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Perspectives
Gene therapy pricing models
Explore three innovative patient financial solutions
The expanding landscape for cell and gene therapies (CGT) promises to transform treatment for oncology, rare diseases, and other diseases. However, due to the high cost of cell and gene therapies, financial innovation may be necessary to help drive the availability and accessibility of these therapies. Here, we suggest three cell and gene therapy pricing models that could change the way CGT are financed.
Transformative therapies require innovative payment models
The cell and gene therapy landscape continues to change at an unprecedented pace—14 CGTs are in the US market today, and an estimated 30–40 manufacturers have CGTs in their near-term pipelines. Some estimates suggest that approximately 100,000 patients will be treated with CGTs by 2030, with an estimated annual spend of $24 billion.
CGTs are unique when compared to traditional therapies—they are potentially curative, will likely only require a one-time administration, and typically come with a high upfront cost. While there are differences in costs, administration, and coverage for gene versus cell therapies, the personalized nature of CGTs, complex manufacturing processes, and limited longitudinal data have contributed to access challenges for patients.
Most of the CGTs in market today are to treat oncology or rare diseases. However, treatments are beginning to come to market for more prevalent diseases such as sickle cell anemia, beta thalassemia, and hemophilia. As more treatments come to market, move to earlier lines of therapy, and target more prevalent diseases, the eligible patient population will meaningfully increase.
Transformative therapies require transformative financing models
Managing gene therapy costs
The current one-time administration or per-dose price tag for a CGT treatment is significantly higher than traditional, typically chronic, treatments that “amortize” the cost of care over months or years. This creates a single, high-dollar, or “lightning strike,” claim that makes legacy financing models inadequate as they are built on the expectation of chronic care and more moderate chronic payments.
These products demonstrate a health benefit and value case, but they still create a challenge to the legacy health care financing models. While all health plan sponsors (commercial and government) face exposure, small and medium self-insured employers in the United States—representing approximately 40 million beneficiary lives—are especially vulnerable to the overall rising cost of care and, in particular, lightning strike claims.
Explore three payment financial solutions
There is no one-size-fits-all solution that can meet the various aspects of the financing challenges and types of coverage that exist. So, addressing the complexities of CGT financing necessitates a tailored and multifaceted approach. Opportunities to create innovative financing models lie both within and outside of the current health care value chain. These opportunities can include supplementing existing offerings or creating new offerings.
Exploring potential solutions requires mitigating the current market frictions and creatively considering novel roles and opportunities for both existing and, potentially, new stakeholders. Bringing solutions to market will require a shift from the traditional health care paradigm. There will be a need for cross-industry collaboration, there may be a need for government or regulatory support, and there might be opportunities for nontraditional players.
Putting aside the idea of potential government intervention in this space, we have explored three innovative models that we believe could fundamentally change the way CGTs are financed.
Existing risk pooling solutions only cover some therapies (typically gene therapies) and are only available to members of the health plan provider that offers the risk pooling solution. Some see the per member per month (PMPM) cost of these models as too high to be viable long term, especially as the number of therapies on the market increases and the cost to access these risk pooling solutions increases accordingly.
We propose creating a supplemental insurance risk pool for commercially covered patients managed by a public benefit corporation, not-for-profit, or other neutral third party. This could reduce the profit margin expectations of the managing entity, align incentives, and reduce the overhead costs of providing this service while increasing the size of the risk pool. In this model, a sponsor would carve out CGT coverage for all its members and instead contribute a PMPM fee to the third party. This fee would be lower than existing risk pooling solutions in the market as it would be covered by an entity with aligned incentives and open across health plan provider networks.
Individual or group coverage for CGTs could resemble existing group life insurance products. These would likely be provided by employers to prevent selection bias, but individual market solutions could also be created. Specific examples include accelerated benefit products, supplemental insurance products, or an extended/optional warranty model for patients.
- In the accelerated benefit product, a patient would receive a premature payout upon CGT diagnosis to cover the cost of treatment.
- The supplemental insurance product could be a rider on a policy, available at an additional premium, to cover the patient out-of-pocket costs as well as indirect costs (cost of caring for a family member, loss of capital and economic productivity) of receiving treatment.
- The extended/optional warranty concept could be purchased at time of care to ensure repayment or a cash outlay to the patient in the event the therapy does not work as intended (duration or effectiveness).
This model would primarily benefit patients and their families. While likely not enough to cover the full cost of treatment (including the therapy), this would provide an added benefit to patients as they undergo therapy and need additional financing support. This is especially important because the patient may have already exhausted short-term disability funds or need additional help over and above what is provided to them.
The third model we considered drives access to therapies through the financial markets. Using financial instruments that exist today could allow for the diversification of the risk associated with the lightning strike nature of CGT claims.
This could take the shape of futures contracts that could be acquired by health plan sponsors to cover the cost of an unexpected future claim. If the claim does not materialize, a secondary market would allow the sponsor to sell the contract to another sponsor that has an immediate need for a treatment.
Alternatively, loan contracts could be structured to amortize the payments related to CGTs. A low-interest loan would make the one-time nature of a CGT more like the traditional chronic care model that health plan sponsors are more familiar with. Those loans with repayment terms could become commodities. If the employee/member left the company after receiving a CGT, the asset could travel with them much like a preexisting solution.
Advancing CGT availability and accessibility
Multiple solutions will be required and can coexist in the ecosystem given the diversity of financing frictions and needs. In developing these models, we can drive more equitable access to life-changing therapies for patients in need today, while simultaneously fostering a more sustainable and efficient health care system for tomorrow. As more therapies move toward market approval, time is of the essence to ensure patients have access to transformational, potentially curative, cell and gene therapies.
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