FDA approval of Novartis’ Zolgensma made it the first gene therapy for the rare muscle disease spinal muscular atrophy. The 2019 regulatory decision also boosted the market’s premium pricing for a single gene drug treatment — more than $2.1 million.
The genetic drug market is shaping up as new products follow in Zolgensma’s footsteps. Recent approvals of new cell and gene therapies along with upcoming regulatory decisions for additional products are now putting pressure on payers to adjust to these new types of therapies and the prices they set. Their decisions have implications for who can access these potentially healing agents and whether paying for them will break the bank.
“They’re really trying to determine if I’m at that risk and what I can do to protect myself,” said Raymond Brown, head of the North American practice for Mercer, a healthcare consulting firm.
Brown spoke Tuesday in Las Vegas during an HLTH conference on the cost of cell and gene therapies. He was joined by Niko Economides, director of healthcare and life sciences at consultancy Oliver Wyman.
Most of the cell and gene therapies that have reached the market so far are for cancer and rare diseases. But Economides sees the reach of these therapies soon expanding by targeting more common diseases. For example, the first gene therapies for hemophilia (from BioMarin Pharmaceutical) and sickle cell anemia (from Bluebird Bio) may reach the market as early as next year. These upcoming regulatory decisions have insurance companies thinking about how to cover these new therapies.
Insurance companies are really trying to understand the implications of these therapies, including the financial risks, Brown said. In light of the potential of being responsible for paying for these very expensive new types of therapies, payers are looking for ways to protect themselves from the financial costs. Some are weighing whether they need reinsurance or another longer-term strategy, Brown said.
Economides said two main concerns have come up in his discussions with carriers. The first is the high cost of these therapies, which roughly translates to how the company can pay for these therapies. The second concern is the longevity of these treatments, which translates to whether the therapy is worth paying for.
Cell and gene therapies have high prices because of the curative potential of a single treatment. In most cases, these therapies are covered because they meet a medical need that has no other treatment options, Brown said. Coverage decisions may become more difficult as cell and gene therapies expand to more prevalent conditions. Right now, coverage of cell and gene therapies makes sense under Medicare, Brown said. But for some other indications, the field may be moving toward placing them under pharmacy benefits. In such cases, reimbursement may require prior authorization. One indication of where that might happen is hemophilia, where patients have treatment alternatives to gene therapy, Brown said.
As for the longevity of these treatments, uncertainty remains. Brown said one way payers are choosing to protect themselves is through outcomes-based reimbursement. alternatively referred to as value-based contracting. Those agreements tie payment to certain outcomes that demonstrate treatment benefit, Brown said. Performance-based agreements are nothing new, but for plan sponsors they have been a “nice to have” option, Brown said. Some therapies have them and some don’t. But Brown sees the high prices of cell and gene therapies creating more demand for demonstration of therapeutic results.
“If they are really seen as cures, I think there will be a lot more focus on these risk-based agreements,” he said.
Zynteglo, Bluebird Bio’s recently approved gene therapy for beta thalassemia offers a recent example of this approach. Patients with this rare blood disorder require frequent blood transfusions. In clinical trials, measuring transfusion independence is how the benefit of therapy is assessed. Bluebird set a price tag of $2.8 million, which exceeded Zolgensma, but the company also offers performance-based agreements under which a portion of that amount will be paid if patients return to needing a transfusion over time.
The other question payers ask is how to assess risk. Brown noted that not every hemophilia patient will need Roctavian, the BioMarin gene therapy currently being considered by the FDA as a potential one-time treatment for hemophilia A. The considerations go beyond diagnosing the disease. These include taking into account the patient’s history and the severity of the disease. Brown sees payers moving toward authorization strategies. However, he adds that stop-loss reinsurance, a type of insurance for insurance companies, is not very attractive. In stop-loss reinsurance, the reinsurer covers the primary insurer’s losses incurred during a certain period and up to a certain amount.
Outcomes-based agreements face a challenge that is unique compared to health coverage in many other countries. In the U.S., where coverage is tied primarily to employment, policyholders move from plan to plan as they change jobs, which can make tracking treatment outcomes challenging, Brown said. He sees potential for third parties to enter the space, offering ways to track those results. Although cell and gene therapies offer potential treatments for patients, outcomes-based agreements don’t last forever, Economides added. These agreements usually include a specified period of patient observation to assess the therapeutic outcome.
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