Pharmacy Benefits Uncut

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If you ‘re like most employers, your drug spend has exploded over the past few years and now likely consumes close to 30% of your total healthcare spend, with seemingly no end in sight. In fact this trend is set to continue with a median annual list price north of $370,000 for new drugs approved by the FDA in 2024, more than double the price for drugs launched in 2021.

One of the key reasons for these astronomical drug prices is the growing number of treatments for orphan diseases (defined as affecting fewer than 200,000 Americans). In 2024 72% of drugs launched were for orphan diseases, up from 51% of drugs launched in 2019. And the most expensive of these drugs are cell and gene therapies (CGTs) with price tags of up to $4 million.

With more than 60 CGTs expected to be available by 2030, you as an employer need to stay ahead of the curve when it comes to these therapies.

So today I’m going to share what you need to know about CGTs and how to address their risks and benefits.

CGTs Versus Conventional Drugs

Conventional medications are usually aimed at managing a condition. For example, we use pills to lower blood pressure in patients with hypertension or insulin injections to lower blood sugar in diabetic patients. These therapies treat a condition, but they don’t cure it.

CGTs, on the other hand, aim to tackle the root cause of a condition by repairing or replacing the cells or genes that are causing the disease, thereby providing a functional cure.

Gene therapies work by altering a patient’s genetic instructions through replacing a faulty gene, turning off a harmful gene, or directly editing a gene.

Cell therapies use living cells to treat conditions by restoring damaged cells or modifying defective ones to improve function. Cells can also be used as vehicles to disperse treatments throughout the body.

CGTs can be used to treat genetic disorders such as spinal muscular atrophy (SMA), hemophilia, and some forms of inherited blindness. They have also been used to treat certain cancers, and work is underway to develop CGTs that could potentially treat more common conditions such as diabetes, heart failure, and Parkinson’s disease.

While conventional medications are taken on an ongoing basis, CGTs are usually administered as single doses or as a defined number of doses, and almost always require infusion in a hospital or specialty care setting. Additionally, many patients receiving CGTs require complex care before, during, and after therapy.

Effectiveness of CGTs

CGTs offer clinical promise for patients suffering from incurable, difficult to treat conditions and are brought to market with loads of fanfare about their potential to revolutionize the treatment of certain diseases. But evidence of their effectiveness is mixed.

Let’s look at the example of hemophilia, a genetic bleeding disorder for which three gene therapies have been approved to date: Hemgenix, Roctavian, and Beqvez. While Hemgenix has demonstrated evidence of helping hemophilia patients achieve a longer-term functional cure for their condition, the commercialization of both Roctavian and Beqvez has been halted because of a lack of effectiveness. Specifically, predicting which patients will respond to the therapies and the high variability in the extent of the response, along with determining which patients will experience side effects is difficult. Furthermore, these therapies demonstrated a loss of durability – in other words they were billed as lifelong curative treatments, yet their effectiveness was not sustained.

Another example to consider is Zolgensma for the treatment of spinal muscular atrophy. Although this therapy has achieved blockbuster status (defined as sales of greater than $1 billion), it also hasn’t lived up to its intital therapeutic promise. It was initially touted as a one-time curative therapy for SMA, but recent evidence strongly suggests that it’s a treatment rather than a cure for this condition. Realistically it’s transforming SMA from a deadly disease into a more chronic one.

Here's what you need to keep in mind: Most CGTs are approved on the basis of uncertain evidence about their effectiveness and safety and additional evidence will most likely be required to confirm or refute the initial findings.

Risks and Benefits of CGTs for Employers

Of course as an employer, you want to provide access to the most effective therapies for your plan members to improve their health to the greatest extent possible, and by extension reduce future healthcare spending and increase productivity.

But the combination of stratospheric prices and clinical uncertainty with CGTs presents employers with a unique set of challenges related to decisions about reimbursing these therapies.

A recent survey found that 33% of employers include CGTs in their benefit plans, with 36% actively evaluating CGT coverage strategies, and 58% of those currently excluding CGTs planning to implement CGT strategies in the next 24 months.

Given that these therapies range in price anywhere from $200,000 to $4 million along with accompanying ancillary costs, a single claim can represent real financial risk particularly if you’re a self-insured employer.

Here are three things to you can do to address the financial risks of CGTs while offering the benefits of these therapies to plan members who require them:

1) Implement a process to conduct detailed, objective assessments of evidence related to a CGT’s effectiveness, safety, and cost-effectiveness. It’s okay to limit or delay access to therapies whose evidence is uncertain. Your goal should be to provide plan members with access to therapies that meaningful improve their health at fair prices, and if a CGT doesn’t meet these criteria you should say no to it. Just be sure you have a plan to re-assess your decisions as new evidence emerges.

2) Take steps to mitigate your financial risk. The first step is to ensure you’re paying value-based prices. Paying millions of dollars for a therapy with uncertain outcomes represents poor value for money. Paying this sum of money up front for a one-time treatment that may or may not live up to its claim of providing a functional cure for a chronic disease is accepting a huge risk. Negotiate prices and consider implementing outcomes-based agreements where payment is tied to durable outcomes. If the therapy fails or its effectiveness wanes over time, the manufacturer refunds or shares the cost.

3) Evaluate your financial risk related to CGTs and develop a plan a plan to fund or off-set it. Estimate your risk of CGT claims based on how many plan members you cover, disease incidence, anticipated availability of therapies, and projected cost per claim. And don’t assume your stop-loss plan has you covered. Some stop-loss policies exclude or strictly limit reimbursement of CGTs. Read the fine print and figure out where your carrier stands on CGTs.

The Bottom Line

CGTs represent both the potential for new approaches to treating severe, difficult to manage diseases and the risk of financial unsustainability owing to their sky-high prices. Navigating this landscape is something every employer will have to eventually face. But implementing a proactive system to objectively evaluate the clinical benefits of these therapies and address head-on the financial risks they pose will put you in a position to provide fair access to CGTs for plan members who have the greatest chance of benefitting from them.

That's all for now.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com

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