New Payment Models Needed to Handle Gene Therapies

An Interview With Steve Miller, MD, MBA, Chief Medical Officer of Express Scripts

In your recently published blog post, “Gene Therapy Holds Great Promise, But Big Price,” you allude to the FDA’s first commercial gene therapy approval as a major challenge for the current health care system. What are some of the financial challenges of this drug’s entry into the marketplace?

The new CAR-T therapy for childhood leukemia obviously carries a big price of $475,000. Now this one will not be the biggest challenge, but it’s just the beginning of gene and cell therapy coming to the marketplace at what’s going to be some extraordinary high prices. In this particular case, you have a very lethal condition that’s associated with a large spend already because what we spend for chemotherapy and stem cell transplants for these children is often up to $400,00 and the survival rate still is less than 50%. 

In this particular case, you’re going to have a product that is priced at a premium, but it’s a well-deserved premium because the survival rates go up to about 80%. And so, it’s an exciting breakthrough, it’s great movement in the right direction to curing more kids, but when you see prices of products of $200,000, $300,000, $400,000, $500,000, it gives the payers a great pause. 

Gene therapies are clearly here to stay. They are demonstratively effective. Yet, due to their one-time-administration, they are exceedingly expensive. What are the best methods for ensuring appropriate patient selection?

What we have always done and what we do for many high-priced products, is we do what’s called utilization management. We always make sure that it’s the right diagnosis, the right patient, being treated with the right methodology, through the right provider. And so, if you think about it, we already have products in the marketplace that costs hundreds of thousands of dollars; be it enzyme replacement therapy, or treatments for hemophilia or other expensive diseases. But making sure that you have the right patient, that they’re getting the right product, that there’s not a competitive product that actually works just as well at a lower price, making sure it’s the right provider, because outcomes differ even by the providers, are all parts of the keys to making sure were using our dollars the best, and getting the best clinical outcomes.

You wrote in your blog that “the health care system isn’t set up for this type of economic model.” What can drugmakers, policymakers, patient groups, payers, and pharmacy benefit managers (PBMs) do to create a feasible economic model that is accessible for patients?

There are a lot of things we can learn from other examples in health care. So, if you think about transplant for instance, a transplant often results in, if not a cure, then dramatic improvement in a patient’s life and often for an enormously high bill and its mostly a one-time bill with ongoing immune suppression. This is even more dramatic in that you could have a child with a degenerative eye disease or someone with hemophilia, and you can give them a one-time treatment, and if we’re lucky, it may actually be the last time they have to be treated for that condition. 

So, we have to come up with new models because the ongoing payment model isn’t going to work. And so, are there ways for instance to amortize the cost over time? Are there ways to create risk pools that people can access to pay for it over time? And most importantly, can we do value-based contracting where, if the product doesn’t work as billed, that is it loses effectiveness over time, are the pharmaceutical manufacturers and biotech companies willing to share risk with the payer community so that we’re not paying a premium price and not having a premium outcome.

Article continues on page 2

What do you believe are some other components of a new payment model that are necessary to accommodate gene therapies?

One of the things that may be unique for this is if the price is really extraordinarily high, let’s say the price for a therapy is over $1 million, and you want to amortize it over time, that is you may want to pay $200,000 up front and $100,000 a year for the next 8 years, you can see the beauty of having a value-based contract, where if that product quit working in the out years you could reduce the payments. It puts the pharmaceutical company at risk, but it also gives the payers some reassurance that what they’re paying a premium price they’re getting a premium outcome. But that would also require, perhaps, portability. That is if someone switches from one carrier to another; if you switch from United to Anthem or to Aetna and Cigna, then what happens to those downstream payments? Are they going to be paid for by the initial company who you paid your premiums to, or are they going to paid for by the company you’re moving to, who’s actually getting the benefits? 

And so, you can see there is going to be a lot of work that has to be done across the payer community to figure this out, and we’re going to have to come up with two new payment models that just don’t exist today. 

We continuously hear the line that “more competition is the key to lower drug prices.” Does this apply to the gene therapy market? Will the approval of more gene therapy products bring costs down?

So there are a couple of things that should help bring costs down over the long haul. One is that as the platforms get reused over and over again, so as you have a gene therapy platform, theoretically the cost of development and cost of the regulatory burden and other things, will perhaps go down. Remember, this is not about cost recovery, it’s about what’s the right value for a product in the marketplace. The other thing is, is that just like in pharmaceuticals, there will be certain gene products that will get competition from multiple companies. So, you can see eventually having multiple companies competing for hemophilia treatments. And so, we’re really well positioned to put these companies against each other and hopefully drive the best value to plan sponsor and patients, but always putting clinical first.  

What are some novel ideas that Express Scripts, in particular, have considered for a successful payment model?

We are already in discussions with many of the leading gene therapy companies and we’re actually already working on value-based contracting with them. We’re working on trying to set up risk pools, and we’re also looking at the issues of amortization and portability. So, we’re actively involved in all of these things. 

Novartis, as you know, came to the marketplace first with the CAR-T therapies, and as they’ve publically acknowledged we’re working with them. But we’re truly meeting with all of the companies that have products in the near term, with the idea that our large number of patients, our large payer group, and our tremendous assets—being specialty pharmacies, specialty distribution companies, a PBM, our therapeutic resource centers—we’re going to be able to bring to the table a lot of things to make sure that patients and payers are getting the most value out of this, but its working for the patients plan sponsors and the biotech and pharmaceutical companies. 

What do you believe the future of gene therapies holds from a payment perspective?

As you can tell I am an optimist. I really am excited. This is much different than it was 15 years ago with cystic fibrosis treatments. I really believe gene therapy is here, it’s going to work, and we need to make these products available to patients because it’s truly a great advance forward. But just like the biotech companies and pharmaceutical companies are being innovative, we as payers have to hold ourselves to the same bar, and we have to become innovative in the ways we pay for these things. There will be enough money there; we can’t allow these products to fail just because we can’t figure how to pay for them.