Accessing Cell and Gene Therapies: Insights on Coverage, Reimbursement and Emerging Models

Health Highlights

Editor’s Note: In a new white paper, summarized below, Manatt Health discusses emerging reimbursement models for cell and gene therapies. The paper provides an overview of current Medicaid, Medicare and commercial coverage, including separate payment policies, value-based payment (VBP) arrangements and reinsurance programs. Click here to download a free copy of the full white paper.

More than ten cell and gene therapies have been approved by the FDA in the past five years,1 and over 500 gene-based therapies are in clinical development2 as of 2023. Based on current pipeline and product success rates, the Food and Drug Administration (FDA) anticipates approving 10–20 a year by 2025,3 with spending expected to reach $25 billion annually over the next ten years.4 With the emergence of these transformative treatments, payers are facing a practical reality of paying for them, with list prices ranging from $400,000 to $3.5 million per course of treatment.

Cell and Gene Therapy Today

Cell and gene therapies seek to modify genetic material in order to treat an inherited or acquired disease. Preparing and administering cell and gene therapies is a complex and expensive process. Cell therapy aims to infuse whole cells into a patient’s body to replace or repair damaged tissues and may involve blood transfusion or transplantation of stem cells to create bone marrow. Gene therapy aims to modify a mutated gene or introduce a new copy of a gene.5

Various cell and gene therapies have gained market approval over the past five years, creating the need for state Medicaid agencies and commercial payers to find financing solutions to cover therapy costs.

Medicaid Coverage

State Medicaid programs are required to cover all FDA-approved drugs if the drug manufacturer has signed a federal Medicaid rebate agreement.6 In practice, states sometimes delay coverage of newly approved drugs, and cell and gene therapies are almost always subject to prior authorization given their price point. Reimbursement and access are further complicated by out-of-state (OOS) dynamics since many patients will need to travel to another state to get cell and gene therapies.

Most Medicaid programs use a diagnosis-related group (DRG) system to reimburse hospitals for inpatient services, where a hospital receives a bundled payment for both the services provided and any drugs administered. Since the costs of cell and gene therapy to hospitals may be significantly higher than such reimbursement, this reimbursement structure could disincentivize hospitals from offering cell and gene therapies to patients. To ensure adequate reimbursement to hospitals and patient access to cell and gene therapies, some state Medicaid agencies implement separate payment policies, where a cell preparation or a drug itself is paid separately from inpatient drug administration. Another emerging approach to balancing costs and patient access is value-based arrangements, where performance-based contracts are linked to targets around efficacy and durability of patient response.

Several states are using reinsurance programs to manage cell and gene therapy costs. These programs are intended to provide protection to Medicaid managed care organizations (MCOs), which, depending on their size, can face financial troubles if they pay a higher-than-expected number of cell and gene therapy claims.

State calculus for offering separate payments for cell and gene therapies may change in the future given a proposed rule issued by Centers for Medicare & Medicaid Services (CMS) in May 2023,7 which could trigger rebate liability from the drug manufacturer to the state for drugs that are reimbursed as part of a bundled payment. The same rule proposes another cost control mechanism—a new “drug price verification survey,” which would collect cost, utilization and pricing data for high-priced therapies (cell and gene therapies were specifically called out as an area of focus).

Another proposed federal initiative is the Cell and Gene Therapy Access Model, in which CMS would coordinate and administer outcomes-based agreements with participating manufacturers for certain cell and gene therapies on behalf of state Medicaid agencies.8 These agreements could be in the form of outcomes-based payments, rebates or annuities, where continued payment is based on durability of benefit.

Medicare Coverage

Medicare is somewhat behind Medicaid in its flexibility to cover and reimburse high-price transformative therapies. Medicare may pay additional funds to a hospital for a newly launched high-price therapy via New Technology Add-On Payments (NTAP) or outlier payments in the case of inpatient therapies or pass-through payments in the case of outpatient payments. Medicare has also established a new DRG for chimeric antigen receptor (CAR) T-cell and other immunotherapies. The Medicare program, however, has not experimented with VBP arrangements or separate payments for therapies provided in the inpatient setting.

In its August 2022 Inpatient Prospective Payment System (IPPS) rule,9 CMS indicated that it would consider a new DRG for cell and gene therapies in future rulemaking but is not yet ready to make structural reimbursement changes to accommodate cell and gene therapies.

In February 2023, the Center for Medicare and Medicaid Innovation issued a report describing the innovation models it has selected for testing based on affordability, accessibility and feasibility of implementation.10 As opposed to an outcomes-based access model suggested for Medicaid, CMS suggests a bundled payment approach for Medicare—a model that would replace fee-for-service billing during cell/gene therapy care episodes.

Commercial Coverage

In commercial coverage, there are no federal requirements for plans to cover specific drugs, although plans in the individual and small group market are required to cover essential health benefits (EHBs) that set minimum standards for prescription drug coverage.11 With the emergence of cell and gene therapies, plans and employers are looking for ways to enable access for their beneficiaries while managing high upfront costs.

Obtaining reinsurance for cell and gene therapies is critical for commercial payers. Since general reinsurance policies may exclude cell and gene therapies, secondary reinsurance policies have been established specifically for these therapies.

VBP arrangements for pharmaceuticals are getting off the ground, but as with Medicaid, progress has been in part limited by Medicaid rules, requiring drug manufacturers to provide “best price” to state Medicaid agencies. In 2022, a CMS rule that allows manufacturers to report separate pricing in the context of value-based arrangements (multiple “best prices”) opened the door to such arrangements in the commercial market. Manufacturers, however, have not yet embraced these arrangements.

Looking Ahead

According to the 2022 national Magellan Rx Medical Pharmacy Report, gene therapies represent a top concern for half of the surveyed payers.12 Similarly, state Medicaid agencies reported in a recent survey that addressing the costs of cell and gene therapies is a key priority.13

Cell and gene therapies offer life-changing opportunities for patients suffering from blood cancers, genetic diseases and rare diseases. Protecting patient access, managing costs and linking payments to quality will be top of mind for payers as they adopt new cell and gene therapy payment models going forward.

1 Cell and gene therapies approved by the FDA over the past three years include Elevidys for Duchenne muscular dystrophy, Adstiladrin for bladder cancer, Skysona for neurological dysfunction with active cerebral adrenoleukodystrophy, Zynteglo for beta thalassemia, Hemgenix for hemophilia B, and Breyanzi and Carvykti for blood cancers/disorders, among others. The first three therapies—Kymriah, Luxturna and Yescarta—were approved by the FDA in 2017.

2 ASGCT & Citeline. (2023). Gene, Cell, & RNA Therapy Landscape. ASGCT.

3 Gottlieb, S. (2019, January 15). Statement from FDA Commissioner Scott Gottlieb, M.D., and Peter Marks, M.D., Ph.D., director of the Center for Biologics Evaluation and Research on new policies to advance development of safe and effective cell and gene therapies. U.S. Food and Drug Administration.

4 Becerra, X. (2023, February 14). A Report in Response to the Executive Order on Lowering Prescription Drug Costs for Americans. Centers for Medicare & Medicaid Services.

5 American Society of Gene + Cell Therapy. (n.d.). Gene & Cell Therapy FAQs. ASGCT.

6 The Medicaid Drug Rebate Program (MDRP), authorized by Section 1927 of the Social Security Act, requires drug manufacturers to enter into a National Drug Rebate Agreement with HHS in exchange for state Medicaid coverage of most of the manufacturer’s drugs. It includes CMS, state Medicaid agencies and ~780 drug manufacturers. For more information, see

7 Centers for Medicare & Medicaid Services. (2023, May 26). Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program. Federal Register.

8 See Endnote 4.

9 Centers for Medicare & Medicaid Services. (2022, August 10). Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2023 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Costs Incurred for Qualified and Non-Qualified Deferred Compensation Plans; and Changes to Hospital and Critical Access Hospital Conditions of Participation. Federal Register.

10 See Endnote 4.

11 For prescription drugs included in the EHBs, cost-sharing is capped by a plan’s maximum annual limit on cost-sharing. For those drugs or plans not subject to EHBs (e.g., large group or self-insured plans), patients’ out-of-pocket costs for cell and gene therapies may be prohibitive.

12 The national report covers 152 million lives across 40 payers that include Medicaid state agencies, Medicare and commercial payers. For more information, see

13 Hinton, E., Guth, M., Raphael, J., Haldar, S., Rudowitz, R., Gifford, K., Lashbrook, A., Nardone, M., Wimmer, M. (2022, October). How the Pandemic Continues to Shape Medicaid Priorities: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2022 and 2023. KFF.



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