Top Payer Strategies Around Payment Models for Advanced Therapies

Existing solutions for commercial payers

The fifteen-person workgroup was not operating in a vacuum. Various models have been proposed in order to establish fair, sustainable drug pricing practices for advanced therapies. The Aspen Institute laid out these current models in a paper specifically designed for the workgroup.

Commercial insurers’ efforts were at the top of the list. Payers may collaborate with pharmacy benefit managers in order to offer insurance risk products for advanced therapies.

In order to manage cell and gene therapy coverage, BCBSA works with BCS Financial. This pharmacy benefit manager offers reinsurance products to Blue Cross Blue Shield companies and supports health plans as they establish payment models for advanced therapies.

The drug manufacturer sets the initial price for the therapies and then payers negotiate the price from there, aiming to achieve the lowest cost.

But Handelman stressed that establishing payment models to cover advanced gene therapies requires more than just a payer and a pharmacy benefit manager.

“There are no easy answers right now, which was a critical reason why we brought the group together to have the discussion,” Handelman said.

Alternative payment models that can help finance advanced therapies include outcomes- or milestone-based agreements, mortgage-like mechanisms, subscription payment models, risk pools, and orphan reinsurer benefit managers.

Some of these models have been tested. Twelve percent of payers implemented ten or more value-based contracts with pharmaceutical manufacturers that involve outcomes-based measures in 2021.

Louisiana and Washington both implemented subscription-based models in 2019. The Louisiana model gave the state’s Medicaid program unlimited rights to use a drug for hepatitis C. The drug’s price was capped and the state paid it over time.

The Washington model also allowed the state to have limitless access to a drug for a capped price that was paid off over time.

In the first year of their implementation, however, the advanced payment models have shown mixed results. In Louisiana, the model seemed to have a positive impact on the rate of chronic hepatitis C but no impact on acute hepatitis C. In Washington, prescription fills rose only slightly. 

The difference may have been related to certain pre-implementation restrictions in Louisiana, historical access to direct-acting antiviral HCV medications, or the influence of the coronavirus pandemic.

The results of Louisiana and Washington’s models showed that many factors can influence a payment model’s success.

Handelman suggested three important components of establishing a payment model for advanced therapies and gene therapies:

• determining meaningful outcomes measures for the drug
• ensuring that the advanced therapy's price reflects its value
• complying with state and federal laws

Determining meaningful outcomes measures

Payers have to set outcomes measures in order to assess a therapy’s sustainability and continued efficacy. But discerning outcome measures requires sufficient data. For this, BCBSA turns to resources such as the Institute for Clinical and Economic Review (ICER).

In November 2020, ICER launched ICER Analytics, a tool that allows payers, life sciences experts, and other stakeholders to find ICER’s reviews and data on certain drugs quickly.

However, stakeholders do not have to purchase the tool in order to access ICER’s data and reports. ICER offers free resources in addition to the analytics tool. For example, the organization published a study on the efficacy of the controversial Alzheimer's drug aducanumab, and their work is freely accessible to anyone with an internet connection.

Many payers also may have access to ICER’s tools through AHIP. The payer organization subscribed to ICER’s cloud-based analytics platform in June 2022 to improve members' access to cost-effectiveness data and other resources.

For payment models that are fitted to a particular disease, Handelman indicated that BCBSA seeks out appropriate, targeted resources.

For example, BCBSA may rely on the American Society of Clinical Oncology and the National Comprehensive Cancer Network to determine pricing for advanced therapies in oncology.

Many factors can contribute to clinical outcomes, which is why some payers have integrated medical and pharmaceutical benefits in order to manage patients' conditions better.

Ensuring that price reflects value

To establish a drug price for a therapy that is new and still relatively untested for longevity, pricing must hinge on value.

“We know the current financing system was designed to consider actuarial risks on an annual basis, but the current system doesn't handle situations where you have a short course of treatment that's expected to have a very long-term therapeutic effect,” Handelman explained. 

“That's why we're looking at: are there potentially multi-year payment models? And how do we make sure we've got systems to capture data as we go forward on these potentially curative therapies?”

Healthcare stakeholders agree that value is core to an advanced therapy payment model, but value is also a tricky element to define, much less calculate.

“While economists define value in many ways, the term at its most basic can be thought of as what one gets for what one pays, a framing that factors in the component parts of outcome and cost,” the white paper explained.

Just as there is no standardized definition for value in the advanced therapy space, there is also no standardized equation to quantify or integrate value into advanced therapy payment models. The closest thing to a value equation is the ICER value-based price benchmark.

As a result, many questions remain about how to assess value.

There are a plethora of factors that could be included in a value assessment such as hospitalization reductions, remission periods, patient-identified benefits, and even the costs and patient experience of managing comorbidities for a longer period of time if the advanced therapy successfully elongates a patient’s life. Criteria might vary based on the drug.

“Ultimately, it may not be practical to fully calculate the package of downstream benefits and costs as part of a value determination, but more rigorous tools for collecting and using post-marketing patient data would nonetheless add a layer of accountability to these assessments,”  the white paper stated.

However, one key element of all of those factors is the term “patient.” Patients—their experiences and their voices—must be at the core of assessing value, Handelman stressed.

Incorporating the patient or member has to go beyond clinical experiences and emotional impact, the white paper argued. Caregivers’ voices should also be introduced into the conversation.

Patients and caregivers have no platform that allows them to contribute to the conversation on advanced therapies’ value.

Efficacy and scientific benefits are also crucial to establishing a drug’s value, Handelman added. This may overlap with the need for robust outcomes measures.

Complying with federal, state laws

Healthcare stakeholders must also ensure compliance with both state and federal laws related to drug pricing.

While legal compliance could be seen as a check in the box, it is still a complicated endeavor. 

Fifty states have passed laws on drug pricing in the past five years. From 2017 through July 19, 2022, US states passed 236 laws related to drug pricing, according to the National Academy for State Health Policy (NASHP). Of those, seven were related to affordability, and 31 were related to coupons or cost-sharing. Another 27 had to do with price transparency.

Not all of these state laws had to do with advanced therapies, but the volume of regulations and the constantly evolving regulatory environment help explain why Handelman called out compliance as key to establishing advanced therapy payment models.

While compliance is key, regulatory reform is also needed in order for effective advanced therapy payment models to develop and thrive, according to the Aspen Institute’s white paper. Specifically, policies such as the Medicaid “best price” practice and the Orphan Drug Act—both of which have drawn criticism from major payers and payer trade organizations—were identified as requiring review.

“Policymakers could adopt narrow modifications to Medicaid best price rules that would encourage the use of outcomes-based arrangements for these life-saving therapies,” Handelman suggested.

Next steps for the industry

Many questions remain related to advanced therapy pricing. However, there are steps that payers and stakeholders can take.

Handelman recommended implementing a gene therapy registry. A registry would track patient outcomes without increasing the burden of data collection. Databases and registries already exist—such as CureSMA which tracks spinal muscular atrophy treatment data from 18 neuromuscular disease centers or the World Federation of Hemophilia’s data collection system for cell and gene therapies.

Registries should allow for patient-reported outcomes, the Milken Institute has recommended in a workshop. The National Institute of Health’s Patient-Reported Outcomes Measurement Information System (PROMIS) could serve as a basis for that effort.

“In order to make sure these treatments are affordable to patients, we do believe that Congress should support a gene therapy registry,” Handelman said. 

“We think the administration could launch pilot programs that test alternative payment mechanisms to find some sustainable solutions to finance gene therapies.”

The 15-person work group that convened in 2020 was well aware of the challenges and opportunities that advanced therapies present in the healthcare system. Shortly after the group disbanded, the coronavirus pandemic would create an even more complex environment.

The group urged healthcare leaders to continue testing new solutions.

"In this dynamic environment, the time to plan for the future is now," the paper concluded. "We need to continue the conversation, pilot-test new financing mechanisms, and ensure that patients can benefit from the best that science and medicine have to offer in a system that is equitable and sustainable."