Precision medicine with precision management and precision pricing; ensuring affordability in the cell and gene therapy era

Written by Dorinda Hickey on Friday 31st May 2019

Last week’s third plenary session at ISPOR in New Orleans focused on affordability in the face of new and expensive therapies and asked the question “is affordability driving a need to revolutionise drug pricing?”

The imminent explosion of cell and gene therapies raises issues of affordability for all health systems, not just for low and middle income countries.  The one off cost of £0.25m up to £1m per treatment might not be that much more than the lifetime cost of these patients to the health system, but the fact that it falls into the drug budget in one fell swoop is a problem for payers.  If payers want to ensure access to these treatments, there will need to be a change in the cost curve; but current barriers to progress in this area include perverse financial incentives, separation of hospital and drug budgets and inefficiencies within the system. 

In the US the drug budget comprises 11-15% of total healthcare expenditure and 90% of this is taken up by generics.  Yet the drug budget is the only part of the health economy that is subject to cost containment.  Inefficiencies in the other parts of the system, if addressed, could play a role in driving change and facilitating a bend in the cost curve to accommodate new and expensive cell and gene therapies.  In addition to this, insurance plans demand lower co-pays for hospital costs i.e. 3% compared with 14% for drug costs; so there is a perverse incentive to hospitalise rather than adopt new technologies which keep patients out of hospital.   Even the QALY is not considered to be perfect for setting prices by not including the wider societal benefits of new therapies which could be taken into consideration.

Differential pricing of these technologies based on willingness to pay is a key driver of equitable access across the globe and is implemented by manufacturers, but hampered at the same time by international reference pricing.  If pricing in low income countries is adopted more widely across the globe, this will kill innovation by driving a race to the bottom.  The plenary panel urged the consideration of access and innovation as a global enterprise where all stakeholders have a role to play and each economy should pay for innovation in so far as it can.

Potential methods of payment proposed for expensive cell and gene therapies include:

  1. Milestone based payments in the first and second years of treatment linked to performance
  2. Performance based annuities over the longer term with payers taking responsibility for patients who move plans in the US
  3. Insurance carve outs, reinsurance and specific contractual arrangements
  4. The “Netflix” example of the Louisiana state approach to hepatitis C elimination which is based on unlimited access for a pre-specified budget taken from pooled treatment and correction expenditures.

Even if acceptable payment methods are agreed, the issue of affordability is unavoidable.  In the UK affordability is managed by capping expenditure on new technologies at £20m in each of the first 3 years.  Early discussions between pharma and payers are encouraged and are a major factor in ensuring access and affordability, allowing the health system to anticipate and manage the impact of high cost technologies.  The panel proposed a move away from approaches to pricing such as international reference pricing and a move towards active incentives for innovation.  They also proposed increased responsibility for evidence development on the part of payers and providers who have abdicated this responsibility to manufacturers.  The panel agreed that evidence is the key to ensuring efficiency in the system; driving the right investment in optimal treatments, guidelines and pathways and ensuring affordability for new technologies.

For more information on how OPEN VIE can help with your market access and evidence challenges, please contact:

Dorinda Hickey, Joint Managing Director, OPEN VIE

+44 (0) 1628 481112