By Erin Harris, Editor-In-Chief, Cell & Gene
Follow Me On Twitter @ErinHarris_1
Alliance for Regenerative Medicine (ARM) is the global voice of the cell and gene therapy sector, and during the 41st Annual J.P. Morgan Annual Healthcare Conference in San Francisco, ARM’s CEO, Tim Hunt, delivered the State of the Industry Briefing. Hunt’s presentation delivered important information about how the CGT sector fared last year and where it’s headed in 2023 and shortly thereafter.
The Good News …
Worldwide, 2023 is expected to deliver 2,220 active clinical trials, as 43% have sites in North America, 38% in APAC, and 18% in Europe. Two hundred two trials are in phase 3, and there are more than 100 clinical trials ongoing around the world for gene editing technology. Fifty-eight percent of trials have potential applications in a prevalent disorder. Sixty percent of trials focus on oncology with near equal representation in liquid and solid tumors. The sector has seen 11% growth in the number of developers working in service of patients and in the form of startups.
The Not-So-Good News …
When it comes to modernizing healthcare to ensure patient access, the U.S. has a LONG way to go, BUT change is feasible. Hunt explained that the science behind cell and gene therapies is progressing rapidly to the immense benefit of patients. But the question remains – as we’re seeing larger patient populations, will these new therapies be a “forcing function” that makes some, including payers, think about systemic reform, modernization of how they do business? Can they modernize to keep pace with the science? These questions are complicated, so just imagine the complexity of the potential solutions. I caught up with Tim Hunt just recently to better understand his take on the challenges the U.S. faces when it comes to healthcare system modernization. “I would pinpoint three hurdles to overcome in modernizing the U.S. healthcare system for cell and gene therapies: first, removing state-level access barriers and allowing cross-state reimbursement for advanced therapies; second, modifying the Centers for Medicare and Medicaid’s two- decade old New Technology Add-On Payment (NTAP) system to better accommodate advanced therapies; and finally, supporting state Medicaid programs to address payment and access challenges through value-based agreements adoption.”
One-Time Payments? Annuity-Based Payments? Outcome-Based Rebates?
Dr. Peter Marks has gone on record stating that OTAT shall be reorganized to a “super office,” the Agency will be filling current vacancies. In fact, Dr. Marks and I had a lengthy discussion about this exact topic on a recent episode of Cell & Gene: The Podcast. Yes, we need to modernize payment systems across Medicaid, Medicare, and private insurers and expedite access to CGTs. The changes Dr. Marks and I discussed are necessary to help bring real improvement to the sector, and that includes payments.
Because of their limited durability data, one-time administration, and/or price ranges of hundreds of thousands to millions of dollars per patient, CGTs struggle to fit into the traditional treatment and reimbursement paradigms designed for treating chronic diseases.
In a recent article for Cell & Gene, authors Visakh Prabhakar, Sam Worrapong Kit-Anan, Zachary Kleiman, and Youbean Oak, Ph.D. explain that in an effort to share in their inherent risk, cell and gene manufacturers have collaborated with payers to develop multiple access pathways — including managed access agreements, early access programs, and innovative payment models — to help enable therapies to reach patients and be commercially attractive to warrant investment. Among those, manufacturers are increasingly turning to innovative payment models that address payer uncertainty across both financial (through discounts, price volume agreements, sales caps, annuities, etc.) and clinical outcomes (through outcomes-based agreements, coverage with evidence development, etc.). Many types of innovative agreements exist, and each presents pharmaceutical companies with opportunities and challenges to fulfill short- and long-term strategic access priorities and meet the needs and expectations of payers.
Regarding gene therapy specifically, they are the most expensive therapeutics to ever launch, with prices in the range of millions of dollars per patient. It is important that companies carefully consider their pricing strategy as flexible pricing approaches can aid in payer negotiations and assist in unlocking large segments of the eligible population. In an article for Cell & Gene written by the team at Trinity Life Sciences, authors Hanson Koota, Blair Miller, Shannon Anderson, Keren Shani, Theresa Morley McLaughlin, and Nathan Buchwald state that for fixed cost approaches, which include one-time or annuity-based payments, there is the potential for strong payer pushback due to gene therapies’ high cost. Most simplistic from a forecasting perspective, one-time payments will result in a revenue uptake curve that directly reflects the number of treated patients. For annuity-based payments, although the total cost is still fixed, revenue is spread over a set period (e.g., 5-10 years), leading to a delayed revenue peak. There is no precedent for this. With outcomes-based pricing, including rebates, interval payments and payment over time, companies have the potential to negotiate a higher overall price with payers by linking payments to treated patients’ clinical milestones. The effect of each outcomes-based pricing approach on revenue varies based on the timing of both payments and patient outcomes assessments.
The authors explain that in outcomes-based rebates, the full cost of the drug is paid upfront, but the manufacturer is responsible for paying rebates if patients miss pre-determined efficacy milestones. While revenue for outcomes-based rebate pricing will follow treated patients, issued rebates over time will lead to a steeper drop-off. The two other outcomes-based pricing strategies, spread payments out over time and include outcomes-based fixed interval payments or outcomes-based payments over time. With fixed interval payments there is a set price paid at treatment, with a few additional milestone-contingent payments. This method’s uptake curve would be similar to annuity-based payments with a delayed revenue peak, but the former would be slightly flattened due to some patients missing milestones. In contrast, outcomes-based payments over time would consist of smaller payments over a longer period of time, pending the continued durability of the gene therapy. This would lead to a long revenue tail.
Hunt’s question remains – can the various stakeholders modernize efficient payment structures quickly enough to keep pace with the science? This exact argument has been going on for years. This may be the year we experience real improvement.