Cracking the code on paying for cell and gene therapies

Third in a series

The future of healthcare is both daunting and promising for group health plans. Precision medicine will help employers raise the bar on managing some of their priciest medical claims, saving significant dollars – and lives – in the process. 

But it is not clear how. For example, the approval of cell and gene therapies — while breathtaking in their potential to cure genetic diseases like hemophilia and sickle cell disease — have substantially raised specialty drug costs and risk for employers. Benefit brokers and advisers can now prepare their clients if armed with the right information.  

The U.S. Food & Drug Administration has approved 37 cell and gene therapies and is expected to green light 10 to 20 more of them each year with an additional 500 now in development. But that's just the tip of a much larger iceberg. As many as 4,000 cell, gene and ribonucleic acid therapies are estimated to be in the R&D pipeline by 2030 and precision therapeutics is the direction for most specialty drug development. Patients who are good candidates for these treatments are driving up costs, which is why group health plans need to pay closer attention to these areas. 

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Precision medicine is a novel approach to controlling excessive healthcare costs that improves diagnosis, treatment and prevention. Having a better understanding of patient biology, as well as genetic and genomic data, will allow group health plans to establish specific treatment strategies, including cell and gene therapies, based on each patient's own data. The upshot is an ability to make more precise decisions about treating various disease states to reduce costs and improve clinical outcomes.

But how will employer-sponsored plans pay for new specialty drugs like cell and gene therapies that cost anywhere from $350,000 to more than $3 million? While self-insured employers use stop-loss insurance to cap their costs, there's a loophole in this funding mechanism that allows reinsurers to laser out (and, therefore, avoid) high-cost claims. Given the sticker shock of these treatments, it's easy to see why stop-loss carriers would want to shift costs or exclude them from contracts – even if it means abdicating their role to cover medical procedures for the employee populations they serve. 

With treatments like cell and gene therapies clearly expected to ramp up in the years ahead, the focus must be on long-term financing solutions. What's needed is a pragmatic approach to making these treatments accessible and affordable for the right patients. Such efforts already are under way. Cell and gene manufacturers, for example, have been collaborating with payers on managed access agreements, early access programs and innovative payment models. 

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The early stages of this partnership include the availability of significant discounts, coupons, price volume agreements, sales caps and one-time or annuity-based payments spread out over years to finance these incredibly expensive treatments. Other approaches include loan-based pilot programs and international sourcing from overseas centers of excellence.

Mindful of concern over efficacy, companies that have brought these treatments to market are offering payers outcomes-based agreement and coverage with evidence development. That means small amounts would be paid over a longer period of time based on meeting clinical milestones for treated patients. 

Manufacturers also would issue rebates if pre-determined efficacy milestones are missed or treatments do not perform as anticipated under a pricing model that provides warranties to payers that are akin to an IOU, though built-in challenges would include defining those metrics and laying out a reasonable timetable. Higher payments tied to successful treatments and lower amounts for less successful outcomes, however, would simply amount to a bifurcated system whose playing field is uneven. Another concern would be tracking outcomes over years for an increasingly mobile workforce. What happens if someone changes jobs multiple times? 

Nevertheless, these arrangements are an acknowledgement of not only the inherent risks and uncertainty payers face from both a financial and clinical-outcomes standpoint, but also the need to create a viable market for their treatments. They are a step in the right direction, and it's important for HR and benefit professionals not to lose sight of the potential for enormously improved outcomes that also boost employee productivity. For example, roughly half of people who have sickle cell disease are unable to work full time, so think of the return on investment for those patients and employers alike. 

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Making cell and gene therapies more accessible and affordable to members raises the bar on health and welfare benefits stewardship because it's ultimately in the best interest of plan participants. It enables group health plan sponsors to fulfill their fiduciary responsibilities under the Consolidated Appropriations Act, which we will examine next in our series of commentaries on precision medicine. And with the CAA top of mind for benefit brokers and advisers, what better way is there to service clients by discussing these game-changing treatments for health plan members? 

But the most critical part of these treatments is better assessment of who are the right patients to get which drugs at the right time. Thus, a critical piece of this puzzle is better identifying those for whom these complicated treatments work best. As drug development moves in the direction of more specialized, targeted therapeutics, precision becomes increasingly important. This needs to happen before these treatments come to market when they're still being defined and tested in clinical trials. Getting these formulas right will maximize their value for patients and all other stakeholders.