November 27, 2023

Employers’ Guide to Precision Medicine: Genetic Testing, Treatments and Implications for Coverage

Precision medicine has great potential to improve patient care and outcomes. The speed of clinical progress has been unprecedented, most notably benefiting patients at risk for, or affected by, genetic conditions.

Full Series

Complementing the intensifying focus on genomic science and genetic testing, therapeutic interventions called “gene therapies” have entered the landscape alongside traditional pharmaceutical treatment options. Though these therapies may deliver unprecedented and potentially curative patient success stories, their price tags pose significant cost and plan management concerns. Moreover, their efficacy and effectiveness evidence is only a few years old. We’ve merely scratched the surface of what’s to come in terms of pipeline, long-term durability of clinical outcomes and financial impact to the health system overall, including total cost of care analyses. Nevertheless, with over 1000 gene therapies in clinical development in the U.S.⁴⁵ and more than 2000 worldwide,⁴ employers are seeking a broader understanding of these medications and their impact, as well as strategies to maintain sustainable trend while balancing member access.

Click here for a list of currently approved gene therapies on the U.S. market.

Background

Gene therapies are intended to treat, cure or prevent diseases or medical conditions – from certain cancers and viral infections, to those that stem from an unfavorable variation in an individual’s genetic makeup. Such variation – most often the target of gene therapy – could mean that a whole gene or part of a gene is defective or missing from birth or that a mutation occurred due to environmental or lifestyle factors in adult life.

A complex science also brings with it complex clinical hurdles, including:

• The difficulty of delivery in a real-world setting;
• The possibility of needing multiple therapies down the road when the new gene eventually stops being expressed (i.e., gets diluted out); and
• The fact that there is not always a good animal model for testing these new therapies.⁴⁷

Coverage Sustainability Considerations for Plan Sponsors

• 1 | High prices and ancillary costs: With price tags exceeding a million dollars or more, these therapies increase the volatility of health care expenses and threaten the sustainability of affordable coverage.  The price alone is not the whole story, however. The complex administration of these drugs raises a host of additional considerations for employers, leaving payers grappling with how to cover the total cost of these therapies, which often incorporate extended hospital stays and supplementary services and medications.⁴⁸ In the case of Hemgenix, a gene therapy for adults with Hemophilia B, a one-time injection is priced at $3.5 million.⁴⁹ 
• 2 | Gaps in utilization management, transparency and adaptive adjudication: Another cost challenge is adjudication under the medical benefit, as opposed to the pharmacy benefit. When using the medical benefit, standard utilization management and formulary strategies used by pharmacy benefit managers (PBMs) likely will not suffice or even apply in the case of most gene therapies.  Further, employers report challenges when it comes to understanding the full picture of drug spend within the medical benefit; a lack of transparency may obscure the ultimate cost of these therapies for plan sponsors. The merging of various PBM and health plan entities may offer future hope for more integrated reporting and effective management of drug costs under the medical benefit, but to date, there remain significant transparency deficiencies for employers. Finally, these treatments do not fit within the current payment system structure – insurers cover specialty drug infusions and episodes of hospital care; they do not handle treatments that combine both.⁴⁸   
• 3 | Record-breaking price tags poised to expand market share: By the year 2025, the Food and Drug Administration (FDA) expects to be approving 10-20 gene and cell therapies annually.⁵⁰ Therefore, gene therapy claims will increase steadily for plan sponsors in the coming years.  

• 4 | Existing “cost-containment” approaches do not address the real issue: Gene therapies have escalated market conversations about Rx stop-loss or reinsurance, long-term financing and risk pool models. These approaches may provide a temporary respite with respect to price absorption, but they are not true cost-containment measures and ultimately have no impact on list prices. In fact, when asked about these options, the majority (79%) of large employers do not feel confident that they will manage the impact of high-priced therapies.⁵ Further, while these approaches may alleviate upfront budgeting constraints, employers will still be responsible for rendering payment, be it in the form of high stop-loss premiums, per member per month (PMPM) costs or “mortgage-like” payments for months and years down the road.  

Current Plan Management Approaches

These million-dollar therapies have sparked urgent focus on managing this rising cost for a sustainable coverage environment. When asked about their top pharmacy benefit concern, employers ranked patient and plan affordability of high-cost drugs in the pipeline among top concerns with the top of the list with 92% of respondents either concerned or very concerned according to the 2024 Large Employer Health Care Strategy Survey. When asked how they are currently managing these therapies, responses were as follows (Figure 1):

 

Figure 1: Tactics to Address High-cost Therapies, 2021 – 2026

Source: Business Group on Health. 2024 Large Employer Health Care Strategy Survey. August 22, 2023. https://www.businessgrouphealth.org/resources/2024-large-employer-health-care-strategy-survey-health-and-pharmacy-plan-design. Accessed September 21, 2023.

What Can More Employers be Doing?

• Monitor the gene therapy pipeline and request that plan partners provide:
• Advanced notification when an anticipated high-priced therapy may come to market; and
• Their evaluative strategy related to the therapy’s safety, efficacy, as well as the plan’s coverage considerations.
• Evaluate the potential prevalence of plan exposure via eligible member claims for products as early as possible, working with plan partners.
• Monitor drug spend under the medical benefit carefully and request full transparency on price, discount and/or rebate negotiations that may be taking place with respect to these therapies.
• Create urgency with plan partners on integrated total cost of care forecasting and implications. 
• Ask plan partners what considerations are to be made relative to Centers of Excellence and bundled payments for the administration and follow-up of complex therapies.
• Ask what value-based, outcomes-based and/or risk-sharing payment models plan partners are considering with manufacturers, keeping in mind the following:
• Definitions of value vary by stakeholder, and stakeholder measurements are exceedingly complex;
• Long-term durability of curative efficacy may warrant contracts that allow for extended outcome evaluation periods; and
• Value-based arrangements often leverage manufacturer rebates as a form of payer repayment, but the majority of gene therapies may be adjudicated through the medical benefit, where rebates are less prevalent.

More Topics

Articles & Guides Cost Management Plan Design & Administration Vendor Management