certain clinical milestones. Treatment centers that administer Kymriah in the pediatric indication, for example, are not charged for the therapy unless patients meet certain clinical milestones. We look forward to continuing to use such outcomes-based frameworks. We also recognize the need to explore novel payment structures, including those that spread the cost of a one-time therapy over multiple years — changes that will require healthcare systems to adapt their current approach to payment..

As a physician-researcher, I am optimistic about the potential of cell and gene therapies to reimagine how we treat disease and transform the lives of so many patients around the world. We are working hard to develop new models, but we need openness and a commitment from our partners, payers and health systems, to truly ensure patients get access to innovative lifesaving treatments.

As an industry, we also need to work together to build consensus around the benefits of value-based pricing and cost-effectiveness benchmarks. It is becoming increasingly clear that in the future, health-care systems can neither afford, nor will they pay for, medicines that fail to deliver real value to patients, the system and society. If we can make the necessary system changes to usher in these new cell and gene therapies, I believe we can have a dramatically beneficial impact on the lives of patients and their families, and hopefully make cures a reality.

—Vas Narasimhan, M.D., is the chief executive officer of Novartis.