Introduction

Durable, potentially curative therapies offer great hope for patients and society. Short, even single dose, treatment regimens are expected to yield lasting health benefits. However, large, single upfront payments will challenge the current reimbursement system which is oriented to payment for chronic treatment over time. Policy, regulations, and business operations need to evolve to enable emerging financing solutions.

This section provides a concise overview of needed policy enablers for emerging financing solutions. Greater detail of durable therapies follows from the policy perspective and policy needs to support patient access to these therapies and stakeholder use of precision financing solutions to support that access. We have structured the section around four key questions.

Needed policy enablers

The precision financing solutions identified as part of the FoCUS workgroup face implementation challenges given how government pricing and other regulations are currently written. Historical legislation and regulation are not always amended to permit innovative contracting approaches.

FoCUS has identified six key federal policy issue and policy recommendations, in priority order below. The most critical issue to address is Medicaid Best Price Value-Based Purchasing (VBP) arrangements.

Each issue is briefly described and recommendations for solutions are highlighted. A 2-page summary of these recommendations may be found here.

1. Medicaid Drug Rebate Program Accommodations for Performance-Based Agreements
2. FDA Communication Guidelines to Enable Appropriate Performance Metrics
3. Anti-Kickback Statute to Define Explicit Safe Harbor
4. HIPAA to Enable Patient Data Visibility to All Involved Parties
5. Federal and State Insurance Regulation to Allow Deductible and Co-Pay Waivers
6. Fair Provider Payments

Medicaid Drug Rebate Program Accommodations for Performance-Based Agreements

Historically, Medicaid Drug Rebate Program statutory and regulatory requirements had not kept pace with the developments in the market, which now promotes pricing tied to value. However, a recently finalized CMS rule seeks to enable value-based purchasing by introducing new price reporting options as bundled sales or multiple performance tiers. While creating opportunity, there are significant challenges remaining with MDRP reporting for cell and gene therapy VBP arrangements.

• Challenge – Bundled sales reporting: Bundled sales reporting enables manufacturers to spread the impact of the price of value-based discounts over all utilization. A bundled sale approach is ineffective where an insufficient patient population exists to absorb the discounts associated with poor outcomes.
• Challenge- Multiple Tier reporting: The Multiple Performance Tier option for MDRP requires developers to report a best price for each unique, contract-defined performance tier offered in a VBP arrangement. Medicaid is offered the opportunity to contract for the same VBP arrangement. Multiple VBP agreements makes this approach administratively complex and may reduce options, flexibility and innovation for VBP arrangements for cell and gene therapy.
• Challenge – Inability to offer VBP arrangements to states that participate in purchasing pools such as the National Medicaid Pooling Initiative (NMPI), TOP$, and Sovereign States Drug Consortium (SSDC).

Recommendations/Suggestions:

A potential solution to the threat created by small populations or administration of numerous performance-based contracts would be for CMS to change the definition of bundled sales to allow bundling across payers, reporting periods or both. Further insights are provided at Medicaid Best Price Volatility Could Inhibit Payment Innovation.

We also encourage CMS to explore how it could play a role in addressing a broader set of operational barriers to the adoption of value-based contracting beyond pricing regulations.

1. Facilitate scaled-up CMS grants to State Medicaid agencies to develop the capabilities and capacity to design, negotiate and implement these agreements. FoCUS experience suggests that there is a meaningful learning curve in establishing these types of value-based payment arrangements. Grants to date have enabled some adoption by s More will be required to scale.
2. Consider options for simplifying the process of obtaining approvals to enable adoption of precision financing solutions. It would be helpful if CMS could be clear whether the Agency’s expectation is that each state seek a State Plan Amendment to be able to take advantage of the relevant VBP provisions being proposed. To do this, the Agency could consider offering a blanket approval rather than requiring individual SPAs or issuing a pre-approved SPA template that states could adopt akin to ‘automatic approval.’
3. Advance efforts to track outcomes for performance-guarantees. FoCUS experience suggests that states will require resources to track and extract data to evaluate performance in outcomes-based contracts. CMS may be able to help advance real-world data systems capable of national longitudinal patient monitoring, e.g., allowing IT investments needed for performance tracking as part of capability grants; facilitating cross-disease area and cross-sectoral collaborations to create scale in data collection, enabling cross-state/cross-payer interoperability and linking given patient movement across payers. It is also imperative to define data element standards to ensure data uniformity and to maintain data interoperability.
4. Consider carving-out these durable therapies from Medicaid MCOs to ensure uniform coverage and potentially mitigate small MCO’s actuarial risk.

FDA Communication Guidelines to Enable Appropriate Performance Metrics

Issue: Payer agreements that use performance metrics not reported in the FDA-approved label may place the developer-manufacturer in violation of FDA Guidelines for communication with payers.

Recommendation/Suggestion: Clarify that patient real-world performance metrics are acceptable in performance-based agreements when therapies are administered to patients in accordance with the label indications and usage criteria. Metrics need not be limited to those included in the FDA label. FDA guidelines remain relevant for any communications regarding the metrics.

Anti-Kickback Statute (AKS) to Define Explicit Safe Harbor

Issue: The AKS regulations currently provide a safe harbor for traditional rebates, but do not explicitly include value-based agreements that tie payments or refunds to outcomes and may pay for monitoring visits that relate to these.

Recommendation/Suggestion: Explicitly include rebates and payments arising from performance-based agreements in an AKS safe harbor.

HIPAA to Enable Patient Data Visibility to All Involved Parties

Issue: Sharing patient performance data among the involved parties in performance-based agreements (especially developers and subsequent payers) often requires additional hurdles due to HIPAA (Health Insurance Portability and Accountability Act) regulations that did not contemplate this sort of agreement.

Recommendation/Suggestion: Amend HIPAA regulations to ensure that those investing in patient health through long-term performance-based agreements can access needed, relevant data. Clarify any enabling requirements for patient and provider consent forms.

Federal and State Insurance Regulation to Allow Deductible and Co-Pay Waivers

Issue: Current regulations usually require refiling and approval of insurance products if patient benefit designs are altered. This 12–18-month process can delay patient-favorable changes by payers.

Recommendation/Suggestion: Amend regulations to allow payers to make modifications beneficial to all participants, such as reductions or waivers of deductibles, co-pays, and coinsurance payments, increases in patient incentives, and other improvements in patient access for specific therapies with automatic regulatory approval upon filing with insurance regulators.

Fair Provider Payments

Issues: Some therapies provided in the inpatient setting are reimbursed through existing fixed-rate payments (e.g., DRGs) that are intended to cover a range of possible treatment options. The inclusion of new high-cost therapies in this setting may create a substantial loss for providers if they choose to use such a therapy, even after potential new technology add-on payments. Thus, there are concerns that reimbursement will continue to be a barrier to access for Medicare patients.

In the outpatient setting, payment rates are more predictable than in the inpatient setting. Medicare typically pays the Average Sales Price (ASP) plus 6% for separately billable drugs. However, reimbursement for 340B-acquired drugs has disrupted competitive dynamics within the class. Medicare reimbursement for 340B acquired drugs is set to ASP – 22.5%. However, newer drugs that have been granted transitional pass-through status are exempt from this lower reimbursement rate and are paid at ASP + 6%. Given that pass-through status is awarded for 2-3 years, the newest therapies in a class may potentially benefit from higher payments. This payment differential could potentially disrupt competitive dynamics. For example, if two separate drugs each have a list price of $400,000, but only one drug has pass through status, Medicare reimbursement to 340B providers using the pass-through drug would be $114,000 higher than the drug that does not have pass-through status ($424,000 and $310,000, respectively).

Recommendation/Suggestion: Policymakers should ensure predictable payment that equalizes reimbursement levels across settings of care. Further, payments for cell and gene therapies that may be administered in the outpatient setting should not incentivize providers to use newer drugs due to higher reimbursement based on their transitional pass-through payment status. Instead, it is necessary to establish fair and predictable payments to ensure appropriate provider reimbursement in all settings.

A range of precision financing solutions will be necessary due to the distinctive differences between diseases, products, and types of payers. Policy support is required to remove existing inadvertent barriers to these arrangements and to proactively facilitate broader utilization of innovative payment models. A depiction of the importance of the policy issues and a need for change is depicted on the table below. Greater detail on each of these financial models is found by clicking on the name of the financial model.

Collaborative stakeholder action could enable more rapid development of these and similar financial solutions. Perspectives of each stakeholder and the impact of cell and gene therapies are found here.

Expected pipeline: durable therapies

Durable Therapies: Definition

The development of transformative cell- and gene- therapies over the past decade has raised the possibility that patients with life threatening and rare diseases with severe unmet needs may experience significant improvement or even cure after a single course of treatment. These therapies represent a foreseeable reimbursement challenge to the current healthcare systems: upfront cost is substantial and is incurred all-at-once, but patient benefits are accrued over a longer period of time. If these benefits minus the costs are the basis of value, then this accrual is of significant value in a single administration event. Durability could extend for years or even a lifetime.

Expected on-market availability to 2030

There are currently 11 (eleven) gene and cell therapy products available in the US approved for treatment of 14 (fourteen) indications.

NEWDIGS FoCUS has conducted a unique, condition-by-condition analysis to estimate the expected number of durable cell and gene therapies likely to be available on the US in the coming years. We completed an assessment with detailed estimates of clinical trial progression rates, disease incidence and prevalence, and estimated patient uptake for each product indication. Details regarding this analysis can be found here. Results are updated periodically with December 2020 being the current information in use.

Based on registered clinical trials, at year-end 2020, there were approximately 780 active durable, cell and gene therapies in development. China based clinical trials registered in the US (382) were excluded from the analysis as commercialization in the US was judged to be unlikely.

Figure 1: Pipeline of active programs in development for durable cell and gene therapies for the US market

NEWDIGS FoCUS has developed detailed estimates of clinical trial progression rates, disease incidence and prevalence, and estimated patient uptake for each product indication. Approximately 57% of treatments being developed today are for oncology patients, 36% are for patients with rare, non-oncology conditions and 7% are to treat patients with conditions such as cardiovascular disease, which will have larger potential patient populations.

Based on those clinical trials, the current pipeline of US-targeted therapies is expected to result in 60+ product-indication approvals (estimated range 54-74) by 2030; the model’s projected rate of approvals estimates there will be 35 product-indications within the next five years (2026), with an average of five new approvals annually There is a range because the statistical simulation provides a range of estimates for how many medicines will be proven to be effective in the clinical trial process.

Figure 2: Projection of cumulative product launches from pipeline analysis
Source: FoCUS Drug Development Pipeline Research Team, December 2020

This estimate reflects the pipeline of active drugs in clinical trials as of December 2020. However, the pipeline will continue to be replenished and added to with new treatment innovations. Thus, towards the back end of this timeframe we may see additional products launch beyond those reflected here.

The key uncertainty in these estimates is the adoption rate—how many patients and physicians will use these therapies and how quickly. We have assumed that conditions with no good treatments today and with more severe/fatal consequences will see greater and faster adoption of cell and gene therapies. We will continue to analyze this as we learn more about how patients and physicians make treatment choices in the real world

While clinical trial outcomes and regulatory approvals are never guaranteed, by 2026 we expect the following types of products may be available to patients:

• Oncology
  Additional therapies for B-cell leukemia and lymphoma
• Rare Disease treatments
  Hematological conditions
  Hemophilia A & B
  Sickle Cell anemia
  β-thalassemia
• Additional treatments for ophthalmological conditions
• Neurological conditions
• Higher prevalence disease treatments
  Age related wet macular degeneration
  Diabetic peripheral neuropathy
  Osteoarthritis (Knee)

Note: Research continues to advance, and findings will be updated on a periodic basis.

The following link provides further information on clinical trials and therapy successes:
University of Utah, Gene Therapy Successes, Learn.Genetics: Genetic Science Learning Center

Likely stakeholder impact

The emergence of durable, potentially curative therapies will require new approaches in many aspects of patient care and financing. Stakeholders will need to work together to address coverage and reimbursement issues. Operational changes may be required for how and where care is delivered. Reimbursement processes and payment terms impacting therapy access will need to be changed for providers, patients and payers. Government regulators and legislators will need to ensure regulatory policies continue to evolve along with innovations in science and payers’ approaches to reimbursement.

Below is a summary of key stakeholder issues that impact appropriate access to these therapies.

Patients and Caregivers

Durable gene and cell therapies offer patients the potential to treat chronic conditions with one treatment. Many of the conditions addressed by cell and gene therapy are rare and may have limited alternative treatments—a situation that has brought together communities of patients and their families for support and advocacy. To them, cell and gene therapies bring new hope. The specific benefits of each therapy will vary. In some cases, these therapies can improve patient survival rates. In others they can reduce morbidity, offering individuals improved health and well-being. Some cell and gene therapies stop disease progression, preventing patients from becoming sicker. Others offer quality of life improvements, including improved functioning, less pain, and a greater sense of well-being.

The patient and their caregivers will want to understand these new therapies, and the financial and operational implications for their treatment. Additionally, patients share concerns with other stakeholders regarding risks, limitations, and unknowns. Read more about their key issues here:

• Determining status for access to treatments: Patient access to therapies depends on a variety of factors, including geography, ability to navigate institutional environments, their insurance status, and, when insured, the coverage and formulary decisions of payers. If payers either exclude cell and/or gene therapies or institute restrictive formularies, patients will be limited in which therapies they can benefit from.
• Accessible provider networks: To control costs, some plans may restrict their provider networks, establishing “narrow networks.” Moreover, for durable therapies, there may be limited providers (centers of excellence) who are authorized by either a developer or a payer to deliver a particular therapy to ensure quality administration. Patients, and often their caregivers, may need to seek out new providers or pursue potentially costly travel – perhaps even across state borders –to access treatment. This can have cost implications for patients, in addition to time lost from work, and may require payers to establish specific processes for patients to access providers who are not typically “in network.” This is particularly relevant for Medicaid payers, HMOs or regional plans who may traditionally work only with in-State providers.
• Financial burden: Generally, for these treatments the patient will experience a high financial burden due to out-of-pocket costs from co-insurance, co-pays, deductibles, and in some cases travel to care sites. The specific impact will vary by patient, but the burden is likely to be experienced all-at-once under the current payment structure. As a one-off cost, new treatments can affect out-of-pocket costs much more at the start of the year than the end. For some patients, the treatments may represent new costs. Other patients on existing high-cost, treatments may already be hitting their deductibles and out-of-pocket maximums. Still other patients may see the costs of treatment offset by savings from traditional treatment regimes.
• Potential lost income: The age of the patient will determine whether and how the income-earning members of his or her household are affected. The lost income may be due to the patient or caregiver’s limited availability to work due to health status and time required for medical appointments. In some cases, there may be limited providers who are authorized to deliver a particular therapy within the patient’s regional area. In these instances, patients will need to seek out new providers where travel is required, creating the need for greater amounts of time away from work for the patient and/or the caregiver.

  Some states have enacted paid family medical leave programs, which can help the income earners in these situations. Also, disability benefits provided by employers can protect a portion of a patient’s (employee) lost income. While helpful, these programs do not fully replace previous earnings.

• Monitoring over time: As this is a new area of science, patient monitoring over time will be required from a regulatory perspective. In addition, some performance agreements between developers and payers may require tracking of patient outcomes over time. Patients may need to make themselves and their outcomes available to allow such monitoring.
• Education: To help patients self-advocate and access therapies, patient and caregiver education on financing options and financial literacy is also needed to support effective planning.

For additional insights please see: American Society for Gene and Cell Therapy, Addressing the Value of Gene Therapy: Enhancing Patient Access to Transformative Treatments

Providers

A provider’s decision to prescribe a cell or gene therapy treatment is influenced by the same factors guiding chronic treatment medication selection – severity of disease, possible treatment options, benefits, side effects, formularies, prescribing restrictions, etc. The availability of durable therapies, however, may raise both temporary and more unique financial challenges for providers.

Temporary challenges include:

• Delay in availability of billing codes: The amount of time it takes for new billing codes to be provided and how providers will be able seek reimbursement during that period will potentially impact access upon the launch of new cell and gene therapies.
• Inadequate DRG rates: In Medicare, existing inpatient DRGs may not include the costs of new durable/curative therapies at launch. This may be partially addressed by Medicare New Technology Add-on Payments, but these often significantly lag the therapy launch, are not approved, and only provide partial coverage. New DRGs may also be established in certain cases, but the process for establishing new inpatient DRGs is not well-defined and can take time.
• Unavailable or inadequate outpatient reimbursement: A therapy administered in an outpatient setting may need to receive a distinct and separate code, e.g. a “J code,” to enable reimbursement filing. Code issuance is often delayed, with commensurate patient access delays and significant financial risk to providers during the interim. Once issued, adequate federal and private reimbursement levels are not assured.

Infrastructure modifications 

Specialized healthcare services/facilities may currently exist for select rare conditions such as hemophilia or sickle cell disease. A new cell or gene therapy however may require some form of provider certification to administer the treatment. Following initial product release, certification may or may not include all current specialty sites. Alternatively, certification may extend beyond the current infrastructure, introducing new coordination of care requirements. The treatment may also require establishment of new centers of excellence, which will potentially cause delays in patient access following launch of a treatment.

Unique financial challenges include:

• Buy and bill risks: Under a buy-and-bill model, providers acquire the product, administer it, bill, and then receive payer reimbursement at a mark-up over the acquisition price. Contract conditions for product acquisition will vary the provider’s risk in terms of cash flow and risk of wastage if the patient is ultimately not treated. These financial risks increase with a therapy’s cost and any delays in payment. Additional details on buy-and-bill considerations may be found here.
• Impact of changing service patterns: Cell and gene therapies may also result in financial risks due to changing provider service patterns. Gene therapy may replace existing treatments. If the administration of gene therapy is performed by a different provider or if the provider was dependent on income from administering existing treatments, the advent of gene therapies may require re-evaluation of the services a provider offers, alternative approaches to achieve greater efficiency in service delivery, and/or re-negotiation of payer reimbursement levels for remaining services. This type of financial risk is particularly a concern where providers may be informally cross-subsidizing one service with another’s income. A concrete example of how gene therapy might affect Hemophilia Treatment Center income and services may be found here:

Hemophilia Treatment Center example

Financial Sustainability—Hemophilia Treatment Centers

In 1973, the National Hemophilia Foundation (NHF) launched a campaign to establish a nationwide network of hemophilia diagnostic and treatment centers (HTCs). The goal was to provide a range of comprehensive services for patients and families within one treatment facility. The federal government recognized the work of the HTCs and established a grant program to provide funding for important services typically not covered by insurance. The 146 such funded Hemophilia Treatment Centers (HTCs)¹⁶, manage approximately 90% of hemophilia patients.

Approximately 85% of HTCs provide clotting factor and injection supplies to patients as necessary. Most HTCs are located in or adjacent to academic medical centers and children’s hospitals, and participate in the 340B Drug Pricing Program under their federal designation as a comprehensive hemophilia treatment center. The 340B Drug Pricing Program is a US federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. Providers then bill payers at higher prices creating a financial margin.

Income from providing clotting factor and injection supplies to patients represents a significant percentage and, in many cases, the majority of an HTC’s income. This income is utilized to support the multidisciplinary integrated care provided to the hemophilia population. 

In 2014, a survey was conducted by the National Hemophilia Program Coordinating Center (NHPCC) of HTCs that have 340B pharmacy programs.18 The survey showed that most HTCs with 340B programs fund >50% of the salary costs of non-physicians with 340B program income. 90% of HTCs utilize 340B program income to support social workers. Home and school visits by the HTC team are almost entirely supported by 340B program income.  

In addition (see table below), the majority of centers also utilize 340B program income to provide over 90% of the funding for phone triage, care coordination, case management, and patient education. Most of these services are not typically reimbursed by insurance making the 340B program income vital to the HTCs.

New payment models

Various innovative financing strategies for cell and gene therapies involve new payment models under which the manufacturer and payer directly contract (bypassing the provider). Such models may involve payment over time or payment delays based on product performance benchmarks. and could result in a lost revenue stream for the provider.

Operationally, providers may also be affected by:

• Certification: The cost and the complexity of administering some durable therapies is leading payers and also manufacturers to certify which providers may offer the products. Both Gilead/Kite and Novartis have limited access to their CAR-T therapies to company-certified treatment centers. Beyond core medical competence, some stakeholders suggest providers should meet additional quality procedure standards and/or reporting requirements. Insurers may want assurances that providers have sufficient expertise and that the laboratory and other sources needed by patients on these treatments are readily available. Therapy-specific certification programs may be an avenue to define standards and criteria for providers who wish to provide these more complex treatments and services. Certification will require provider organizations to expend time and resources.

• Potential patient shifts towards Centers of Excellence (COE): As some of these therapies may be delivered through Centers of Excellence, providers that are not part of those centers of excellence networks may see some shift in patient treatment towards those centers. Further insights regarding cell and gene therapy administration at COE’s may be found here.

• Coordination of care across sites: Some therapies may be administered by one provider with shorter-term follow-up and then patient monitoring over time carried out by the patient’s community-based provider. Administering providers may need to ensure appropriate coordination, potentially also to monitor and report outcomes over time.

• Outcomes reporting: Durable therapies will require up to 15 years of patient monitoring for safety and additional outcomes reporting in the event of performance guarantees. While this will be the responsibility of other stakeholders, providers may be asked to report outcomes data for these patients. Providers will need to establish administrative processes to ensure data completeness. Stakeholders will need to ensure appropriate reimbursement for these services. Additional details on outcomes reporting may be found in the brief – “Payer perspectives on outcomes tracking for value-based payment arrangements (VBPs)”

Payers

Payers help ensure effective treatments are available to improve patient outcomes, while balancing the financial risk of reimbursing these treatments. Payers will not be equally affected by cell and gene therapies. US payers differ in terms of number of covered lives (size), types of lives covered (children, elderly, mixed), funding sources (self-funded, premiums, taxes), and the coverage and reimbursement rules that they must follow. Details on differing payer impacts may be found here and by viewing the Payer Pipeline worksheet

Payers need to:

• Define coverage policies and processes: The same practices for developing traditional product policies and processes will be required for cell and gene therapy products but with additional consideration. Policies may require alignment with coverage terms of secondary insurers. Processes may require changes in which personnel is authorized to approve or which organizational areas should be alerted to potential therapy claims of substantial costs.
• Secure access to qualified providers: Payers need to ensure provider networks and reimbursement are in place to support patient access to treatments. It will need to be determined if existing providers have clinical expertise or if additional providers or centers of excellence will be required. Contracts with providers will need to be reviewed for appropriate reimbursement terms as well.
• Eliminate plan design barriers: Plan designs may impact patients initially with out-of-pocket costs for product administration. Afterwards, collecting specific outcome metrics over time becomes important to potential payer financial agreements but may be costly to the patient with deductibles, coinsurance, or copays. Plan benefit designs with patient out-of-pocket costs cannot act as a barrier to treatment or the follow-up appointments necessary to collect outcome data. Information on regulatory considerations regarding plan designs may be found here.
• Assess financial risks: The magnitude of financial impact of a new cell or gene therapy will depend upon payer size, demographics of covered individuals and costs of product and product administration. Further details on risk assessment and strategies to address the risk can be found in the Payer: Pipeline section of this website.
• Work with third parties: Completing an organizational assessment of resources may result in recognition of the need for external resources for patient coordination, provider contracting, establishing financial strategies or collecting patient outcomes.   

Developers

Cell and gene therapy products and clinical trials have, because of their genetic specificity, targeted diseases or conditions impacting smaller numbers of patients. Limited patient volume as well as the durable/curative nature of the therapy has expanded the considerations for developers for cell and gene therapy product launch and adoption. Developers should:

• Manage the manufacturing and distribution channel: Two strategic challenges faced by the developer when launching a product are:

1. Clinical requirements for treatment administration– Complex product administration may restrict the sites of administration to select settings or even centers of excellence. Provider restrictions for safe administration of the product may limit access locations, resulting in a potential need for developer run patient and caregiver support programs.
2. Predictions of product penetration and adoption rates will be needed to guide manufacturing. Treatment for prevalent conditions may anticipate pent up demand but coverage decisions by payers may blunt that demand. A treatment impacting a life-or-death scenario will have a greater number of treatment eligible patients treated compared to a treatment impacting quality of life. Product production at correct levels is required with any product launch but the impact of incorrect levels is greater when the total eligible patients to be treated is small and the cost of the product is high.

• Conduct long term follow-up studies: The FDA has established the requirement for long term follow-up (LTFU) studies for the collection of data on delayed adverse events following administration of a gene therapy product. While an exception exists for products with low potential for adverse events, as defined in the guidance, LTFU protocol detailing patient visit schedules, sampling plan (for patient test samples, such as blood), methods of monitoring tests, and clinical events of interest that will be monitored must be submitted to the FDA. LTFU observations include scheduled physical examinations performed by a health care professional once a year during the first five years (or until the completion of LTFU if the LTFU is less than five years), unless the assessed risks associated with the gene therapy product indicates that they should be done more frequently.
• Consider financial solutions to support payers and patient access: Developers are challenged by payers’ heightened concern regarding the financial risk and durability of high-cost one-time durable treatments. In addition to high upfront costs of individual treatments and the financial impact of multiple treatments, payers wish to address performance risk. Potential payer strategies require developer collaboration on payment timing and performance metrics. Various models of value-based payment arrangements address both payment timing impacts and product performance. Payment timing may be addressed through use of third parties such as specialty pharmacies, or by implementing payment models recently allowed through updates to Medicaid Best Price requirements (see below). Developers of metrics for product performance must be adherent to requirements on communications between developers and payers. Further information on this topic is found in the research brief “Impact of FDA guidelines on Communication between Developers and Payers on Metrics in Performance-Based agreements”.
• Comply with Medicaid Drug Rebate Program requirements for value-based payment arrangements. CMS recently passed rules under the Medicaid Drug Rebate Program to encourage the use of value-based purchasing (VBP). Three options were provided to developers for Medicaid required best price reporting. VBP contract options included: 1) report a single ‘traditional’ best price; 2) use a bundled sales approach to offer a best price that is averaged based on sales with VBP contracts; 3) report multiple best prices that are available with VBP contracts. Implementation of the rule remains in the future, July 2022. While details on reporting and implementation plans continue to develop, FoCUS continues to collaborate with various stakeholders to determine the impact of the rule change. Further information may be found at https://www.healthaffairs.org/do/10.1377/forefront.20210913.896620 

Government regulators and legislators

Government regulators and legislators will need to ensure regulations evolve in a manner that keeps track with innovations in science and payers’ innovative contracting approaches to ensure appropriate, timely patient access to these therapies. A description of policy issues related to innovative precision financing solutions is described above.

Needed precision financing solutions

Durable, potentially curative therapies create three financial challenges:

1. Payment timing: Therapies can involve substantial upfront payment for multiple years of therapeutic benefit.
   Detail

   For a single payer, this can mean a mismatch between costs and expected benefits. Also, the payer will have concentrated costs in the first year of a patient’s treatment. Moreover, as patients may switch payers over time, the first payer may incur the costs and future payers may benefit from reduced longer-term costs.

2. Therapeutic performance risk: Real world efficacy and durability are uncertain at the time of initial regulatory approval and market launch.
   Detail

   Payers may need to address two types of uncertainty as they evaluate whether to cover and how to reimburse durable, transformative gene and cell therapies: 1. Uncertainty as to the expected benefits of treatments in a broader, real world population, given that regulatory approval will be based on limited clinical trial data and real word results are sometimes different from clinical trial results; and 2. Uncertainty as to the duration of those benefits (how long the benefits will last), given this is a new, innovative area of science.

3. Actuarial risk: The number of eligible patients in a payer’s population may be uncertain and could vary significantly from period to period.
   Detail

   Health plans with relatively few covered lives are unlikely to have patients needing a particular rare product in a given year, but a single case could have large cost consequences if the risk is not managed

   The table below shows the likelihood of a health plan of different sizes having a patient in a given year who could benefit from a new treatment for a very rare condition.

   Hypothetical Example: Product with US incidence of ~1,600 patients—Number of Patients Per Year by Health Plan Size

   

   The above analysis focuses on a single new treatment considered in isolation. In a portfolio of products, uncertainty will be dampened because it is unlikely that all products will have similarly high utilization levels in the same year. The figure below shows the simulated results of portfolios with different numbers of uncorrelated new products. As you can see, when there is only one product (purple curve), the curve of actual to expected patients is relatively flat and spread out around 1. It is hard to be actuarially certain that the estimated number of products will be correct in actual practice. When there are more products in the portfolio, say 100 products as the yellow curve shows, the ability to predict accurately increases and the band is very tight around 1. Therefore, as the number of products increases, uncertainty and average portfolio risk decline.

   Illustrative—Distribution of Actual Patients vs. Expected Patients

   

Various financial solutions have potential to address some aspect of some or all risks.

Payers must take into consideration each of these risks and their potential to implement any selected financial solution. Details on each of the solutions may be found by clicking on the solution link.

Milestone-based Contracts Multi-year Milestone-based ContractsPerformance-based AnnuitiesPayment Over Time/Installment FinancingSubscriptionReinsurance/Stop Loss Insurance Risk Pools
Orphan Reinsurer and Benefit Manager (ORBM)Warranty