Alternative payment models for new cellular and genetic therapies

The new cellular and genetic therapies (CGTs) to win FDA approval are likely to be the first tumbling rocks of what will become a landslide of new therapies, especially those employing technologies like the CAR-T method. Gilead Sciences ponied up $12 billion to buy Kite Phama last year, on the basis of one soon-to-to-be approved therapy, Yescarta (axicabtagene ciloleucel). So far, these therapies have been priced at hundreds of thousands of dollars—with the promise that it’s a one-time treatment. There are hundreds of clinical trials going on involving these therapeutic approaches, which typically involve extracting cells from a patient (or a patient’s tumor), performing a genetic manipulation, and then re-infusing the products. And CGTs are just one family of approaches to the growing interest in regenerative medicine, involving cells as well as tissues and even whole organs.

While the scientists get more and more excited about the possibilities, the payer community is looking on with some concern. So far, the number of patients (and the disease states being addressed) are relatively small, but when and if a therapy is approved for a more common disease, or for cancers that affect larger numbers of patients, the affordability concern will jump to the forefront.

A survey just conducted by Precision for Value, a New York consulting firm to the pharma industry, shows some of the way forward. “Payers know that this is coming, and that they are not ready,” says Jeremy Schafer, SVP at Precision for Value, who presented the survey results at the recent Academy of Managed Care Pharmacy gathering (AMCP annual meeting, Boston, April 23-26). About a third of the respondents, 25 managed-care medical or pharmacy directors, have yet to have had experience with delivery of new CGTs, and half of them said that the therapies have had minimal impact on plan spending so far.

Looking ahead, however, half of respondents say that some form of outcome-based payments will be developed. Among the payer respondents (others were health system representatives), 35% say that selecting appropriate patients is a concern, and 30% each say that the potential for re-treatment, or that members leaving the plan shortly after treatment is likewise a concern. The latter point is a troubling one: the logic of allowing a high-priced CGT is that doing so will reduce or eliminate chronic care costs, but if a patient leaves the health plan after treatment, those savings conceptually are garnered by the next or later health plan the patient joins. “The core issue is, how do you justify a large up-front cost for these therapies when it is hard to understand the potential long-term benefit?” says Schafer.

This problem has been recognized; among the payment alternatives being proposed is a “payment follows patient” model, where reimbursement will extend over a number of years regardless of what plan the patient joins; another is for payment to occur when a health benefit of the therapy has been clearly identified, but not when no beneficial response is seen—roughly the outcomes-based model that Novartis offered Medicaid when its CAR-T drug, Kymriah (tisagenlecleucel), was approved last year. And hovering over all these models is the question of the “durability of response” of the therapy—i.e., whether a cancer might return years after the treatment was dispensed to a patient. The simple fact is that it will take time for CGT’s value to be determined.

Shafer, whose company consults with biopharma firms developing CGTs, says that industry awareness of these issues is growing, and the alternative payment models are in an “exploratory phase” now. Meanwhile, it is still a problem with some health plans that the new CGTs are lacking the “J codes” health systems typically use to identify the therapy. “It’s one thing to ask a health system to justify the cost $80,000 cost of hep C treatments, which were initially lacking J codes,” he says; “It’s another altogether if health systems must carry the cost of a $500,000 drug until the J code is established.” Payers, providers and the manufacturers are in an early learning phase, concludes Schafer, and it will take time to adjust to these CGTs.