Gene Therapy Explosion Forces Employer Coverage to Get Creative

Employers are grappling with the limits of both traditional and innovative payment models for coverage in trying to offer insurance for cutting-edge cell and gene therapies.

Employer coverage of the treatments is spotty at best, due to the rarity of the diseases they target and price tags that can exceed $4 million.

But their potential to alter a patient’s genetic code to cure debilitating and life-threatening diseases—particularly in children—has employers searching for ways to improve access without bankrupting the business. Strategies include paying over time, negotiating rebates based on the therapy’s effectiveness, and buying stop-loss insurance.

“I would hate to see our system not evolve to handle these transformational, potentially curative one-time treatments, because I think that’s what we sort of deserve as patients,” said Sarah Emond, president and CEO of the Institute for Clinical and Economic Review, which evaluates drug treatments.

The Food and Drug Administration has approved 23 single-administration cell and gene therapies since 2017, totaling 35 approvals with additional expansions. Most approvals have come in the past two years, and roughly 60 more could hit the market in the next three years, according to Milliman Inc.

Nine percent of employers surveyed by the Business Group on Health currently contract with specialized medical providers to offer cell and gene therapies through “centers of excellence.” Nineteen percent are considering doing so within two years.

Popular treatments include Sarepta Therapeutics Inc.’s $3.2 million Elevidys, which treats Duchenne muscular dystrophy, and AveXis Inc.’s $2.1 million Zolgensma for spinal muscular atrophy.

Earlier this month, the FDA also granted conditional approval to PTC Therapeutics Inc.’s Kebilidi, which targets an extremely rare motor function disorder through infusions to the brain.

Some employers may hesitate to shoulder the heavy cost of a one-time treatment for workers who are likely to eventually switch jobs. Manufacturers argue the prices are justified because they offset a lifetime of medical costs patients would otherwise face.

Outcomes-Based Agreements

Several manufacturers offer pricing flexibility through rebates tied to the therapy’s results or a series of payments that can be made over time. These deals are typically struck with insurance companies or pharmacy benefit managers that offer employers supplemental coverage.

The arrangements help when there’s “true uncertainty” about a drug, but often function as just another rebate off the list price, said Anna Kaltenboeck, who leads ATI Advisory’s Prescription Drug Reimbursement Practice. Critics allege the current rebate system incentivizes higher list prices instead of driving them down.

The agreements’ confidentiality provisions could also be keeping effectiveness data secret to the public’s detriment, Kaltenboeck said.

“This is scientifically important information,” she said.

Evernorth Health Inc., the parent company of Express Scripts, covers 10 gene therapies through a subscription-style model. Employers pay $1.25 per member per month, and Evernorth shoulders the financial risk from there.

Neither the employer nor the patient incurs additional treatment expenses, said Kasey Raetz, Evernorth’s vice president of product and pharma contracting and strategy. Total enrollees have jumped to 7.2 million from 6 million roughly a year ago, she said.

“A lot of these approvals are for much more prevalent conditions,” Raetz said. “So as I’m talking to plans it’s no longer a question of if they’re going to have a patient. It’s more so when and how many patients they’re going to have.”

While subscription models are one of the most promising payment innovations, they can also exclude patients with pre-existing conditions, said Emond. Evernorth said it has taken steps to address the issue.

Stop-Loss Insurance

Self-insured employers often purchase stop-loss insurance to hedge against unexpected, expensive claims. The agreements typically cover employee medical costs above a certain threshold, and are offered by consultancies, health insurers, and other insurance companies.

Stop-loss options are growing as concerns around a potential surge in demand for cell and gene therapies have waned, said Jessica Naber, a principal and consulting actuary with Milliman who specializes in the treatments. Patients seeking them out tend to have the most severe cases, or conditions with no other treatment options.

“It does seem that initial fear of the flood of patients has not hit yet, and so therefore it’s still being covered under traditional means like stop-loss,” she said.

Of the 17 one-time therapies approved by the Food and Drug Administration at the end of 2023, only eight had been used by more than 10 patients, according to Naber’s analysis of 60 million commercially insured enrollees. Kite Pharma Inc.’s $425,000 lymphoma CAR T-cell therapy Yescarta had the most claims, at just 413 since its 2017 approval.

The diseases the therapies target are rare, and not all eligible patients opt for the often grueling treatment process. Receiving a treatment might make the patient ineligible for a possibly easier or more effective version later on, Naber said.

Coverage Concerns

Stop-loss policies often come with caveats. Insurers can omit certain drugs from their policies, and—unlike health insurers—can exclude coverage for pre-existing conditions. Stop-loss insurers can “laser” a specific enrollee or drug to set higher coverage thresholds, effectively removing financial protection for the employer.

Some states have imposed restrictions to prevent employers from offloading too much financial risk onto stop-loss carriers in a bid to close potential loopholes for employers looking to skimp on health coverage.

House Republicans in June 2023 passed a bill from Rep. Bob Good (R-Va.) that would exclude stop-loss insurance from federal health regulations under the Employee Retirement Income Security Act. Education & the Workforce Committee ranking member Bobby Scott (D-Va.) said then that while the legislation would ultimately preclude the Department of Labor from reining in any future abuses.

Good lost his reelection, but his bill was previously folded into a larger measure on alternative insurance plans, which are likely to make a comeback when Republicans gain full control of Congress in January.