Editor’s Note: In a recent webinar, Manatt Health’s Anthony Fiori, Senior Managing Director, and Alex Dworkowitz, Partner, hosted a panel of innovative thought leaders—including Dr. Sanjiv Shah, Chief Medical Officer of MetroPlusHealth; Kristin Wolff, Vice President, Global Policy Strategy and U.S. Government, bluebird bio; and Christine Lee, Director, Managed Care & Payor Relations, Memorial Sloan Kettering Cancer Center—to explore how public and private payers, life sciences companies, providers and patients are tackling the complex challenges of providing affordable access to groundbreaking therapies. The article below provides a summary of stakeholders’ perspectives on possible payment options for breakthrough therapies as well as highlights key points that arose during the panel discussion. Click here to view the full webinar for free, on demand and to download a free copy of the presentation.
Scientific advances in understanding how to manipulate genes to alter the course of disease are now starting to bear fruit. Cell and gene therapies are bringing hope to those with conditions once thought to be incurable or irreversible. However, the complex science involved in developing these breakthrough treatments—and, in some cases, their need to be tailored to individual patients—has led to very high prices compared with most current drugs and biologics, with some of these treatments carrying list prices in the hundreds of thousands or millions of dollars.
While the current impact of these treatments on the overall health care budget may be small, a National Bureau of Economic Research study estimates more than 1 million patients will be treated with gene therapies by 2034, with spending reaching up to $25.3 billion annually.1 Meanwhile, the political focus in the Trump and Biden Administrations has been on controlling drug prices, both for innovative therapies and long-existing treatments, with an ongoing push to give public payers more power to negotiate drug prices.
Key Stakeholder Perspectives
- Manufacturers: Manufacturers view cell and gene therapies as providing tremendous clinical benefits and want to promote access to the greatest extent possible. Some are concerned that the drug pricing debate is failing to adequately distinguish between breakthrough treatments and markups for older therapies.
- Payers: Payers want to provide their members with access to innovative treatments but are skeptical of whether their value will be sufficient to justify the price. Payers are more receptive to treatments where there will be cost offsets, such as lower hospital expenses following treatment.
- Providers: Hospitals want to provide cutting-edge treatments to their patients but are concerned about the sustainability, given the high financial losses these treatments can incur due to inadequate reimbursement levels, particularly among public payers. Pharmacies are interested in playing a role if these treatments can drive revenue.
- Patients: While many patients are desperate for new treatments, many others are wary of them, as resistance to COVID-19 vaccines demonstrates. In addition, patients often face high cost-sharing for drugs.
Possible Payment Options
- Value-based purchasing (VBP) helps address uncertainty regarding outcomes by tying a treatment’s reimbursement to results. For example, MassHealth, Massachusetts’ Medicaid program, has entered into a VBP arrangement for Zolgensma®, Novartis’s gene therapy for treating spinal muscular atrophy in infants, through which the state receives an up-front discount and further rebates if the drug does not perform against agreed upon outcome measures.2
- Financing arrangements help spread financial impact over many years, better aligning costs with benefits; however, no agreements of this type have been effectuated yet between payers and manufacturers.
- Reinsurance helps spread risk among payers and can be particularly valuable for self-insured employers and smaller health plans. For example, Florida withholds a portion of the capitation payment owed to Medicaid managed care organizations (MCOs) to fund its Prescribed Drug High Risk Pool, under which the state provides reimbursement to MCOs for some of their expenses for high-cost drugs.3
Panelist Discussion Highlights
Panelists discussed the coverage and reimbursement challenges that breakthrough therapies face and shared potential solutions from the perspective of manufacturers, providers and payers. Panelists highlighted that after a breakthrough therapy is approved by the Food and Drug Administration (FDA), there can be significant barriers to access as payers develop coverage and reimbursement policies. Since the timing of administration for some of these treatments can be critical, delays in patient access can be harmful. Panelists offered the following insights to ensure patient access:
- Payers should be as proactive as possible in developing coverage and reimbursement policies for breakthrough treatments, engaging with manufacturers and providers, to the extent possible, prior to approval by the FDA to understand the value of the treatment.
- Providers can support patient access by advocating for payers to rapidly develop fair coverage and reimbursement policies and guiding eligible patients to manufacturer assistance programs.
Panelists also discussed approaches to delivering and paying for breakthrough treatments, including some of the barriers and facilitators of value-based payment agreements.
- In establishing the value of breakthrough treatments, it is important to factor in not only the direct health care cost offsets but also the resulting improvements in the patient’s quality of life. For example, a treatment that cures childhood blindness may not directly offset substantial future health care costs, but it would greatly improve the patient’s quality of life.
- While there has been general interest in value-based payment for drugs and biologics among payers, providers and manufacturers over the past several years, agreements have been notoriously hard to establish due to regulatory barriers and difficulty aligning on the outcomes, reimbursement terms and agreement time frames for particular products. However, due to their high prices and, in some cases, potential to cure previously incurable diseases, breakthrough treatments offer an opportunity to establish value-based agreements. A few keys to success in establishing value-based agreements include ensuring that the treatment has a strong clinical efficacy and safety profile and that it addresses an unmet need. To garner interest from payers, manufacturers seeking to establish value-based agreements for breakthrough treatments should be prepared to take on significant risk based on the outcomes of their treatments. It is also important, whenever possible, to use binary outcome measures in a value-based arrangement and ensure that the agreement is not overly cumbersome for either party to administer. Finally, the time frame of the agreement should be long enough to ensure the outcome can be detected.
- On the provider side, a “Centers of Excellence” approach is the typical model for administering breakthrough treatments to patients since it concentrates expertise about delivering these treatments and may lead to beneficial learning opportunities.
The panelists closed by discussing the reforms they would like to see to better facilitate access to breakthrough treatments. Some of the ideas the discussion surfaced include:
- An increased role for the federal government in establishing coverage policies and financing breakthrough therapies.
- Reforms that would remove legal and regulatory barriers to establishing value-based payment arrangements.
- Reforms and new guidance around the types of financial assistance that manufacturers can provide for Medicare and Medicaid patients (e.g., streamlining the process for manufacturers to pay for a patient’s travel and lodging in order to receive the treatments that they need).
With at least nine currently approved cell and gene therapies, dozens of breakthrough treatments currently in clinical trials and an ongoing political focus on drug pricing, issues related to accessing and paying for breakthrough treatments will remain salient. In the coming years, new models for financing and delivering these treatments are likely to emerge in federal, state and commercial health care programs.
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