What Managed Care Organizations Should Do About High Cost Therapies

October 24, 2018

How can payers cope with new, ultra-expensive therapies?

One of the biggest problems facing healthcare today is the inability of traditional healthcare models to keep up with the rapid pace of innovation. This is especially true with new advances like gene therapies, which can cost hundreds of thousands of dollars even as they hold great promise for patient treatments.

To help payers better navigate the problem of absorbing these high-cost medications, Jane F. Barlow, MD, MPH, MBA, senior advisor at the MIT Center for Biomedical Innovation, gave a talk at AMCP Nexus titled “Coverage and Reimbursement for High Cost Curative Therapeutics: Does a Solution Exist?”

While there are still only a handful of gene therapies available, Barlow said the number of therapies is likely to be around 40 approved by 2022-though there are a total of 932 in the pipeline. According to Barlow, around half of those approvals will be in the oncology market. Around a third will be in the orphan drugs category, while around an eighth will be in what Barlow called the “quantum leap” category-drugs that will radically alter current treatment paradigms.

Challenges

Barlow identified three main concerns for payers attempting to cope with the coming onslaught of these high-cost therapies:

  • Timing. The timing of payments is and will be a problem with these medications. Since most require only a one-time treatment, the cost of treatment is largely front loaded. The problem for payers is how to divide up these costs over time. This raises additional concerns over patients who move from plans during that payment period-if a patient moves from plan X to plan Y three years into a five-year payment plan, should plan X still be on the hook for those payments?
  •  Product performance and value. While these therapies promise great value, there is no long-term evidence of efficacy. Payers must ask questions of efficacy and durability-who will these treatments work for? For how long?
  • Actuarial risk. Most gene therapies will only be utilized by very small populations, meaning that smaller plans aren’t likely to even ever see a patient needing coverage. Payers must weigh the likelihood of encountering the need for certain therapies.

As new therapies are announced and gain more coverage, more payers are thinking about what they will mean for their plans. Barlow cited payer surveys from early 2017, late 2017, and early 2018. In the earliest studies (before the approval of Kymriah, the first CAR T therapy), very few payers were even thinking about gene therapies as a potential problem. Later surveys indicated that more payers are considering how they will react-many indicated that they are looking for alternative financing and reimbursement models.

Another key takeaway from those surveys is that different payers will require different models based on the payer’s size and needs. Therefore, any new plans would need to be tailored to individual payers to some degree.

Possible solutions

Barlow offered some economic models for how payers can adapt. The first was milestone-based contracts. These are short (less than two-year duration) and have a series of pre-determined milestones that will trigger payouts.

The second model Barlow discussed was performance-based annuities. This plan is longer (more than two years, likely between three and five). This kind of plan would spread payments out over that period, or could even pay the cost upfront with reimbursement for poor performance.

Overall, Barlow stressed that new models will require some common structural elements:

  • Patients must be treated only to the therapy’s label.
  • The annuity duration must remain constant (e.g., 20% every year over five years).
  • A common performance metric.
  • An arrangement in place for patients who move from a plan to another participating plan.

However, payers will also have plan-specific elements:

  • Price of a therapeutic.
  • Provider reimbursement for initial treatment and follow-up care.
  • Specific patient deductible and copay levels.
  • An arrangement when patients move to another non-participating plan.
  • Program implementation mechanics.