Cell therapies represent a significant scientific and medical advancement for patients suffering from serious disorders, and they are transforming how many diseases are treated and, potentially, cured. In the future, these therapies may allow doctors to treat a disorder by inserting a gene into a patient’s cells, instead of using drugs or surgery.

A recent article in the Harvard Business Review reports that the use of these new therapies has been slower than expected due to several key factors, including the high cost of treatment and the difficulty in obtaining coverage and reimbursement. As a result, many patients are either denied gene therapy treatments or they experience lengthy delays in receiving coverage.

Municipalities, especially small communities and those in self-funded health care arrangements, are vulnerable to the potentially unaffordable cost impact of having employees or their dependents prescribed one of these treatments. Municipal leaders are advised to work with their health plan managers on both short- and long-term strategies for managing these costs as these treatments become more prevalent.

Current and pending gene therapies
DNA is the blueprint, or genetic code, that lives in each cell. Sometimes one or more genes have a malfunctioning code, which can lead to different genetic conditions.

Gene therapies currently on the market seek to restore the normal activities of the cell by giving it a functioning copy of the misfiring gene. This functioning copy lives outside of the DNA the patient is born with. Future gene therapies would look to fixing the genetic code itself.

Four gene therapies are currently approved by the U.S. Food and Drug Administration. The first two are chimeric antigen receptor (CAR T-cell) therapies, Kymriah and Yescarta. This new form of immunotherapy uses specially altered T cells for patients with specific blood cancers who have not responded to traditional treatments. Yescarta has a list price of $373,000, and Kymriah costs between $373,000 or $475,000, depending on the type of cancer.

In 2017, the FDA approved Luxturna to treat a rare form of inherited blindness that affects 1,000 to 2,000 people in the U.S. This treatment costs $425,000 per eye.

Last year, Zolgensma was approved to treat a rare childhood disorder, spinal muscular atrophy, for patients under the age of 2. A single intravenous infusion costs $2.1 million per patient.

Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, has covered Luxturna for two patients since 2018 and Zolgensma for two patients in 2019. The insurer anticipates having between 15 and 30 patients using Kymriah or Yescarta in 2020.

The FDA is currently evaluating 900 new gene therapy drugs. By 2025, the agency anticipates approving 10 to 20 new cell and gene therapy products per year.

Gene therapy treatments up for a regulatory decision in the coming year or so include Cambridge-based Bluebird’s Zynteglo, which targets a common blood disorder, beta-thalasemia. The Mayo Clinic is seeking FDA approval to conduct human testing of a single-dose gene therapy to treat cocaine addiction.

The affordability question
The U.S. health care system, built on a traditional fee-for-service model, was not designed to handle extremely expensive, one-time therapies. Health insurers and other health care payers have relied on volume-based discounts and rebates as their primary tools for managing pharmaceutical costs. But this approach has limitations when applied to the new wave of gene therapies.

Gene therapies are extremely expensive to develop and manufacture, and there are significant costs associated with clinical trials and bringing the products to market. The main reason gene therapy is so expensive, however, may be the paradigm used in the price-setting strategy.

The cost of production is weighed against the value of a life saved or the improved quality of life over a specified timeframe. For the current pricing model for gene therapies, the case can be made that they can offer substantial savings by curing or mitigating chronic conditions that would otherwise require more costly lifelong medical interventions.

For example, if approved by the FDA, biopharmaceutical company BioMarin is considering pricing its hemophilia A gene therapy Valrox at $2 million to $3 million. The company estimates its one-time gene therapy for any form of inherited hemophilia could save health care systems more than $20 million over a typical patient’s lifetime.

The Institute for Clinical and Economic Review, headquartered in Boston, provides independent assessments of the value of particular drugs. ICER concluded that in order for Luxturna to be cost-effective for a 15-year-old patient, it should be priced between $153,000 and $217,000, not the current $425,000 per eye treated.

Desiree Otenti, senior director of medical policy and program implementation at Blue Cross Blue Shield of Massachusetts, says pricing products based on the value to society is challenging, particularly if the quality of life and cost of care are bundled in upfront costs.

New payment models and reimbursement strategies are starting to emerge to address the high cost of gene therapy. Two that are gaining traction are payment-over-time and outcomes-based pricing.

Payment-over-time, or installment models, allow insurers to amortize the cost of therapies over several years to reflect the value provided and overcome short-term budgetary risks.

Outcome-based models require payers and manufacturers to contractually agree on product performance and payment amounts and timing. There are risks, however, that patient outcomes may not be readily measurable through insurance claims data, or that patients may switch insurers before long-term outcomes can be assessed.

Implementation of these alternative payment models is not without potential challenges and risks, and will require the cooperation of regulatory agencies to fully achieve their potential.

There are many stakeholders that will need to collaborate to determine how to price and pay for gene therapies. Public health insurance programs, insurers, hospitals, drug companies, regulatory agencies and taxpayers all have a stake in ensuring that an accessible and affordable health care system is developed for this next generation of medical treatments.

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