Cell and Gene Pricing: How Can Manufacturers Get it Right?

Ana Stojanovska, Vice President of Commercial Consulting at Xcenda, has close to two decades of experience in reimbursement and health policy. Now she assists a number of biopharmaceutical companies with their understanding of the coverage and reimbursement landscape. Here, Ana shares her approach to, and experience of, working with manufacturers on their payment models.

Are manufacturers open to alternative payment and reimbursement models?

Yes! There is so much scrutiny around drug pricing that we see manufacturers proactively approaching payers, making proposals and being part of the solution. While there are numerous challenges with designing and implementing alternative payment models, many of the newly launched gene therapies are taking the challenges to heart and showing not just willingness, but often leadership in engaging in some more innovative payment concepts. For example, the gene therapies that have recently launched in the US have all coupled their launch announcements with some sort of outcomes-based payment messages. These have varied in scope and detail, but generally have included arrangements with both public and private payers that tie reimbursement for the therapy to achieving certain pre-defined outcomes within a specified timeframe.

Is there a wider trend here?

Indeed. This is already happening to some extent. Additionally, Centers for Medicare and Medicaid Services’ (CMS’) recently proposed memo on how to cover CAR-T therapies nationally (1) can be seen as an additional step in this direction. In short, the proposal would mean that Medicare would cover CAR-T products for relapsed or refractory cancer indications and hospitals would need to enroll each Medicare patient into a national registry, ensure the patient meets all criteria and report on specific data points for these patients at baseline, treatment, 3, 6, 12, and 24 month intervals.

Though, for widespread and sustainable patient access, I keep coming back to what I think is the greatest challenge in paying for high-investment medications: the ability to recognize the value of the therapy over the term of the policy. That can be seen as a case for risk pools/reinsurance and/or special Medicare enrollment. We already have historical examples of how Medicare, for instance, has remained flexible to overcome high-investment therapy costs through the introduction of the End-Stage Renal Disease (ESRD) benefit. This could potentially also signal how other high-cost therapy could be covered in the future – the government could step in to create risk pools for insurance companies, have some sort of special Medicare enrollment or create an ESRD-type program for patients needing care. All of this would, of course, need further analysis, advocacy, and importantly, a more conducive political climate. Regardless, continued steps towards paying for value will allow patients to receive important and life-saving therapies.

Can you give some examples of payment models manufacturers could, or should, be considering?

Outcomes or value-based contracting (VBC) is an example that seems to be most practical in the relative short-term. We’ve found that 40 percent of the payers we talk to and survey already have a VBC in place with pharmaceutical manufacturers, and this number is expected to rapidly increase. And while most of these existing contracts are for chronic conditions like diabetes, cholesterol or multiple sclerosis among others, it’s only a matter of time before such arrangements for high-investment medications become more prevalent. Over half of our payer advisors tell us that they plan to implement a VBC for therapies like CAR-Ts or cell and gene therapies. Integrated Delivery Networks (IDNs) seem to be particularly interested in and taking steps towards making these contracts a reality.

We are also seeing carve outs and reinsurance options increasingly discussed for these advanced, potentially curative therapies. One major national payer for example is carving out their review of CAR-T therapies through their transplant benefits and we have at least one manufacturer publicly talking about reinsurance as an option for their next generation products.  

How would you approach working with a manufacturer on their payment model? What are the main things companies should be thinking about?

First, engaging early with decision makers to educate them on their advanced therapies is vital. The scientific breakthroughs for many of these potentially curative medications are incredible, but that does not equal automatic patient access because our payment systems have not evolved fast enough to accommodate the current advances. Education is one of the key steps in overcoming this barrier. The complexity of producing and administering a cell and gene therapy, for example, may involve multiple sites of care, multiple providers and multiple high-cost procedures, requiring an increased need for coordination and, from an access standpoint, an understanding of how the costs of the different aspects of the therapy will be covered. A thoughtful and deliberate effort is needed to educate stakeholders, including payers, on the pipeline, appropriate patient characteristics for the specific therapy and anticipated patient journey.

Second, generating evidence through data to support product value will support meaningful discussions with payers. The challenges to VBCs particularly for high-investment medications are many. For example, many of these advanced therapies are in rare diseases and small populations, which limits the ability of manufacturers to develop robust data sets and long-term outcomes that may be needed and desired. Further complicating the challenge is that often there is no prior treatment for a specific illness so there are no comparators or true understanding of burden of illness. Additionally, while payers say they desire to measure durability of benefit for a therapy, the large majority simultaneously acknowledge that they have limited or non-existent capabilities for monitoring long-term outcomes.

To address these challenges, manufacturers will need to have a detailed and comprehensive understanding of the patient journey from a clinical, reimbursement and care-coordination standpoint to ultimately design the types of patient experiences they want for their unique products. This requires aggregated data systems that allow the sharing of data between stakeholders, and use of registries to track longer-term outcomes.

Finally, manufacturers should be open to new approaches, arrangements and collaborations with the patient at the center of all decisions. The novelty of this space and the fact that there is no standard template for anyone yet creates a lot of opportunities to shape thoughts around decision making. This may require different solutions for the short- and long-term. In my opinion, given the fragmented nature of the US healthcare system, scenarios that will be most feasible to become a reality in relative short-term are ones that gradually build on established reimbursement paradigms and are perceived as adding minimal complexities to what is already thought of as an already overly complex reimbursement system. Longer-term, we should be looking for additional thoughts around reimbursement and potentially changes to legislation to make patient access to these innovative therapies a reality.

Is current legislation is standing in the way of innovative payment arrangements in the US?

Many stakeholders agree that increased adoption of value-based arrangements for biopharmaceuticals has been significantly impeded by legislative and regulatory barriers. Many cite Medicaid Best Price and the Anti-Kickback Statute as examples of significant impediments to entering value- or outcomes-based contracts with payers. For example, Medicaid’s “best price” rules are seen as increasing the cost of contracting and creating a financial incentive to limit rebates on applicable medications. The costs of running afoul of federal law are too high to make it worthwhile for many. Enacting safe harbors and carve-outs for Medicaid best price for example could increase the willingness of manufacturers to enter such non-traditional contracts.

And it’s not just manufacturers that say this. Payers agree as well. In a recent (Dec 2018) Xcenda survey of nearly 50 managed care decision makers in the US representing over 300 million covered lives, over 90 percent of respondents say that exemption of purchases under VBC from federal best price requirements has extreme/strong or moderate impact on their ability to implement VBCs (same holds true for clarification of the anti-kickback statute that would specifically exempt VBCs with nearly 80 percent of respondents citing extreme or moderate impact). Exemptions of purchases under VBCs is not only the most impactful for payers, it is also the most urgent aspect that needs to be addressed to help with implementation of VBCs according to the same survey.