Navigating Payer Challenges in Cell and Gene Therapy

In this Breaking Down Health Care conversation, John Hennessy, MBA, and Michael Kolodziej, MD, discuss the challenges and potential solutions for integrating cell and gene therapies—particularly CAR T—into clinical practice and insurance structures.

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John Hennessy, MBA: Welcome to Breaking Down Health Care, where we discuss evolving topics in health care in the United States. I'm John Hennessey. I'll be talking with my good friend, Mike Kolodziej. Mike is a retired oncologist and an advisor to Canopy, working in patient-reported outcomes. I'm a consultant with Valuate Health Consultancy.

Mike, we're going to talk about cell and gene therapy today. We've talked before about the unique roles you've had in your career, both as a practicing oncologist and oncology practice leader, but you've also been on the payer side. When we think about cell and gene therapies, the challenge is that these are products that theoretically have long-term values that may exceed the actuarial horizon from which payers would see that value. From a payer perspective, how do they struggle with this value proposition of cell and gene therapies and long-term benefit vs short-term horizons.

Michael Kolodziej, MD: John, it’s good to see you again; it's been a while. The question about cell and gene therapy from a payer perspective boils down to the target population and who the relevant payer is for that population.

For example, we are clearly the furthest along in cell and gene therapy in 2 spaces. One is hereditary disease; let's use sickle cell as an example. The second is in the treatment of malignancy, particularly lymphoid malignancies, by the introduction of genes into immune effector cells to educate them and activate them so that they would kill the cancer, like CAR T. Those are very different populations because hereditary cancer is an issue from birth. If you take the issue of sickle cell disease, children and babies are diagnosed, and they have their first manifestation when they're toddlers. They have their first serious manifestation either during childhood or during adolescence. Who are the payers for those patients? The most important payer is Medicaid. The second most important payers are the commercial health plans, who cover the children of the insured. But, by and large, it's a Medicaid issue.

On the other end of the spectrum, for lymphoid malignancies, it’s mostly a commercial health plan and Medicare challenge because cancer is a disease of aging. Now, of course, there is one exception, which is CAR T for B-cell acute lymphocytic leukemia, but let's leave that aside. That's actually a very small population. The perspective of the payer varies depending on how much it affects them. I would say Medicaid is often held up as a payer that has a very hard time deciding how to manage cell and gene therapy. There are a couple of reasons for that.

First, it's insanely expensive. Second, Medicaid budgets from year to year. Trying to figure out the value of a cell and gene therapy, which has a lot of upfront costs but might have its benefit over the next 20 years, doesn't necessarily fit well into their budgeting paradigm.

For the commercial health plans, it's a little bit simpler. On the cell and gene therapy side, for adults, Medicare doesn't really consider what the long-term benefit is. It either works or it doesn't work. Both Medicaid and Medicare, as well as the commercial health plans, are challenged by the fact that, because all of these therapies have been approved by a somewhat accelerated process, we actually don't have any idea whether they have long-term benefits, nor do we have any idea whether they have long-term toxicities. We don't know how long they're going to work. It's very hard to do an analysis of the return on investment for these various therapies.

John Hennessy, MBA: We've talked about the need to have a coverage policy for these things, and there's an element of that ought to be, rightly, about the clinical value—whether this is this a space of unmet need, whether this bridges whatever gap there is between what patients need and what we can offer. Is that process impacted by this long actuarial horizon, or is it really much more of an evidence review of whether this is better than or a different option than we otherwise might have for these patients?

Michael Kolodziej, MD: I would say both. Pfizer has looked at the cost-effectiveness of these therapies and done long-term projections about at what point do they become cost-effective. To an extent, we still have been given a pass in the gene therapy space because there just aren't that many gene therapies, there aren't that many centers prepared to administer them, and we haven't yet identified what the right patients are for it. So we're not quite ready for that yet.

It's probably fair to say that in the cell therapy space, these treatments are being treated just like everything else—they’re treated like a really expensive chemotherapy drug. In the long-term, that's not what I think is going to happen. I think what's going to happen is we are going to see the emergence and widespread acceptance of payment over time or outcomes-based contracting, where a certain amount is paid upfront and then additional amounts are paid at various milestone points based on continued benefit.

That's a lot easier to grasp in terms of common sense. Should we pay all the money up front? The problem with payment over time is if the payer changes, does the holder of the lien change? Does the person responsible for the payment change? That kind of cooperation has not historically been achieved by the payers. But I think there'll be a way to do that. The government has stated they're going to try to figure a way to make this happen, and if they can find a way, then I think commercial payers will jump right on board and adopt it.

John Hennessy, MBA: You mentioned that this is considered in the context of everything else available, and we've seen the growth of bispecifics leaning into this space. One of the things that we'll face, and one I think is difficult to cross with gaps in knowledge of the long-term impacts of these medicines, is whether they fit at the end stages of disease, or will we see these approach second-line, first-line, moving farther forward, just because of the promise of a “one and done” approach, as opposed to a therapy administered every week, or every 3 weeks, or every 4 weeks. Maybe you can talk about, from an oncologist standpoint, how do patients cogitate that risk/reward of, “One and done, I don't have to go back to see you as often” vs being treated for indefinitely otherwise.

Michael Kolodziej, MD: Again, I think there's a distinction here between cell and gene therapy. Gene therapy is the potential for a curative approach. We can readily concede that, to this point, the therapeutic options for sickle cell disease have been suboptimal. Even though some new drugs approved, they have very modest clinical benefits. The preliminary results in gene therapy show that it really does completely eliminate things like vaso-occlusive crisis. They're really quite amazing.

Cell therapy is different, and the reason cell therapy is different, of course, is because we don't know whether it's curative. The manufacturers are looking at this just like they look at every other product they develop: "Let's move it earlier, it's gonna work better." I am waiting to see the evidence. Myeloma is a wonderful example. There has been an explosion in treatments available for multiple myeloma, many of which are given indefinitely. The cost starts to get pretty substantial after a relatively short period.

We also continue to perform bone marrow transplants in multiple myeloma, even though autologous bone marrow transplants are not curative. Yet we still do them. The hope is that bispecifics or, in relationship to today's discussion, CAR T, if administered earlier, could eliminate a lot of that cumulative cost, cumulative toxicity, cumulative commitment to therapy. But we'll have to wait and see.

Patients, when given the option, will weigh the risks and benefits. When I say risks, I include costs. We've become much smarter in managing the toxicities of CAR T, such as immune effector cell-associated neurotoxicity syndrome (ICANS) and cytokine release syndrome (CRS), the peculiar toxicities related to this type of therapy. As the therapy gets safer, and especially as it gets to the outpatient setting, it will become more and more attractive to patients.

The other factor, of course, is it has to become something that the doctors can do. We can't send every CAR T patient to a big academic medical center. We have to find a way to make this work for the oncologists so that they can give it, ideally, in their office, in collaboration with their local hospital.

John Hennessy, MBA: You talk about a democratization of CAR T therapy. We know that there are patients who might benefit from those therapies, but spending 4 weeks in Manhattan or Boston is just something they can't pull off. I'm sure you saw that in your practice. What are the things that really need to happen for a practice like that to adopt that therapy? When I think of the practice I worked in, we had a community-based blood and marrow transplant program. The talent was there, but fitting it into the economics and workflow of the practice was somewhat challenging.

These are patients that can be difficult to manage in the early days post-transplant, and someone has to be willing to take call. So, what are the challenges? What are the barriers to bringing this into the community and making this more democratized, at least in terms of administration?

Michael Kolodziej, MD: During your career and mine, we saw the widespread adoption of autologous bone marrow transplant in the community setting. Initially, it was done for the treatment of advanced breast cancer, which unfortunately proved to be a foolish application of that technology, potentially harming many patients.

But even saying that, non-Hodgkin's lymphoma, Hodgkin's disease, multiple myeloma, autologous transplants are routinely done in the outpatient setting. They are no longer routinely done in the inpatient setting. It's not that people don't go in the hospital; they do, but only for a short period of time. Most of it is outpatient. Practices learned that this is what we have to do to deliver the therapy. They developed a reproducible way to get paid for it. They figured it out, and I don't have any question that they'll figure it out with CAR T. We should note that CAR T has been hindered by a number of different things including the fact that the manufacturers had a bit of a snafu, and there was a period of time where it was very hard to get CAR T product for the patients.

We should also acknowledge that the payment for CAR T, at least for Medicare, has been messed up for a very long time. The diagnostic-related group (DRG) was wrong, underpaid dramatically, and now we have an average sales price (ASP) for CAR T. We could theoretically administer it as an outpatient. What's going to happen, I think, is that we're going to learn how to prophylax to prevent a lot of the toxicities and there's already a lot of work being done on using steroids or more aggressive forms of therapy to block CRS. As we get these things sorted out, bispecifics have stepped into the void. Bispecifics appear to have fewer toxicities, can be delivered in the office or with very short hospital stays, and some practices are even doing it as an outpatient therapy. It's a little bit labor intensive to do it as an outpatient, but it's possible. Where there's a will, there's a way. You and I both know community oncology can be very innovative in finding a way to deliver this kind of therapy.

John Hennessy, MBA: I want to close with your thoughts on the affordability from the payer side. We often think of the BUCA payers—Blue Cross Blue Shield, UnitedHealthcare, Cigna—but we forget that two-thirds of Americans are on self-funded health plans.

Maybe another 40% who aren't in those plans are in what are called "level funded plans," where small employers are basically accountable for the spending. One of these events—say, a product costing half a million dollars plus another half a million in hospitalization—could bankrupt a small employers health plan for all intents and purposes. They're faced with these challenges of whether to cover these therapies or exclude them. How do we create a value proposition that works for them? Is it these long-term payment programs? Is it super insurance pools that take this small group of risks and isolate them from the rest? What are the things that you think are going to be helpful for financing in the way that we have structured health care payment in this country?

Michael Kolodziej, MD: We should start with what it's not going to be. You may recall that, at the very beginning, some health plans sold riders that specifically excluded cell and gene therapies. That backfired. We're not going to see that again because it's a public relations nightmare for the health plan.

Reinsurance is alive and well. Stop-loss insurance that prevents a catastrophic expenditure for a self-insured employer will be an attractive opportunity. There are some people who believe that the cost of these products is going to come down to the fact that, as the market becomes more full of therapies, the price will come down and some have said that traditional negotiation rebating may be the key to making this the real thing.

The other thing that I've heard talked about, which is really quite interesting, is whether or not Medicare, or the federal government more precisely, will create a new entity, a new division, a new funding source similar to how end-stage renal disease is handled by a specific funding source. There could be a mechanism where there's a governmental benefit for cell and gene therapy, in which case the government would be the insuring entity, thereby taking the burden off of the commercial health plans or even Medicaid. With our current government, I'm not sure you could ever come to any compromise over anything, but that's not a crazy idea. There may be some merit in that, especially as we start to expand the therapeutic options in this space, and it gets to be a real concern for Walmart, or Liberty Mutual, or whichever self-insured employer you're talking about. It won't take very many of these for them to pay attention.

Just as with practices, there's an appetite for innovation. If we can get to the outcomes-based contract, it will help things a little bit because then you don't have to pay it all in one big fell swoop. You could theoretically pay it over time and that would smooth out the expense so that it doesn't have a profound budgetary impact in any given year.

John Hennessy, MBA: In many ways, some of those stop-loss products that are meant to convert that spike in cost to a long-term premium are effectively becoming that the tool you describe. It's just being driven on a different side of the market than we might have expected.

Michael Kolodziej, MD: Yes. One other thing we can be certain of: it's not going to be borne by the patient. These are expenses that are just astronomical for any given patient. It would be a pity if we couldn't offer a curative therapy to a sickle cell patient just because the state of XYZ didn't want to pay for it. I hope we never, ever come to that.

John Hennessy, MBA: Thanks for joining us this afternoon on Breaking Down Health Care. We have more episodes to come. Please join us as we continue to have these conversations.