What happened

Depending on how you measure it, 2018 was a great year for bluebird bio (NASDAQ:BLUE). The company's cell-based therapies took big steps forward and produced impressive results. Disappointing early sales numbers for the types of treatments Bluebird's trying to hatch, though, caused investors to knock the stock 44.3% lower in 2018, according to data from S&P Global Market Intelligence.

So what 

Bluebird is developing a treatment for beta-thalassemia patients that appears capable of permanently reducing their need for regular blood transfusions after a single administration. It's also developing highly effective cancer therapies with a similar once-and-done approach. In 2018, competition on the way from some deep-pocketed competitors made investors nervous. Disappointing drug launches for complex one-time treatments in 2018 weighed heavily on the stock as well.

Downward-sloping chart drawn with chalk.

Image source: Getty Images.

Paying for treatments over the long term based on the outcomes they produce seems like a sensible solution. Unfortunately, insurers have been paying upfront for drugs whether they work or not since the beginning of time, and nothing changes quickly in the heavily regulated world of healthcare.

Near the end of 2017, the FDA approved Luxturna to prevent genetic blindness, and Spark Therapeutics (NASDAQ:ONCE) launched the one-time injection with an $850,000 price tag. Spark offered insurers clawback rebates if patients lose their vision down the line, but it didn't help. Luxturna sales reached just $15.6 million during the first nine months of 2018.

Now what

A quick resolution to investor fears that Bluebird's treatments might not be commercially viable probably won't happen in the near term. Spark recently wrapped up its J.P. Morgan Healthcare Conference investor presentation without providing fourth-quarter sales details, which means they won't be good.  

Bluebird intends to offer insurers a chance to pay 20% upfront for their beta-thalassemia treatment, then continue paying unless patients require regular transfusions again. It's a sensible plan, but you shouldn't assume it has a chance until you see it work with your own two eyes.

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