Introduction

Durable, potentially curative therapies offer great hope for patients and society. Short, even single dose, treatment regimens are expected to yield lasting health benefits. However, large, single payments will challenge the current reimbursement system. Policy, regulations and business operations need to evolve to enable emerging financing solutions. This section provides a concise overview of durable therapies from the policy perspective and identifies policy needs to support patient access to these therapies and stakeholder use of precision financing solutions to support that access. We have structured the section around four key questions.

Expected pipeline: durable therapies

Durable Therapies: Definition

The development of transformative cell- and gene-based therapies over the past decade has raised the possibility that rare diseases with severe unmet need that are currently considered chronic or fatal may be significantly slowed down or cured after a single course of treatment. These therapies represent a foreseeable reimbursement challenge to current healthcare systems: upfront cost is substantial and is incurred all-at-once, but patient benefits are accrued over a longer period of time. If these benefits minus the costs are the basis of value, then this accrual is of significant value in a single administration event. Durability could extend for years or even a lifetime.

Expected on-market availability to 2031

MIT NEWDIGS FoCUS has conducted a unique, detailed, indication-by-indication analysis to estimate the expected volume of durable cell and gene therapies likely to be available on the US market in the coming years. Currently there are ~1,300 active, US-registered clinical trials of durable cell and gene therapies. 6 therapies (4 individual drugs) are already approved for patient use in the US.

Figure: Pipeline of active, US-registered clinical trial programs for durable cell and gene therapies

Approximately 58% of product candidates in development are for oncology patients, 27% are for orphan, non-oncology indications and 15% are to treat larger therapeutic areas such as cardiovascular conditions.

MIT NEWDIGS FoCUS developed detailed estimates of clinical trial progression rates, disease incidence and prevalence and estimated patient uptake for each product indication.

The current pipeline of US-trial therapies is expected to result in 80-100 product-indication launches by 2031; with 45-55 launching within the next five years (by 2025).


Figure: Predicted product launches 2019–2031


Figure: Projected treatable patient population 2019–2031

Based on the team’s estimates, the average projected cost burden of these therapies on Medicare in 2031 (drug cost only) is estimated to be $12.9B for oncology medicines and $2.6B for gene therapies. For Medicaid the cost burdens in 2031 are estimated to be $0.7B for oncology medicines and $2.1B for gene therapies. At its peak in 2025 the cost burden on Medicaid of the current pipeline is estimated to be $3.3B.  Note:  While this estimate reflects the expected cost of the current pipeline, the pipeline will continue to be replenished and added to with new innovations.  Thus, towards the back end of this timeframe we may see additional products launch beyond those reflected here.

While clinical trial outcomes and regulatory approvals are never guaranteed, by 2023 we expect the following types of products may be available to patients:

Currently available

  • Oncology CAR-T therapies: Kymriah®, Yescarta®
    • Currently approved for acute lymphocytic leukemia (ALL) and diffuse large B-cell lymphoma (DLBCL)
  • Ultra-rare disease treatments
    • Luxturna® for Retinitis pigmentosa & Leber’s congenital amaurosis (both RPE65)
    • Zolgensma® for Spinal muscular atrophy

Likely available by 2023, assuming clinical trial success

  • Rare Disease treatments
    • Hematological conditions
      • Hemophilia A & B
      • Sickle Cell anemia
      • β-thalassemia
    • Additional treatments for ophthalmological conditions
      • Retinitis pigementosa & Leber's congenital amaurosis (other genetic mutations)
      • One or more other conditions possible
    • Neurological conditions
      • One or more probable
    • Other conditions
      • One or more probable
  • Higher prevalence disease treatments
    • Macular degeneration possible

A synthesis of the approach used to develop these estimates may be found here.

Expected value to patients

Durable gene and cell therapies offer patients the potential to treat chronic conditions with one treatment.  Many of the conditions addressed by gene therapy are rare and may have limited alternative interventions -- a situation that has brought together communities of patients and their families for support and advocacy.  To them, gene therapies bring new hope.  The specific benefits of each therapy will vary.  In some cases, these therapies can improve patient survival rates. In others they can reduce morbidity, offering individuals improved health and well-being during the course of their condition. Some gene therapies stop disease progression, preventing patients from becoming sicker. Others offer quality of life improvements, including improved functioning, less pain, and a greater sense of well-being. With improved function, patients may be able to work or contribute to society in other ways.

For additional insights please see:

American Society for Gene and Cell Therapy, Addressing the Value of Gene Therapy: Enhancing Patient Access to Transformative Treatments

University of Utah, Gene Therapy Successes, Learn.Genetics: Genetic Science Learning Center

Needed precision financing solutions

Durable, potentially curative therapies create three financial challenges:

  1. Payment timing: Therapies can involve substantial upfront payment for multiple years of therapeutic benefit.

  2. Therapeutic performance risk: Real world efficacy and durability are uncertain at the time of initial regulatory approval and market launch.

  3. Actuarial risk: The number of eligible patients in a payer’s population may be uncertain and could vary significantly from period to period.

Payers will not be equally affected by these risks. US payers differ in terms of number of covered lives (size), types of lives covered (children, elderly, mixed), funding sources (self-funded, premiums, taxes), and the coverage and reimbursement rules that they must follow.

For example, Medicare and larger commercial insurers face less actuarial risk than self-insured employers, regional commercial plans, and some state Medicaid plans due to the significantly larger number of lives they cover. Financial solutions addressing actuarial risk may therefore be needed and appropriate for only smaller payers. Similarly, some payers may cover clusters of patients with certain genetically-driven conditions that occur in families and therefore have a larger number of members who might benefit from a particular therapy than other payers.

In addition, individual products in the broad category of durable, transformative cell and gene therapies have different profiles and characteristics that will raise the three financial challenges noted above to differing extents. This will in turn affect the need for distinct precision financing solutions to create access for that product.

Given this diversity, we do not believe that a single solution is appropriate in all contexts. However, we have identified a set of solutions that may be appropriate in multiple contexts. Those include:

Milestone-based Contracts Multi-year Milestone-based Contracts Performance-based Annuities Payment Over Time/Installment Financing Reinsurance/Stop Loss Insurance Risk Pools Orphan Reinsurer and Benefit Manager (ORBM)

A description and additional resources on each may be found by clicking on the name of the solution.

Needed policy enablers

The precision financing solutions identified as part of the FoCUS workgroup face implementation challenges given how government pricing and other regulations are currently written. Historical legislation and regulation are not always amended to permit innovative contracting approaches.

FoCUS has identified six key federal policy issue and policy recommendations, in priority order below. Each is briefly described and recommendations for solutions are highlighted. A 2-page summary of these recommendations may be found here.

  1. Medicaid Drug Rebate Program Accommodations for Performance-Based Agreements
  2. FDA Communication Guidelines to Enable Appropriate Performance Metrics
  3. Anti-Kickback Statute to Define Explicit Safe Harbor
  4. HIPAA to Enable Patient Data Visibility to All Involved Parties
  5. Federal and State Insurance Regulation to Allow Deductible and Co-Pay Waivers
  6. Fair Provider Payments

Medicaid Drug Rebate Program Accommodations for Performance-Based Agreements

Issues:

  1. Unclear how to report performance-based rebates or payments that may occur years after treatment
  2. For rare conditions, an insurer who has unusually poor outcomes in a small group of treated patients could set an unfairly low price for all Medicaid patients

Recommendations/Suggestions:

  1. Safe Harbor/waiver exempting pilots from incorporation into current Medicaid Drug Rebate calculations in order to test alternative approaches for calculating Medicaid rebates
  2. Development of performance-based agreement reporting and rebate methods. Methods that avoid small sample size volatility could be based on one of the following:
    1. Average actual patient payments for patients with similar performance-based agreements (updated until agreement completion)
    2. National average actual patient performance applied to individual contract terms (updated until agreement completion)
    3. Expected average payment based on expected patient outcomes (at time of patient treatment, e.g. from clinical data) applied to individual contract terms

Note: In the case of ultra-orphan therapies, even averaging may not insulate against the risk of poor performance under Medicaid Best Price given the small number of patients being treated.

Additional reading material may be found in the Toolkit Bibliography.

FDA Communication Guidelines to Enable Appropriate Performance Metrics

Issue: Payer agreements that use performance metrics not reported in the FDA-approved label may place the developer-manufacturer in violation of FDA Guidelines for communication with payers.

Recommendation/Suggestion: Clarify that patient real-world performance metrics are acceptable in performance-based agreements when therapies are administered to patients in accordance with the label indications and usage criteria. Metrics need not be limited to those included in the FDA label. FDA guidelines remain relevant for any communications regarding the metrics.

Additional reading material may be found in the Toolkit Bibliography.

Anti-Kickback Statute to Define Explicit Safe Harbor

Issue: The AKS regulations currently provide a safe harbor for traditional rebates, but do not explicitly include value-based agreements that tie payments or refunds to outcomes and may pay for monitoring visits that relate to these.

Recommendation/Suggestion: Explicitly include rebates and payments arising from performance-based agreements in an AKS safe harbor.

Additional reading material may be found in the Toolkit Bibliography.

HIPAA to Enable Patient Data Visibility to All Involved Parties

Issue: Sharing patient performance data among the involved parties in performance-based agreements (especially developers and subsequent payers) often requires additional hurdles due to HIPAA regulations that did not contemplate this sort of agreement.

Recommendation/Suggestion: Amend HIPAA regulations to ensure that those investing in patient health through long-term performance-based agreements can access needed, relevant data. Clarify any enabling requirements for patient consent forms.

Additional reading material may be found in the Toolkit Bibliography.

Federal and State Insurance Regulation to Allow Deductible and Co-Pay Waivers

Issue: Current regulations usually require refiling and approval of insurance products if patient benefit designs are altered. This 12-18 month process can delay patient-favorable changes by payers.

Recommendation/Suggestion: Amend regulations to allow payers to make modifications beneficial to all participants, such as reductions or waivers of deductibles, co-pays, and coinsurance payments, increases in patient incentives, and other improvements in patient access for specific therapies with automatic regulatory approval upon filing with insurance regulators.

Additional reading material may be found in the Toolkit Bibliography.

Fair Provider Payments

Issues: Some therapies provided in the inpatient setting are reimbursed through existing fixed-rate payments (e.g. DRGs) that are intended to cover a range of possible treatment options. The inclusion of new high-cost therapies in this set creates a substantial loss for providers if they choose to use such a therapy, even after potential new technology add-on payments.

Therapies that can be provided in the outpatient setting may qualify for 340B pricing or be automatically paid at the rate of “Average Selling Price”+6%, creating much higher reimbursement than in the inpatient setting. Provider reimbursement may increase with treatment cost.

Recommendation/Suggestion: Establish fair, separate and fixed reimbursement rates for these therapies out-side of the payment mechanisms for the clinical care and medical management of the patient to make provider reimbursement appropriate in all settings.

Additional reading material may be found in the Toolkit Bibliography.

Enabling Change

Milestone-based Contract

Multi-year Milestone-based Contract

Performance-based Annuity

Payment over Time/installment Financing

Orphan reinsurer and Benefit Manager

Regulatory

Revised Medicaid Best Price Reporting

Anti-Kickback Statute safe harbor inclusion

FDA Manufacturer communication Guidelines for early discussion & using outcome metrics not in label

HIPAA revisions to ease patient outcomes and insurer status collection & sharing

✓ 

✓ 

✓ 

✓ 

Operational

Outcomes and insurer status data collection

✓ 

✓ 

Provider reimbursement mechanisms

✓ 

✓ 

✓ 

✓ 

✓ 

Risk Management

Center of Excellence

✓ 

✓ 

✓ 

✓ 

Patient mobility mechanisms

✓ 

Reinsurance/Stop-loss evolution

✓ 

✓ 

✓ 

Collaborative stakeholder action could enable more rapid development of these and similar financial solutions. The table above summarizes the priority areas that would benefit from collaborative action to develop new capabilities, mechanisms and policies.

We will continue to add to the Toolkit Bibliography over time. Please note the Bibliography includes both FoCUS and other non-FoCUS publications.

Likely stakeholder impact

The emergence of durable, potentially curative therapies will require new approaches in many aspects of patient care and financing.

Much has been discussed in the press about how payers and developers need to work together to address coverage and reimbursement issues. Government regulators and legislators will need to ensure regulatory policies continue to evolve along with innovations in science and payers’ approaches to reimbursement.

Equally important, however, are the operational changes that durable, potentially curative therapies may require, creating changes in how care is delivered, where care is delivered, reimbursement and payment changes for providers, patients and their caregivers.

Below is a brief summary of key stakeholder issues that need to be resolved together to ensure appropriate access to these therapies.

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Patients and Caregivers

Patient and their caregivers will want to understand these new therapies, and the financial and operational implications for their treatment. They will need to address:

  • Access to Treatments: Patient access to therapies depends on a variety of factors, including geography, ability to navigate institutional environments, their insurance status, and, when insured, the coverage and formulary decisions of payers. If payers either exclude cell and/or gene therapies or institute restrictive formularies, patients will be limited in which therapies they can benefit from.
  • Accessible provider networks: To control costs, some plans may restrict their provider networks, establishing “narrow networks.” Moreover, for durable therapies, there may be limited providers (centers of excellence) who are authorized by either a developer or a payer to deliver a particular therapy in order to ensure quality administration. Patients, and often their caregivers, may need to seek out new providers or pursue potentially costly travel – perhaps even across state borders – in order to access treatment. This can have cost implications for patients, in addition to time lost from work, and may require payers to establish specific processes for patients to access providers who are not typically “in network.” This is particularly relevant for Medicaid payers who may traditionally work only with in-State providers.
  • Financial Burden: Generally, for these treatments the patient will experience a high financial burden due to out-of-pocket costs from co-pays, deductibles, and in some cases travel to care sites. The specific impact will vary by patient, but the burden is likely to be experienced all-at-once under the current payment regime. As a one-off cost, new treatments can affect out-of-pocket costs much more at the start of the year than the end. For some patients, the treatments may represent new costs. Other patients on existing high-cost, treatments may already be hitting their deductibles and out-of-pocket maximums. Still other patients may see the costs of treatment offset by savings from traditional treatment regimes.
  • Potential lost income: The age of the patient will determine whether and how the income-earning members of his or her household are affected. In some cases, there may be limited providers who are authorized to deliver a particular therapy within the patient’s regional area, which can result in patients seeking out new providers or travelling across state borders in order to access treatment.
  • Monitoring over time: As this is a new area of science, patient monitoring over time will be required from a regulatory perspective. In addition, some performance agreements between developers and payers may require tracking of patient outcomes over time. Patients may need to make themselves and their outcomes available to allow such monitoring.
  • Education: To help patients self-advocate and access therapies, patient and caregiver education on financing options and financial literacy is also needed to support effective planning.

Payers and developers will want to consider the implications of precision financing solutions for patients of these therapies in finalizing their approaches.

Providers

The availability of durable therapies may raise both temporary and more unique financial challenges for providers that payers will need to consider in finalizing a coverage strategy.

Temporary challenges include:

  • Delay in availability of billing codes: The amount of time it takes for new billing codes to be provided and how providers will be able seek reimbursement during that period
  • Inadequate DRG rates: Existing inpatient DRGs will not include the costs of durable/curative therapies. This may be partially addressed by Medicare New Technology Add-on Payments, but these often significantly lag the therapy launch, are not approved, and only provide partial coverage.
  • Unavailable or inadequate outpatient reimbursement: A therapy administered in an outpatient setting may need to receive a distinct and separate code, e.g. a “J code,” to enable reimbursement filing. Code issuance is often delayed, with commensurate patient access delays and significant financial risk to providers during the interim. Once issued, adequate federal and private reimbursement levels are not assured.

More broadly, a provider may also face product inventory risk under buy-and-bill. Under a buy-and-bill model, providers acquire the product, administer it and then receive payer reimbursement later with a mark-up. During that time the provider bears stocking and inventory carrying costs, as well as risk of wastage, contamination and expiration. These costs and risks increase with a therapy’s cost and any payment timing delays. Given this, providers are unlikely to stock these treatments, but rather would arrange just-in-time delivery. Additional details on buy-and-bill considerations may be found here.

Cell and gene therapies may also result in financial risks due to changing provider service patterns. Gene therapy may replace existing treatments. If the administration of gene therapy is performed by a different provider or if the provider was dependent on income from administering existing treatments, the advent of gene therapies may require re-evaluation of the services a provider offers, alternative approaches to achieve greater efficiency in service delivery, and/or re-negotiation of payer reimbursement levels for remaining services. This type of financial risk is particularly a concern where providers may be informally cross-subsidizing one service with another’s income. A concrete example of how gene therapy might affect Hemophilia Treatment Center income and services may be found here:

Additionally, to the extent that the financing strategy involves a new payment model under which the manufacturer and payer directly contract (bypassing the provider), the new payment arrangement could result in a lost revenue stream for the provider. E.g., under Medicare Part B, providers may get Average Sales Price + 6% for a particular drug.

Operationally, providers may also be affected by:

  • Certification: Provider may need to become certified in order to deliver new therapies.
  • Potential patient shifts towards centers of excellence: As some of these therapies may be delivered through centers of excellence, providers that are not part of those centers of excellence networks may see some shift in patient treatment towards those centers.
  • Coordination of care across sites: Some therapies may be administered by one provider with shorter-term follow-up and then patient monitoring over time carried out by the patient’s community-based provider. Administering providers may need to ensure appropriate coordination, potentially also to monitor and report outcomes over time.
  • Outcomes reporting: Durable therapies will require up to 15 years of patient monitoring for safety and additional outcomes reporting in the event of performance guarantees. While this will be the responsibility of other stakeholders, providers may be asked to report outcomes data for these patients. Providers will need to establish administrative processes to do so. Stakeholders will need to ensure appropriate reimbursement for these services.

Government regulators and legislators

Government regulators and legislators will need to ensure regulations evolve in a manner that keeps track with innovations in science and payers’ innovative contracting approaches to ensure appropriate, timely patient access to these therapies. A description of policy issues related to innovative precision financing solutions may be found in this section of the toolkit.

Payers

Payers help ensure effective treatments are available to improve patient outcomes, while balancing the financial risk of reimbursing these treatments. Payers need to:

  • Define coverage policies and processes
  • Assess their financial risks and ensure adequate risk management strategies, for their size, financial strength and existing regulations that govern their operations.
  • Ensure provider networks and reimbursement are in place to support patient access to treatments
  • Ensure the gene therapy delivery channel is aligned to provider and reimbursement arrangements
  • Establish plan benefits with patient out-of-pocket costs that do not act as a barrier to treatment
  • Work with third parties, particularly where necessary to manage Medicare Drug Rebate barriers, to ensure innovative financial solutions can be implemented

Developers

Developers need to:

  • Ensure stakeholders understand durable, curative therapies
  • Bring a strong evidence-base on the value of each durable, curative therapy
  • Help payers manage uncertainties around the products that are based on limited experience with the product and that affect value
  • Consider what financial solutions they may be able to offer to help allay payer risks and support patient access to treatments
  • Ensure their own financial solutions are in place, e.g., factoring if they offer payment over time.
  • Work with third parties, particularly where necessary to manage Medicare Drug Rebate barriers, to ensure innovative financial solutions can be implemented

•••

Collaborative stakeholder action could enable more rapid development of these and similar financial solutions.

We will continue to add to the Toolkit Bibliography over time. Please note the Bibliography includes both FoCUS and other non-FoCUS publications.