As of the third quarter of 2024, there were 2068 cell and gene therapies in the pipeline, with 38 approved by the US Food and Drug Administration.1,2 These therapies range in cost from $373,000 to $4,250,000 per treatment.3,4 Unlike other medications and treatments, which may be given over extended periods or even over a patient’s lifetime, these therapies are often intended to be a one-time, curative treatment, which helps explain their relatively high costs.5 Payers have demonstrated increased interest in innovative payment models for these high-cost treatments to improve affordability, decrease exposure to shock claims, and help protect their investments if the treatments do not provide the outcomes they promise.6
Among different payment and reimbursement models, one type that has been explored by various stakeholders is an outcomes-based agreement (OBA). OBAs can come in a variety of structures, such as full payment up front with a full or partial refund of the treatment cost or an additional payment to cover the cost of alternative treatments if a prespecified outcome is not met at a specific milestone after the treatment. A benefit of such agreements is that they can reduce the risk to the payer of payment for a high-cost treatment that does not provide the outcomes expected. However, coming to an agreement among all stakeholders on what those outcomes should be (and at what time) can be difficult, considering the need to identify end points that are clinically meaningful and amenable to the collection and reporting by the payer.
Another potential risk for a payer in an OBA-type agreement is that it may be difficult to track patients over time, particularly if they leave the plan during the contract period. Lastly, for payers, given that OBAs may not be paid out for several years, the initial budget impact is still significant, and the long-term budget impact is unpredictable given the uncertainty of payout from these types of agreements. This is a challenge for payers that focus on budgets from an annual time horizon. From a manufacturer’s perspective, they may feel they are taking more than their share of the risk, given that there may be multiple ways a patient can demonstrate positive outcomes, and a good or bad treatment outcome is likely to be multifactorial.5OBAs, also known as value-based contracts, also benefit manufacturers more than traditional rebates when it comes to reporting for Medicaid best price. Recent updates to rulings exclude value-based commercial sales from the calculation of the Medicaid best price, meaning those discounts will not be mandatory for sales of the drug outside of these OBAs.7
OBAs can also be structured so that payers only make a payment when a response or clinical outcome is achieved. In this scenario, more of the risk falls to the manufacturer to ensure the patients are tracked and outcomes reported. Manufacturers are at risk of not receiving payment, or only receiving partial payment, if the specific outcome is not achieved within the specified time frame. With payers, the unpredictability of budget impact is still present.5
Payment over time or installment models offer a payer the opportunity to pay in multiple installments over a set time. This may be particularly beneficial for smaller payers, who may not be prepared for the large up-front costs associated with these therapies. For a larger payer, these types of payment methods are typically not preferred as they would rather recognize the cost up front and within the benefit year that the treatment occurred for budgetary reasons.
Another emerging model gaining traction with stakeholders is the warranty model. In this model, manufacturers purchase a patient-specific warranty policy that reimburses treatment-related costs in the case of suboptimal outcomes. Based on the arrangement, payers and/or patients can be reimbursed for their share of the costs for the therapy. Warranties attempt to solve for the challenge of reaching alignment on outcomes for the contract; in many cases, the manufacturer develops the terms without input from the payer. While this can simplify the development of the contract, it also removes the payer from the discussion. Thus, this model still can mitigate the clinical uncertainty of a high-cost therapy, but it does not impact the high up-front cost. Warranty adjudication may also require the payer and/or provider to identify patients who experience suboptimal outcomes, which may lead to additional resource needs.
Subscription models are another method being explored to spread the risk among payers (TABLE). In this type of model, a payer pays a fixed subscription fee for their population over time that will provide them with coverage should any members in that population have a claim for a covered therapy within the subscription plan. Risk can be spread across multiple payers that are participating, and it provides a predictable budget impact. The downside of these models is the payment of additional premiums and shifting the risk when that might not be the desired result if the payer is able to appropriately forecast budget impact and account for the risk within their own product offerings.
