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How Payer Value-Based Contracts Seek to Cut Gene Therapy Costs

CVS Health recommends value-based contracting, coordinated care, and other strategies to lower gene therapy costs.

Eleven gene therapies could cost an individual as much as $45 billion over the next five years, but payers can bring that cost to a more manageable price range through methods such as value-based contracting and coordinated care, CVS Health and Aetna wrote in a recent white paper.

"The role of CVS Health—and Aetna as a health insurer—is to reduce the costs of therapy, while ensuring appropriate utilization of cutting-edge therapies,” the paper started.

The cost for gene therapies can vastly differ, the report authors said. In vivo therapies, for example, are less costly and use a gene-carrying virus to spread the correct gene through the patient’s affected organ through injection. 

Ex vivo therapies, however, involve re-engineering a patient’s cells, chemotherapy, and re-infusion of the altered cells back into the patient’s body—all of which are costly measures and require lengthy inpatient stays for treatment.

Ex vivo therapies tend to be more persistent, making it more often used to fight previously incurable cancers.

Estimating the size of population that could use these treatments and how much each treatment costs is a challenging task, CVS Health emphasized. Furthermore, gene therapies are still young, so they have yet to prove their cost-effectiveness.

However, what is clear immediately is that the economic impact of gene therapies is staggeringly high.

Looking at the near-term gene therapy pipeline, CVS Health estimated the five-year total impact of gene therapies. These therapies are set to launch between 2020 and 2022, and depending on how prevalent the 11 drugs will be in the following two to five years, costs could be different.

A low market impact for these eleven drugs would cost the healthcare industry $14.85 billion dollars from 2020 through 2024. High impact could cost up to $45 billion over the same timeframe.

"Because of the potentially prohibitive costs, some employers are considering excluding ultra-high cost gene therapies from their plan benefit coverage,” CVS Health explained. “However, doing so might be short-sighted if the treatments are proven to be as effective long-term as they appear to be today. But that can be a tough rationale to accept for plan sponsors facing a large, one-time burst of spending, here and now.”

Where employers may be hesitant to take the risk, payers may be growing bold. Payers could be instrumental in ensuring that patients have access to care through affordable gene therapies.

CVS Health has taken the plunge with its National Medical Excellence (NME) Program.

NME focuses on complex or chronic disease management and has expanded its function to provide gene therapy resources through designated gene therapy centers. The strategy is to increase care coordination around gene therapies.

Care coordination has been known to decrease costs. For example, Washington state’s use of coordinated care networks for primary care, mental healthcare, and long-term care high-cost patients led to $107 million in savings.

Payers can also obtain lower costs for gene therapies by utilizing specialty pharmacies.

CVS Health pointed out that specialty pharmacies tend to refrain from the markups that hospitals and healthcare providers might implement based on administering the drug. Payers can purchase gene therapies from these specialty pharmacies to pay in installments. This approach makes the cost to employers less daunting, manifesting as a series of payments over time instead of one hefty, upfront bill.

Value-based contracting can reduce the risk and cost to payers and, by extension, employers. Payers can negotiate to receive compensation if the therapy fails to meet its objectives and the patient outcomes suffer as a result. 

The data collected for quality measuring can be useful to payer, patient, and researchers alike, beyond the purposes of the contract.

However, for gene therapies, quality measurements must continue over the span of years and upkeep of that data collection over time can be challenging, particularly in the case of turn-over. 

CVS Health recommends “contractual riders” that allow the payer to continue engaging with the patient and collecting information, regardless of a change in payer. Employers would benefit from this arrangement as they would be making payments for the patient’s treatment regardless and the payer’s continued observance could assist in ensuring results.

Patients would also have to accede to such terms of the agreement.

There are regulatory hurdles for gene therapy value-based contracting as well. The Medicaid “best price” rule disallows payers from negotiating discounted prices below what Medicaid pays for a therapy. However, if a manufacturer is refunding based on failed outcomes, the refund may bring the payer’s actual investment below the Medicaid price. 

Specifically, if the drug completely failed to produce a single positive outcome based on the agreed upon quality measurements, then the manufacturer would fully reimburse the payer, such that the payer essentially paid nothing for the drug. Medicaid would then have to pay nothing for the drug in order to remain “best price.”

CVS Health said CMS should change the “best price” rule to be more amenable for gene therapies. CMS has already demonstrated some interest in the potential of gene therapies. In August 2019, the agency finalized a rule that instituted Medicare coverage for an FDA-approved gene therapy.

Lastly, CVS Health recommended stop-loss policies for smaller employers that will be the hardest hit by gene therapy prices. As employers worry about high-cost claims that can wipe out a healthcare budget for smaller companies, stop-loss insurance may provide the needed buffer to safely continue providing access to gene therapies.

“For customers who choose to not purchase a traditional stop-loss policy, we are developing a focused insurance product that offers financial protection for gene therapies by spreading the actuarial risk across a pool of enrolled members,” CVS Health announced.

“Together, these steps can help lower costs for payers while ensuring appropriate access to these life-changing therapies,” the healthcare company concluded.

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