Paying for Cures

For potentially curative therapies, the high upfront costs can obscure longer-term cost and patient outcome benefits. One of the biggest challenges facing the U.S. health care system is how payers and biopharmaceutical manufacturers can work together to make curative treatments more broadly accessible to patients.

What are curative therapies?  

By 2030, an estimated 45 to 60 curative or durable therapies — those with short treatment regimens and lasting benefits — are expected to reach the market. Most of these treatments are gene therapies and immunotherapies targeted to rare, or ultra-rare, diseases for which there are no existing or very limited treatment options. For patients, these new types of treatments could represent a positive, dramatic shift in their daily lives.  

What are the challenges?  

Many of these innovative therapies are considered “one and done” — administered one time with a potentially durable treatment effect. For this reason, there are high upfront or one-time costs to the use of these therapies, rather than spreading the costs over a patient’s lifetime or across different insurers as a patient changes health plans. 

The therapies expected to be approved in the next decade will bring great benefits to patients, along with costs to the system, including hospitalizations, physician visits and related costs of care. 

Within the next 10 to 12 years, up to 55,000 patients will be treated with durable therapies, at an implied total treatment costs of $20 billion-$25 billion.

What steps are being taken? 

States are getting creative about how they can meet the health care needs of their citizens, especially when it comes to curative treatments for conditions with a high rate of prevalence. In 2019, Louisiana became one of the first states to adopt a subscription model — what’s been termed the “Netflix” model for short — as a way to get more hepatitis C treatments to the people in greatest need. Like Netflix — where it’s possible to watch unlimited movies and TV programs each month for one price — Louisiana worked out a fixed-cost, five-year contract with Gilead Science’s authorized generics subsidiary, Asegua Therapeutics, to access all the hepatitis C medicines it needs. Washington state followed suit weeks later by announcing an agreement it reached with AbbVie to provide hepatitis C treatments for the roughly 25,000 patients covered by its Medicaid program. 

Louisiana and Washington are just the start of a broader financing trend by states. The Netflix model is just one of several financing approaches that states and other organizations are testing as a way to make sure their health care dollars are being spent more efficiently and effectively, while providing patients with access to innovative, curative therapies. 

Through the MIT’s NEWDIGS FoCUS (Financing and Reimbursement of Cures in the US) program, more than 150 organizations, including NPC, are involved in efforts to test financing concepts in design labs, particularly for treatments that are currently in the development and approval pipelines. Case studies led through MIT tested performance-based annuities for treatments of blood disorders, milestone-based rebates for chimeric antigen receptor T-cell (CAR-T) therapies and the creation of an orphan reinsurer benefit manager for orphan/ultra-orphan diseases. 

With blood disorders, having an upfront payment tied to the initial treatment, followed by a series of payments over time, reduces the one-time impact of the potential cost over several years, while also reducing the uncertainty for payers. When a treatment first comes to market, there is little to no robust durability data, so the risk of financing such a treatment needs to be shared, with payments made as pre-agreed performance metrics are met. 

Financing CAR-T therapies is trickier because patient success is more difficult to judge. CAR-T is a type of immunotherapy that involves a number of steps to treat advanced cancers; patients may relapse after one or many years. Under a milestone contract for CAR-T, a payer would provide compensation at the time of delivery to the manufacturer with an understanding that if a patient recovery milestone is not met, a rebate for that payment would be forthcoming. 

The reality is that the impact of gene therapy is asymmetric, impacting small health plans more greatly than those with a larger number of covered lives, and many patients switch plans. One way to address this challenge is through orphan reinsurers and benefit managers (ORBM), “which are organizations that develop expertise in the management of patients with a set of rare diseases that are difficult for individual payers to manage.”  

Another way is through multi-payer risk pools, in which payers combine together to provide coverage for orphan and ultra-orphan diseases. This could be done as state-sponsored Medicaid pools or via an ORBM. 

What are the barriers to creative payment models?  

There are regulatory barriers to putting some of these innovative financing solutions into real-life practice, such as Medicaid Best Price—the lowest price for which a treatment is offered and the rate that must be provided to federal programs—and the Anti-kickback Statute (AKS). Current AKS regulations provide a safe harbor for traditional rebates, but do not explicitly include value-based agreements that tie payments or refunds to outcomes and may pay for monitoring visits that relate to those outcomes.