Perennially frustrated by the “albatross” of escalating healthcare costs weighing on American businesses, employer plan sponsors are sounding alarms at the reported 7-figure costs associated with the emerging gene therapies. Not only are employers wrestling with whether to cover these therapies, some have quietly questioned their ethical/legal obligation to cover these therapies that may be considered outside their mission of offering “insurance” – originally intended to address illness and accidents vs changing one’s genetic makeup from birth.

The largest employers that can spread the risk of these “one-time,” “high-cost” cases over large populations tend to be more willing to consider coverage if presented with compelling data on the efficacy and value of these treatments. These employers are mostly choosing to cover these therapies since they may be convinced they are treatments of choice or treatments of last resort. Smaller, self-insured employers, especially those in high turnover industries, appear to be less willing to consider coverage, despite the risks of potential public relations backlash and/or legal issues. The smaller, fully insured employers will be left to consider whatever offerings and prices are made available by health plans.

The 2021 Emerging Trends in Health Care Survey from Willis Towers Watson1 showed

  • 28% cover gene therapy. Of those
    • 44% are only covered under the medical benefit
    • 13% are only covered under the pharmacy benefit
    • 43% are covered under both medical and pharmacy benefits
  • 9% of employers are considering coverage for gene therapy
  • 47% have stop loss coverage to protect against high-cost gene therapy claims (ie, Luxturna®, Zolgensma®)

Because gene therapy products are typically administered by medical professionals in specially designated facilities, the administration, management, and billing of these services can be complex, often with substantial administration and other fees that are being scrutinized by employers and their consultants. Employers are leery of middlemen profiteering that could happen with ultra–high-cost procedures, given their experience with intermediary profit-making on high-cost specialty drugs. Furthermore, they are questioning -their intermediaries’ implicit incentives to allow price escalation in the current drug reimbursement model. Different payment bundles and options are rapidly evolving and challenging the current drug payment model. Some approaches being put in front of employers by consultants and health plans include special reinsurance with or without prior authorization and case management, installation payments, outcomes-based reimbursement, and others.2 Some employers and consultants have even voiced interest in having gene therapy paid by the government, much in the same way that the government pays for high-cost end-stage renal disease/kidney dialysis. The rise of gene (and cell) therapies is likely to be one of the top challenges faced by plan sponsors and health plans over the next decade. Given US Food and Drug Administration approval of 23 different gene and cell therapies,3 employers – the “real payers” – are paying serious attention.

US health plans and pharmacy benefit managers have an opportunity to develop competitive, rational, and transparent package pricing models to offer to employers. Such models would combine the medical and pharmacy components of gene therapy in a way that incorporates rational/competitive pricing, case management, and outcomes data to assure employers that they are meeting their increased fiduciary obligations to effectively scrutinize and manage their plan(s). This would require working with all the stakeholders (ie, facilities, clinicians, manufacturers) to secure tight contractual arrangements defining  clinical and cost data inputs in support of a competitive bundle price. Health plans would also need to work with the employers and/or their consultants or actuaries to harmonize pertinent financial components (eg, special new reinsurance) with broader reinsurance arrangements in place with the employer.

As the gene and cell therapy market continues to evolve, cooperation between manufacturers, payers, and healthcare providers will be necessary to ensure access to these products and maintain affordability. As employers continue to assume a greater role in health plan oversight and driving increased transparency, manufacturers should position themselves to engage with employers, consultants, and employer coalitions to clearly articulate the value of products and available solutions involving the key actors in delivering the product/services to these ultimate payers. Most importantly, they will want to hear how strongly a manufacturer and its clinical “partners” will stand behind the success of their product.

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References:

    1. Belousova A. Gene and cell therapy: the rise of million dollar drug treatments. Mercer. July 15, 2021. Accessed May 15, 2022. https://www.mercer.us/our-thinking/healthcare/gene-and-cell-therapy-the-rise-of-million-dollar-drug-treatments.html
    2. US Food & Drug Administration. Approved cellular and gene therapy products. Updated March 1, 2022. Accessed May 15, 2022. https://www.fda.gov/vaccines-blood-biologics/cellular-gene-therapy-products/approved-cellular-and-gene-therapy-products
    3. 2021 emerging trends in health care survey. Wtwco.com. May 27, 2021. Accessed May 15, 2022. https://www.wtwco.com/en-US/Insights/2021/05/2021-emerging-trends-in-health-care-survey