Gene Therapy Needs New Payment Model, Experts Say

A pair of medical experts – one from industry and one from academia – have teamed up to call for a new payment model for expensive gene therapies.

A pair of medical experts — one from industry and one from academia – have teamed up to call for a new payment model for expensive gene therapies.

CVS Health’s Troyen A. Brennan, MD, JD, MPH, and the University of Pennsylvania’s James M. Wilson, MD, PhD, argue gene therapy should be treated differently by payers. They make their case in the September edition of Nature Biotechnology.

“Unlike most rare disease treatments that can continue for decades, gene therapy is frequently administered only once, providing many years, even a lifetime, of benefit,” said Wilson, in a University of Pennsylvania press release. “Under current reimbursement policies, private insurers and the government typically pay for this therapy once: when it is administered. But these individual payments could reach several million dollars each under current market conditions.”

Brennan and Wilson note that single, up-front payments require payers to fund the therapy based on clinical trials that lasted less time than the expected long-term benefit of the therapy. Instead, they propose an annuity payment system where payments would be made over a defined term and only if evidence shows that the therapy continues to work.

The pair says this approach would end up lowering costs. For example, a gene therapy that under current payment models might cost $4-6 million up front, could instead be paid for using a $150,000 efficacy-dependent annuity. The payments would be spread out over a longer period of time, but the ultimate cumulative price tag would be smaller, the doctors say.

Wilson argues the checks and balances of such a system would bring better incentives to bear on gene therapy payments.

“The annuity model that we’re proposing would eliminate the misguided incentive to invest in drugs and treatments with ongoing revenue streams but which require continuing, perhaps lifetime daily administration, with all the attendant inconveniences and burdens to patients and their families, as well as the direct and indirect costs to the nation’s healthcare system,” Wilson said.

Gene therapy eliminates many of those ongoing administrative costs, he said.

Still, the authors concede that challenges would exist pegging the annual payment amounts and developing the proper efficacy benchmarks. Addressing the former, they suggest the government could set the benchmark, setting prices for Medicare that would then be followed by private insurers.