As of the third quarter of 2024, there were 2068 cell and gene therapies in the pipeline, with 38 approved by the US Food and Drug Administration.1,2 These therapies range in cost from $373,000 to $4,250,000 per treatment.3,4 Unlike other medications and treatments, which may be given over extended periods or even over a patient’s lifetime, these therapies are often intended to be a one-time, curative treatment, which helps explain their relatively high costs.5 Payers have demonstrated increased interest in innovative payment models for these high-cost treatments to improve affordability, decrease exposure to shock claims, and help protect their investments if the treatments do not provide the outcomes they promise.6
Among different payment and reimbursement models, one type that has been explored by various stakeholders is an outcomes-based agreement (OBA). OBAs can come in a variety of structures, such as full payment up front with a full or partial refund of the treatment cost or an additional payment to cover the cost of alternative treatments if a prespecified outcome is not met at a specific milestone after the treatment. A benefit of such agreements is that they can reduce the risk to the payer of payment for a high-cost treatment that does not provide the outcomes expected. However, coming to an agreement among all stakeholders on what those outcomes should be (and at what time) can be difficult, considering the need to identify end points that are clinically meaningful and amenable to the collection and reporting by the payer.
Another potential risk for a payer in an OBA-type agreement is that it may be difficult to track patients over time, particularly if they leave the plan during the contract period. Lastly, for payers, given that OBAs may not be paid out for several years, the initial budget impact is still significant, and the long-term budget impact is unpredictable given the uncertainty of payout from these types of agreements. This is a challenge for payers that focus on budgets from an annual time horizon. From a manufacturer’s perspective, they may feel they are taking more than their share of the risk, given that there may be multiple ways a patient can demonstrate positive outcomes, and a good or bad treatment outcome is likely to be multifactorial.5OBAs, also known as value-based contracts, also benefit manufacturers more than traditional rebates when it comes to reporting for Medicaid best price. Recent updates to rulings exclude value-based commercial sales from the calculation of the Medicaid best price, meaning those discounts will not be mandatory for sales of the drug outside of these OBAs.7
OBAs can also be structured so that payers only make a payment when a response or clinical outcome is achieved. In this scenario, more of the risk falls to the manufacturer to ensure the patients are tracked and outcomes reported. Manufacturers are at risk of not receiving payment, or only receiving partial payment, if the specific outcome is not achieved within the specified time frame. With payers, the unpredictability of budget impact is still present.5
Payment over time or installment models offer a payer the opportunity to pay in multiple installments over a set time. This may be particularly beneficial for smaller payers, who may not be prepared for the large up-front costs associated with these therapies. For a larger payer, these types of payment methods are typically not preferred as they would rather recognize the cost up front and within the benefit year that the treatment occurred for budgetary reasons.
Another emerging model gaining traction with stakeholders is the warranty model. In this model, manufacturers purchase a patient-specific warranty policy that reimburses treatment-related costs in the case of suboptimal outcomes. Based on the arrangement, payers and/or patients can be reimbursed for their share of the costs for the therapy. Warranties attempt to solve for the challenge of reaching alignment on outcomes for the contract; in many cases, the manufacturer develops the terms without input from the payer. While this can simplify the development of the contract, it also removes the payer from the discussion. Thus, this model still can mitigate the clinical uncertainty of a high-cost therapy, but it does not impact the high up-front cost. Warranty adjudication may also require the payer and/or provider to identify patients who experience suboptimal outcomes, which may lead to additional resource needs.
Subscription models are another method being explored to spread the risk among payers (TABLE). In this type of model, a payer pays a fixed subscription fee for their population over time that will provide them with coverage should any members in that population have a claim for a covered therapy within the subscription plan. Risk can be spread across multiple payers that are participating, and it provides a predictable budget impact. The downside of these models is the payment of additional premiums and shifting the risk when that might not be the desired result if the payer is able to appropriately forecast budget impact and account for the risk within their own product offerings.
Employer groups face their own specific financial risks related to cell and gene therapy and have primarily leveraged their standard stop-loss offerings to reduce exposure to high-cost therapies. A standard stop-loss offering helps cover unexpected high costs on a per-member basis by setting a capitation on how much an employer group pays for a certain employee. For example, a member who has a new high-cost diagnosis may rack up claims of more than $1 million over a benefit period. If that employer group has stop-loss, it may cap the amount the group has to pay at $250,000. However, some standard stop-loss programs may exclude coverage for cell and gene therapies, or they may exclude coverage specifically for members who can be identified as candidates for these therapies. Larger employer groups may not carry stop-loss coverage because they can assume more risk based on the size of their population. There has been an evolution of the development of new programs being offered to employer groups that specifically provide coverage for certain gene therapies at a prespecified per-member-per-month cost to the employer group. Examples of these programs include Cigna’s Embarc and Amwins’ Gene Therapy Solutions. A downside to these programs is that they may overestimate the risk exposure and may only cover specific products, excluding any products in the pipeline that may launch during the benefit year.8,9 One of the positives of these programs is that they can provide some financial protection that allows employer groups to provide access to these products when they otherwise may have excluded them from the benefit completely. Programs such as these typically require handing over all aspects of coordination and payment to a third party, so there may be limitations such as how the product is acquired (for example, a program could require acquisition and coordination of the product through its associated specialty pharmacy, if available), which could lead to provider dissatisfaction and fragmentation of care.
Key Takeaways
- Outcomes-based agreements (OBAs) tie therapy costs to clinical success, offering payers financial risk protection while ensuring treatment efficacy aligns with outcomes. This model promotes accountability but requires robust tracking and reporting.
- Innovative payment models for cell and gene therapies address high upfront costs, spreading financial risks and improving affordability for payers while maintaining patient access.
- Effective reimbursement strategies for CGTs requires collaboration among stakeholders to address data gaps, define meaningful outcomes, and ensure equitable risk-sharing across all parties involved.
To solve some of the challenges associated with innovative reimbursement models, the Centers for Medicare & Medicaid Services (CMS) recently launched a Cell and Gene Therapy (CGT) Access Model to support OBAs in Medicaid. In this model, CMS and manufacturers will negotiate the terms; state Medicaid programs will decide whether to sign the agreement. CMS will also provide technical support and funding to participating states. Because the program is currently limited to treatments for sickle cell disease, this still allows state Medicaid programs to consider OBAs on their own for other therapies.10 This model may overcome some of the challenges with tracking and reporting outcomes with CMS assisting payers.
Many options for reimbursement models have been discussed, explored, and even initiated in many cases. More information is needed on the successes or failures of these models for them to evolve, expand, and become widely adopted. Additionally, monitoring how these different reimbursement models may impact patient access to these therapies is key. Open and early communication between stakeholders can help to distribute risk evenly and help ensure that the models work for all parties involved.
REFERENCES
1. American Society of Gene and Cell Therapy, Citeline. Gene, cell, & RNA therapy landscape report: Q3 2024 quarterly data report. Accessed November 1, 2024. https://www.asgct.org/global/documents/asgct-citeline-q3-2024-report.aspx
2. Approved cellular and gene therapy products. Food and Drug Administration. November 21, 2024. Accessed November 21, 2024. https://www.fda.gov/vaccines-blood-biologics/cellular-gene-therapy-products/approved-cellular-and-gene-therapy-products
3. Young CM, Quinn C, Trusheim MR. Durable cell and gene therapy potential patient and financial impact: US projections of product approvals, patients treated, and product revenues. Drug Discov Today. 2022;27(1):17-30. doi:10.1016/j.drudis.2021.09.001
4. Bansal A. Lenmeldy becomes world’s most expensive drug. Pharmaceutical Technology.April 2, 2024. Accessed November 1, 2024. https://www.pharmaceutical-technology.com/analyst-comment/lenmeldy-becomes-worlds-most-expensive-drug/
5. Phares S, Trusheim M, Emond SK, Pearson SD. Managing the challenges of paying for gene therapy: strategies for market action and policy reform. Institute for Clinical and Economic Review. April 23, 2024. Accessed November 1, 2024. https://icer.org/wp-content/uploads/2024/04/Managing-the-Challenges-of-Paying-for-Gene-Therapy-_-ICER-NEWDIGS-White-Paper-2024_final.pdf
6. Lopata E, Terrone C, Gopalan A. Opportunities and challenges surrounding financial models for high-investment medications: a survey of access decision-makers and employers. J Manag Care Specialty Pharm. 2023;29(7). doi:10.18553/jmcp.2023.22436
7. Value-based arrangement pricing flexibilities will take effect July 1. Avalere. June 27, 2022. Accessed November 6, 2024. https://avalere.com/insights/value-based-arrangement-pricing-flexibilities-will-take-effect-july-1
8. Embarc benefit protection. Cigna Healthcare. 2024. Accessed November 1, 2024. https://www.cigna.com/employers/cost-control/embarc-benefit-protection
9. Gene therapy solutions. Amwins. Accessed November 1, 2024. https://www.amwins.com/solutions/group-benefits/self-funded/cost-containment/gene-therapy-solutions
10. Cell and gene therapy (CGT) access model.Centers for Medicare & Medicaid Services. Accessed November 4, 2024. https://www.cms.gov/priorities/innovation/innovation-models/cgt
