Gene Therapy Outlook – The Payor’s Perspective

Gene therapies can help patients with illnesses that either aren’t treatable or require difficult, expensive, or problematic treatments, but also, in many instances, they only need to be given once in a person’s lifetime. It’s this latter element of gene therapy that begs the question: How will insurance companies and/or patients pay for these treatments when they’ve only dealt thus far with medicines that require regular administration?

To be sure, one-time therapies have long existed in medicine, but they’re different in character from ongoing treatments. For example, if you remove a patient’s appendix, their appendicitis is cured; the same goes for gallbladder disease. Outcomes of other treatments, such as bone marrow and organ transplants, are less certain.

We currently pay for pharmaceuticals for chronic diseases on an ongoing basis. If it’s not working, at some point treatment stops, it’s not being paid for anymore, and the patient moves on to a different therapy. High blood pressure medications are a good example of this, where a patient gets a new drug when their body no longer responds to the original treatment.

One-time therapies totally change the ballgame, and that’s where two big issues need solving in terms of payment models. First, we must consider how we value these treatments and what sort of methodologies should be used. The other issue is making these treatments affordable. This is important for payors with less funds, such as Medicaid programs that can’t go into debt or borrow, or a small health plan.

Here are the factors we need to consider:

The Touchpoints for Payment

When determining payments, two factors come into play depending on the illness treated: outcomes or milestones.

A clinical outcome could be something that happens or doesn’t happen for the patient individually. Take hemophilia, for example: What’s the patient’s bleed rate over a certain period? Because patients don’t have a lot of bleeds now, doctors are more likely to look at laboratory measures to find the rate. This works with hemophilia because factor levels correlate with bleed rates and complications of the disease.

Milestones can be related to those sorts of outcomes. You might measure a laboratory value at six months, 12 months, every year after that, and so on. Payments could be tied to the level of lab value, whether it’s above a certain threshold or between certain parameters. But you could have other milestones as well – for example, when the patient doesn’t need another therapy. In patients with beta thalassemia, we could consider how many blood transfusions an individual requires in each time frame. With CAR-T, doctors may look at the disease’s progression, which could be measured in a variety of ways, depending on the tumor.

Longer Time Frames May Be Needed

Payors could base payments on outcomes or milestones on a single endpoint – for example, at 12 months, is the patient making enough hemophilia factor? But that doesn’t really answer the question of whether or not the treatment is working. It also doesn’t solve the problem of knowing whether or not the therapy is sustainable and durable over time. We’re much more likely to see milestones or outcomes measured over a three- to five-year period, depending on the disease state and how long doctors think we need to follow a patient before we know the treatment is working.

This, unsurprisingly, gives rise to what’s basically a contract with multiple payments, like when buying houses, property, and businesses. This payment system is like a mortgage for patient care and is based on whether the patient is doing well at certain endpoints.

Harvard Pilgrim Health Care has already implemented this model with the first gene therapy on the market, Luxturna, the Spark Therapeutics treatment for congenital blindness. There are outcomes at 30 and 90 days, then at 30 months. Spark arranges for patients to be measured using a method similar to what was conducted in the clinical trial: The patient navigates a maze, showing that they can distinguish light and dark, to see outlines and shapes in a way that makes it safe for them to maneuver.

Bluebird Bio, meanwhile, offers five-year contracts in Europe for the treatment of beta thalassemia, which is based on patients not needing transfusions or having reduced transfusion requirements, with annual payments tied to those milestones.

The Challenges for Payors

If there were a true sort of mortgage or financial instrument tied to gene therapies, it’s possible those could be traded or sold in some way, just as mortgages are done now. That would be an advantage to pharmaceutical firms, and not so much the payors. Since some firms are rather small, they may not have many marketable products, or the products may only be used in a small number of patients, so the potential to sell those financial instruments will help them gain some revenue immediately to fund other activities and items in their pipeline.

Some issues may arise. For example, some patients may be lost to follow-up. That’s part of the contractual arrangement: How do you manage the contract if the patient can’t be tested? Do the payments just stop? Is it the responsibility of the pharma company or the responsibility of the payor to find that patient?

Another issue is whether payments are attached to the patient and would move from one payor to the next. At this point, they don’t. Most of the proposed plans involve a straight-out contract between two entities: the manufacturer and the health plan or the ultimate payor. If the patient moves to another health plan, the payor can still check on that patient’s health, have them see their provider, and take measurements. But the contract is still with the plan that made the original payments, so the payor will continue to make payments over time.

For payments to transfer to another health plan, there likely needs to be federal legislation. There’s no reason why, otherwise, an entity would want to take on such payments, unless it’s joined a network of payors, perhaps created by a third party or a manufacturer, where they’ve all agreed to take each other’s patients and accept responsibility for the payments. Right now, that’s not happening, so if the patient moves payors, it doesn’t change the original arrangement.

Other Factors to Consider

There are interesting components to the differences when there is an adequate therapy available versus where there is none. It’s difficult for health plans not to cover a gene therapy or other therapy for a serious disease that has no other treatment. It is a space with very little competition, so most of those treatments get covered. It puts less pressure on the manufacturer to accept a lower price in that setting, except that they’d want to maintain goodwill.

But what about gene therapies that treat illnesses where there’s already a treatment? This situation changes the economics because now there’s a benchmark. We know how much a hemophilia patient’s treatment costs, and so we can make assumptions. One is that even though the prices of hemophilia products seem high, we pay them, so willingness to pay has been established. There’s also a direct cost offset – if you’re no longer obliged to give the patient the original treatment, you can save money. These elements affect product price accordingly.

You also can end up in a situation where the patient gets both: They undergo gene therapy and therefore become a less severe hemophilia patient. You may still have to augment their treatment. In that case, you must anticipate that in the contract and perhaps have a sliding scale of payments or rebates to consider.

The interesting ideas here are not only economic but also clinical: Whether a hemophilia patient is better off staying on factor is a clinical decision. So the gene therapy wouldn’t necessarily be for everyone because some patients are being successfully treated otherwise.

A Real-World Test

All those factors will soon play out, as BioMarin recently announced it will price its gene therapy for hemophilia, Valrox, from $2 million to $3 million. The company argues that because it’s a one-shot therapy, it’s cheaper than a lifetime supply of treatment. That may be the case for an adolescent patient entering adulthood whose treatment could cost up to $200,000 a year. They would reach $2 million to $3 million in 10-15 years, so the price seems reasonable in terms of cost offsets.

But that’s why payment over time makes a difference, because you’re not paying all those other costs all at once. Also, we don’t know if patients will continue to have a response to gene therapies for many years. The price looks good only if you think it’s going to work well.

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About Ed Pezalla, PhD

Dr. Edmund Pezalla currently works as an independent consultant. He is a leading payor expert consulting for pharmaceutical and device developers and manufacturers on public policy, health technology assessment, and value frameworks. He is also active on a number of policy working groups. Prior to this, he was the Vice President for Pharmaceutical Policy and Strategy in the Office of the Chief Medical Officer at Aetna from 2007 to 2016.

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This article is adapted from the GLG teleconference Gene Therapy Outlook – A Payor’s Perspective. If you would like access to this teleconference or would like to speak with Ed Pezalla, or any of our more than 700,000 experts, contact us.