• Articles
  • June 2021
  • 5 minutes

Gene Re-Education: How Gene Therapy Promises to Challenge and Transform Insurance

  • ​​Barbara Tomlin
Skip to Authors and Experts
DNA with pills in glowing nodes
In Brief

It's the million-dollar question: how should insurers respond to an emerging class of gene therapeutics that promise to cure or ease debilitating genetic disorders, rare diseases and cancers but can cost upwards of $1 million per treatment. Learn highlights from an exclusive client webinar featuring experts from RGA's ROSE® Consulting Group and Optum.



Q: Gene therapies are all over the news, but it can be difficult to connect how a treatment in an IV can result in the precise insertion of a gene. Could you explain how the treatments work?

Gene therapy is potentially life changing, but it’s also very complex. Essentially, you are using a viral vector to deliver a healthy gene to target cells in order to replace the function of a currently defective gene. Viral vectors can also deliver the machinery to produce a protein that is not produced by the target cell or to up-regulate or down-regulate the expression of a specific gene in a target cell that is not functioning properly in the body.

As you can see, gene therapies are not one size fits all. Most of the therapeutic pipeline consists of one-time treatments and could be viewed as a single procedure rather than a chronic therapy. But about 20% of the market represents therapies that will require maintenance dosing.

Q: You mention repeat visits, and this has an implication for expense. But what role does delivery play. Do costs and complexities differ based on how these therapies must be administered? 

There is a big difference. Think about the family of gene therapies as split into two categories:  between in vivo therapies, or treatments that are injected into the body and act on cells that never leave the patient, and ex vivo gene or cellular therapies in which targeted cells are removed and the therapy is administered to the cells in a lab  The treated cells are then re-introduced to the patient's body.  In vivo therapies typically require a one-time direct transfusion – and these types of drugs represent approximately 40% of the overall pipeline of therapeutics.  They enjoy simpler, lower cost administration. In vivo treatments generally target a cell type that replicates slowly, such as motor neurons, retinal cells, even liver cells, so a one-time infusion can be effective.  That said, given the accelerated approval process for these therapies, the actual long-term patient outcomes may be uncertain.  

Contrast this with blood disorders such as sickle cell or beta thalassemia, where the target cell regeneration occurs more frequently.  The ex vivo mechanism is needed to ensure the treatment is delivered to the appropriate stem cells which produce mature blood cells. Procedurally, this method has a lot in common with a stem cell transplant, where target cells must be harvested, treated, and reinfused.  In this case the treatment is personalized for each patient.

Read more: Brief Report: Gene and Cell Therapies

Q: Does the size of the patient population influence the cost as well?

That’s important. This is personalized medicine targeting rare disease patient populations. Because these treatments are very niche, the costs are higher. We're seeing therapies exceed a million-dollar price point.  Because of the volume of therapies in the research and development pipeline, we are nearing inflection point. We expect to see rapid growth based on clinical trials – we’re watching just shy of 1,800 therapeutic targets. And when we forecast out the number of therapies, expected spend on the drugs themselves, and the administrative costs, you see that, we're going to grow from what's roughly about $4.5 billion market today to almost $47 billion dollars by 2026. So that's a pretty significant growth rate.

Q: That is an understatement. Given the ultra-high cost of many of these therapies, it seems likely that the industry is looking at significant actuarial risk and volatility, particularly for the self-insured health care market?

So, let’s talk about those market challenges: The reality is that for a self-insured plan, the cost of one or two therapies could represent a small plan’s entire medical spend for a given year. So, figuring out how to create greater predictability is critical. But in addition, these therapies are being studied in very small clinical trial populations, because of their rare nature and potentially curative benefits. They are being accelerated from a time-to-market standpoint, and it’s worth pointing out that the accelerated approval process means that actual long-term patient outcomes may be uncertain. So, there are unanswered questions both regarding specific clinical outcomes in different patient populations, and regarding the endurance of the therapies.

And the big question for these therapies is how do we ensure that price points being introduced are appropriately aligned with the real-world health outcomes that are being delivered to patients?

For the ex vivo therapies, there's a very complex supply chain process, so there are additional questions with respect to how do we manage this supply chain to ensure that the personalized therapy gets to the right patient, while also managing mark-ups that occur as the therapy moves through the distribution process?

Learn more: Precision Medicine and Targeted Cancer Therapy

Q: All good questions. Given that these are very small patient populations and a given payer may not have more than a handful of claims, how much leverage is there to negotiate on price?

Arriving at the appropriate price for these therapies will be challenging. But by remaining focused on the need to provide patient access to these transformative therapies both manufacturers and payers are incentivized to ensure that the real-world outcomes are commensurate with the price paid for therapy. And that's really where the outcomes-tracking and outcomes-based contracts come into play.

Q: That makes perfect sense. Another question insurers may be asking is how to manage the treatment delivery cost?

I would reframe that as how do we ensure high-quality delivery of care while also managing markups through the system? And that's really where a lot of the tools that we use today such as provider contracts, centers of excellence networks, and patient navigation become really a key part of the management strategy.

The reality is that for a self-insured plan, the cost of one or two therapies could represent a small plan’s entire medical spend for a given year. So, figuring out how to create greater predictability is critical.

Q: You had also mentioned the need to manage volatility for the health plans, the impact of these kind of rare but ultra-high cost events can really kind of upset the apple cart with respect to plan economics.

For smaller self-insured payers there is a need to provide access to these therapies, but also to smooth the payment over time. The challenges payors face really are dependent upon their size and ability to absorb risk.  Several national payors are introducing risk bearing products or risk pooling solutions to help address some of that volatility. Optum also has the vision that by enabling longitudinal outcomes-tracking through outcomes-based contracting, the payment models for these therapies will likely evolve over time.

Q: In other words, to effectively manage gene therapies, payors are going to need a unique set of tools and solutions. What should payors be asking themselves right now?

Payors should be looking at everything and need to stay ahead of the curve. Examine how you establish coverage criteria and what prior authorization and/or utilization management strategies make sense. Think about contracting with centers of excellence networks and negotiating bundled payment contracts with high quality providers to ensure positive patient outcomes while also managing any mark-up on the therapy itself.   

From a volatility standpoint, it is important to understand a plans’ risk exposure to the evolving drug pipeline in order to plan for volatility and manage that risk.  And then from the pricing standpoint, it’s about negotiating or participating in well-designed outcomes-based contracts that ensure that the price paid for a therapy is commensurate with the outcomes achieved for patients. 

For those who aggregate risk, it will be important to understand what size of a risk pool is necessary to appropriately price that risk.  Beyond this, there is a need for robust analytics and predictive modeling, pricing and underwriting tools, as well as solutions that start to aggregate sizable risk pools.

Q. How do we manage treatments with such limited clinical evidence?

Again, that’s really where long-term outcomes-tracking and outcomes-based contracts become critical.  By tracking meaningful patient outcomes over years instead of months and sharing risk, manufacturers, payers and providers learn how best to manage these therapies so that patients achieve the best outcomes. 

Because these patient populations are small and dispersed, payers and manufactures will need a multi-payer platform to measure outcomes as patients migrate from health plan to health plan or are treated in centers of excellence and then managed in their local communities.  Optum, with its unique position in the healthcare system supporting both payers and manufacturers and providers, is well positioned to enable this capability. 

Learn more: Case Management: Digging Deeper to Avoid Overpaying Claims for Clinical Trials

In these early days, it may seem like we have more questions than answers when it comes to gene therapies, but these transformative therapies hold the potential to provide meaningful benefits to patients with limited treatment options today, as well as transform the therapeutic options for more common conditions like diabetes and heart failure in the future.   

More Like This...

Related Solutions

Meet the Authors & Experts

Barb Tomlin
​​Barbara Tomlin
Director (Ret.), ROSE Consulting Group, Quota Share