NEW YORK – Payors and drugmakers are considering different ways of reimbursing new high-priced cell and gene therapies entering the market, particularly strategies that hinge on how effective these potentially curative, one-time treatments are for patients.
The US Food and Drug Administration has approved more than two dozen cell and gene therapies, including, for instance, CSL Behring's gene therapy Hemgenix (etranacogene dezaparvovec) for hemophilia B; Vertex and CRISPR Therapeutics' Casgevy (exagamglogene autotemcel) and Bluebird Bio's Lyfgenia (lovotibeglogene autotemcel), both for sickle cell disease and beta-thalassemia; and BioMarin's Roctavian (valoctocogene roxaparvovec) for severe hemophilia A. These therapies, which could potentially be life-changing for patients, also come with price tags soaring into the millions of dollars.
CSL Behring's Hemgenix was considered the most expensive drug in the world with a list price of $3.5 million until Orchard Therapeutics' metachromatic leukodystrophy gene therapy Lenmeldy (atidarsagene autotemcel) surpassed it in March with a $4.25 million wholesale acquisition price. Vertex and CRISPR Therapeutics, meanwhile, have priced Casgevy at $2.2 million, while Bluebird Bio's Lyfgenia is $3.1 million and BioMarin's Roctavian is $2.9 million.
"Cell and gene therapies are just a completely different modality in so many ways. They're not chronically administered. They're not symptom mitigating or [require] continuous follow-up and all those things that actually make money for pharmaceutical companies over time," said Manar Zaghlula, health policy manager at the University of California, Berkeley's Innovative Genomics Institute (IGI). "They're one and done, and they have the potential to be curative."
Expensive therapies like these are generally developed for very small patient populations. Erin Lopata, VP of the access experience team at PrecisionValue, a consulting firm that assesses the "clinical, economic, and humanistic value" of medical innovations, noted that payors could typically absorb the high cost of such treatments because there were so few of them. "But the concern is that we're continuing to see more and more cell and gene therapies approved each year," she said. "Then, as we start to see therapies that are indicated for larger patient populations, it's going to become more common that payors have to face that cost."
And there are uncertainties as to how well gene therapies work and how long their efficacy lasts. Because gene therapies tend to be developed for rare conditions, they may be studied in single-arm trials involving few patients, because larger, gold-standard randomized trials might be impractical or unethical to conduct, noted Marcelien Callenbach, a Ph.D. student at Utrecht University in the Netherlands who is studying different payment and reimbursement models for expensive and innovative drugs.
This, she added, means the therapies may come to market with less comprehensive safety and efficacy data. Gene therapies have "the promise of being curative," she said, adding that while there could be a durable, long-lasting response, "we do not have the data to support those claims. And they come with really, really, really high prices, [and] healthcare systems do not know if it's worth the money."
These concerns have made nontraditional payment models attractive to manufacturers and payors. A survey appearing in Expert Review of Pharmacoeconomics & Outcomes Research in 2023 found that 81 percent of cell and gene therapy developers and 84 percent of payors had or were planning to implement at least one alternative payment model.
Outcomes-based payment contracts
As these gene therapies have secured regulatory approval and made their way to market, a number of sponsors have indicated they would consider outcomes-based pricing, in which they would accept reimbursement tied to how well patients respond to treatment.
According to Bluebird Bio, it currently offers performance-based contracts to payors, in which the company will reimburse insurers "a meaningful portion of the cost of the therapy" if expected outcomes among patients are not met within a predetermined period. According to Bluebird, these contracts are straightforward to implement as they rely on clinically meaningful efficacy endpoints readily tracked in claims data.
When Lyfgenia was approved, for instance, Bluebird said it would offer payors outcomes-based contracts, in which the outcome of interest was the number of times patients were hospitalized due to vaso-occlusive crises. These are painful episodes that affect people with sickle cell disease due to their misshapen red blood cells and that treatment with Lyfgenia is supposed to lessen. In the trial supporting the gene therapy's approval, 28 of 32 patients on Lyfgenia achieved complete resolution of VOCs between six and 18 months after treatment.
Bluebird Bio signed its first outcomes-based contracting agreement with a state Medicaid agency, Michigan, for Lyfgenia in March. At the time, it said it was in talks with more than a dozen other state Medicaid agencies.
By August, Bluebird had multiple outcomes-based agreements in place with national commercial payors for Lyfgenia and had published policies covering more than 200 million US lives, said Tom Klima, the firm's chief commercial and operating officer, during a call with investors to discuss Q2 financial results. He indicated he was pleased with public and private payors' responses to these contracts. "Our goal has always been timely and equitable access to our therapies," Klima said during the call. "We are encouraged by the speed with which commercial and many government payors are approving pathways to patient access, particularly with Lyfgenia for sickle cell disease."
The company, likewise, has offered an outcomes-based contracting option to insurers for its beta-thalassemia treatment Zynteglo (betibeglogene autotemcel). Similarly, Vertex and CRISPR Therapeutics, the makers of Casgevy for sickle cell and beta-thalassemia, are also offering flexible payment approaches like outcomes-based contracts or are providing rebates for patients.
"We are committed to working together with payors to deliver innovative, tailored access solutions, and are open to a range of flexible options," a Vertex spokesperson said. "We are offering creative access solutions, including outcomes-based agreements, and we continue to have conversations with payors and other relevant stakeholders."
Other companies considering outcomes- and value-based risk-sharing agreements include Orchard Therapeutics, the maker of Lenmeldy, and BioMarin, the maker of Roctavian.
Payors' interest
Payors, too, are looking into outcomes-based and other payment models, according to Lopata. "The main goal for payors is to have the manufacturer take on some of the risk related to how well their drug works," she added.
Lopata and her colleagues at PrecisionValue, now part of Precision AQ, surveyed payors from national and regional health plans and employer-sponsored plans to gain a sense of which payment models they are already using or are interested in for these therapies.
Lopata's team reported in the Journal of Managed Care + Specialty Pharmacy that the most common approaches currently in use by payors were reinsurance or stop-loss approaches. Reinsurance is essentially insurance for insurance companies, which provides them coverage should they have higher-than-anticipated costs, and stop-loss insurance similarly protects insurers against large, shock claims.
However, Lopata noted that while insurers are familiar with reinsurance and stop-loss strategies, they are unlikely to fully shield payors from the financial risks associated with cell and gene therapies and don't account for other uncertainties, like how well the treatments work. Those secondary insurers may also seek to limit their financial exposure by, for instance, raising prices.
Payors responding to the survey were also interested in approaches that consider treatment outcomes or treatment performance. Among commercial payors, 45 percent said they already use outcomes-based rebates, 40 percent indicated they already use performance or outcomes-based payments, and 25 percent said they use outcomes-based annuities. Meanwhile, 40 percent of commercial payors said they plan to implement outcomes-based rebates in the future, 40 percent plan to use performance or outcomes-based payments, and 55 percent think they'll use outcomes-based annuities in the future.
Fewer employer respondents, 20 percent, said they currently use outcomes-based rebates and 10 percent said they use outcomes-based annuities. Five percent said they use performance or outcomes-based payments. Employers similarly said they planned to introduce these approaches, though to a lesser degree.
"Right now, the financial risk is primarily on the insurer, and for self-funded commercial plans, on the employer who's paying for it," Lopata said. "If payors cover an expensive gene therapy and it doesn't result in durable clinical benefit, payors are on the hook for the cost of the cell or gene therapy, but also the cost of any additional future treatments. Some of these innovative contracting models were created and discussed because they wanted to partner with the manufacturer to understand how well that drug is going to work in a real-world setting."
Lower payor costs possible
Depending on how they are set up, outcomes-based approaches could lead to lower costs for payors. A team of researchers in the Netherlands were tasked by the health authorities there to explore different pay-for-performance models to support its negotiations with manufacturers.
In their paper, which appeared in Value in Health in August, the researchers focused their analysis on Orchard Therapeutics' Lenmeldy, which is known as Libmeldy in Europe. Callenbach and her colleagues examined three payment models — two of which were linked to patient outcomes — in three patient response scenarios. One payment model was an arbitrary, across-the-board 60 percent price discount and the second model was an outcomes-based and spread-out discounted payment model.
Under this model, the researchers assumed the payor received the same 60 percent price discount as the first model but made yearly increasing payments for five years. The amount of those payments were further influenced by how patients scored on a measure of gross motor function, called GMFC-MLD.
The third model was the same as the second but the payments were also linked to the Dutch willingness-to-pay threshold. For this disease, that willingness-to-pay threshold is €80,000 ($87,485) per quality-adjusted life-year gained.
The analysis of these models included scenarios in which patients were full responders to the therapy, or they responded to treatment along a clinical pathway predicted by the manufacturer, or they were unstable responders or didn't respond. That way, Callenbach said, they could examine the full range of possible patient responses.
The researchers based the cost of the gene therapy on the list price in the Netherlands, €2.872 million ($3.21 million) and assumed, based on the incidence of metachromatic leukodystrophy, that eight patients would be treated with the therapy during the five-year analysis time frame.
Overall, the researchers found that the spread-out outcomes-based models typically cost less for payors. If all patients respond according to the predicted clinical pathway, the outcomes-based payment models would cost less than the discount model, €8.9 million and €6.6 million versus €9.2 million. For unstable responders, outcomes-based payment models also led to lower costs, €4.1 million and €3.0 million, and for the full responder scenario, the outcomes-based payment models' costs tipped higher, €13.8 million and €8.6 million.
Callenbach added that outcomes-based schemes present an opportunity to collect more data on gene therapies. "Depending on how they would respond, going for an outcomes-based agreement would be, from a healthcare payor perspective, financially the most attractive one," she said. "Plus, the extra data that you have, we didn't really put a number or value on that extra data."
She cautioned, though, that an outcomes-based approach is not needed for every cell and gene therapy; manufacturers and payors need to be selective.
"In most cases, simple will be more than enough," Callenbach said, adding that payors need to identify situations where these more complex approaches make sense. "Then you can, for those specific few products, create the infrastructure, the new contracts, etc. to make that work, but you need to be smart about it."
At some point, too, the different options just need to be tested out to "see what these agreements can offer," she said.
CMS access model
Outcomes-based approaches have even caught the eye of the US Centers for Medicare & Medicaid Services' Innovation Center (CMMI). The agency will be testing out a Cell and Gene Therapy (CGT) Access Model that aims to use outcomes-based agreements to increase patients' access to cell and gene therapies and lower healthcare costs, beginning in January 2025. The program comes out of a 2022 Biden Administration executive order on lowering prescription drug prices as a complement to the Inflation Reduction Act. Earlier this year, the Biden Administration announced that the program would initially focus on sickle cell disease. Participation in the CGT Access Model is voluntary for drugmakers and states.
CMS will negotiate agreements with manufacturers on behalf of states to tie pricing to improvements in health outcomes for Medicaid patients. State Medicaid agencies can then enter into agreements with those drugmakers based on the negotiated terms.
According to a CMS spokesperson, the agency will be responsible for establishing financial and clinical outcome measures, reconciling data, and evaluating results. States will still be responsible for their share of the cost for cell and gene therapies, though the agreements may also include additional price reductions, such as volume-based rebates or guaranteed rebates.
"This model ties the payment to manufacturers to the health outcomes of patients over a specified period," the CMS spokesperson added.
The negotiations between CMS and manufacturers are projected to wrap up in November, and states may begin participating in 2025. The CMS spokesperson noted that several states have already expressed interest in the program.
Bluebird has said it is also talking with CMS to include Lyfgenia in that demonstration model. Casgevy-maker Vertex is also interested in the access model. "We believe the CMMI CGT access model could be an important additional path to access," Stuart Arbuckle, executive VP and chief operating officer of Vertex, said during a February investor call.
Other approaches
Still, there are various other payment schemes that could potentially help payors manage the costs of expensive cell and gene therapies. One is a subscription-based scheme, also known as the "Netflix" model, in which a payor or health system pays a fixed fee for access to a therapy or a suite of therapies for a certain period of time.
Such an approach has been implemented in the US and in Australia to fund hepatitis C treatments, and it led to cost savings and increased treatment access. Subscription-based schemes have also been tried in England by the National Health Service to fund antibiotics, where it is hoped it will not only reduce costs but also improve antibiotic resistance-associated outcomes.
Another idea is to reshape how cell and gene therapies are developed.
As IGI's Zaghlula and his colleagues explained in a recent commentary in Nature, a task force assembled by the IGI comprising health economists, intellectual property experts, regulatory experts, and manufacturers analyzed different pricing philosophies and found that the one that ties pricing to the cost of developing and deploying the therapy, rather than market-driven value-based pricing, leads to the lowest cost for patients. The researchers argued that value-based pricing, in which a drug's cost is determined by the magnitude of its benefit to patients, the healthcare system, and society, is not set in relation to the cost of development and production of a drug. Instead, they said the approach aims to maximize the profit companies can generate.
Zaghlula cited a recent report, which found that once a cell and gene therapy gets to a Phase I clinical trial, it is more likely to be approved by the FDA than a comparable small molecule drug. Based on this, he argued that at that stage, the risk analysis should shift and developers should seek a lower rate of return, but that isn't happening.
"Cell and gene [therapies have] highlighted the potential market failures that the current system and the current status quo are eliciting," he said.
But Zaghlula noted that an approach using a different pricing philosophy is unlikely to be employed by a traditional for-profit drug company. Instead, he and his colleagues suggested a mixed-model organization consisting of an academic institution, a nonprofit, and a public-benefit organization to implement their model. In a mixed-model organization, an academic institution would conduct discovery and preclinical research with philanthropic or government funding. They would then license that IP to a 501(c)(3) medical research institution, which would then shoulder further development of the therapy including pre-investigational new drug and IND studies. That organization would then out-license the therapy to a public-benefit corporation backed by venture capital, philanthropy, and other sources to manufacture and distribute the therapy. The nonprofit in the middle would, Zaghlula said, keep the public-benefit corporation in line.
How different payment models may play out in the real world isn't yet clear. During a panel discussion on helping patients navigate the benefits and risks of gene therapies at the National Society of Genetic Counselors' annual meeting in New Orleans last month, Kristy Lee, a genetic counselor and research professor in the department of genetics at University of North Carolina-Chapel Hill, highlighted the cost of these treatments as a major barrier to patient access. While she pointed out that manufacturers have patient access programs and may offer different payment approaches, referring specially to warranty programs, Lee noted that "we're not sure what that warranty looks like as far as a payback, if the gene therapy doesn't work out."
"There's a lot of things we still are waiting to see how they roll out," she said.