Cell and gene therapy: Clinical marvels, commercial challenges for employers

The news about cell and gene therapy is clinically amazing. A baby with a fatal enzyme deficiency was treated with personalized gene therapy and is developing normally. Infusion of a gene therapy into the brain of a man with Huntington’s Disease has slowed neurologic progression by two-thirds.

Currently, gene therapies are available to treat Sickle cell disease, thalassemia, spinal muscular atrophy, muscular dystrophy and other rare inherited disorders. CAR-T therapy, where a patient’s T cells are harvested, genetically modified and reinfused, has become an important treatment option for certain leukemias, lymphomas and multiple myeloma. It’s being actively studied for solid tumors that have resisted most other therapies.

All this miraculous treatment, though, is expensive. Gene therapies that are approved are generally sold for $2 to $3 million dollars per person for the drug alone. Cell therapies can cost as much as a million dollars. Some gene therapy treatments require disabling the immune system to prevent the body from rejecting the therapy. This can mean weeks of hospitalization and add hundreds of thousands of dollars to the bill.

Gene therapy adoption has been so slow that the pharmaceutical companies selling these therapies have struggled financially. One company, Bluebird Bio, has three FDA-approved gene therapies. It recently sold itself to private equity firms for the price of just a dozen doses of one of its treatments. Other manufacturers have removed their gene therapies from the market. Cell therapy has been more commercially successful, as it is used to treat more common diseases.

The cost of cell and gene therapy could destabilize some employer-sponsored health plans. Many employers are evaluating ways to address the financial risk posed by these treatments. Among plan considerations:

1. Reinsurance: Even large companies are taking another look at reinsurance, recognizing that gene therapy represents a random risk that can't be managed. Companies that have existing reinsurance policies can be sure that gene therapies aren't excluded, and that individuals with known genetic diseases aren't excluded from their reinsurance plans.
2. Centers of Excellence: Cell and gene therapies are generally offered in a relatively small number of academic medical centers. This means most patients will receive care at what are effectively Centers of Excellence even without intervention.
3. Alternative financing models: Some drug companies and pharmacy benefit managers (PBMs) are offering installment arrangements for employer-sponsored plans where payments can be made over time. Installment financing can address the problem of large, unexpected bills in the current year, but this approach increases costs for years to come.
4. Value-based contracting: Cell and gene therapies won't succeed in all cases, and some pharmaceutical companies have been willing to offer warranties. These warranties will refund the cost of the biopharmaceutical if a patient’s disease returns. A challenge is that the patient may no longer be on the employer-sponsored health plan when the treatment fails, and warranty payouts have historically been rare.
5. Non-coverage: Cell and gene therapy isn't an “essential benefit” in any state, so theoretically employers can decide not to provide coverage. Some employers have plan design language written years ago, which excludes gene therapy altogether. Because some cell and gene therapies are generally the only effective treatment for the diseases for which they are prescribed, few employers will want to exclude coverage. The treatments are so expensive that almost no employees could afford to pay for this without insurance coverage.
6. Captives: Companies that already have captives in place to self-insure for rare occurrences might add cell and gene therapy to their programs. This allows the spreading risk for these expensive therapies over multiple years and avoids paying a risk premium to an insurer. It also allows the company’s captive to more effectively deploy its risk-based capital, the reserves it needs to pay claims that arise.

Medical carriers know the problems these treatments can pose for employer-sponsored health plans. The major carriers all offer buy-ups that provide reinsurance for some or all of these therapies. Companies should be sure that such programs provide more coverage than is already provided by their existing reinsurance program if they have one. PBMs also offer reinsurance products, although the medical carrier pays for these therapies when they are administered in the hospital.

Two companies, Emerging Therapy Solutions (ETS) and Aradigm, have developed products to address the full set of risks companies face from cell and gene therapy. The companies offer claims analytics, forecasting, provider contracting, clinical navigation, claims repricing and pool risk across their clients. Each also offers reinsurance or directs clients to potential reinsurance, and develops warranty-based contracts with pharmaceutical companies and submits claims for warranty reimbursement on behalf of their clients.

Cell and gene therapies offer enormous potential for clinical benefits, but they are expensive and their use is rare enough that it’s hard to budget for costs year-to-year. Companies can deploy strategies to address the risk of unexpected claims while maintaining employee access to these valuable therapies.

Authors

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Jeff Levin-Scherz, MD, MBA

Population Health Leader

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Chantell Sell Reagan, PharmD

Senior Director, National Pharmacy Clinical Leader

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Cody Midlam, PharmD

Director, Rx Solutions

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