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Health Trends 2021: Paying for New Medical Miracles

March 09, 2021 | Health Trends Report

Million-dollar treatments are becoming more common. How can the health care system financially take them on?

Recent discoveries are, in some cases, completely changing the rules of intractable disease. Gene therapies, in particular, can sometimes offer durable improvement or complete cures, and the U.S. Food and Drug Administration (FDA) expects to approve up to 20 such therapies a year by 2025.,adding%2050%20additional%20clinical%20reviewers “The drug pipeline is very exciting from a clinical point of view,” says Joanne Armstrong, M.D., M.P.H., Chief Medical Officer for Women’s Health and Genomics, CVS Health. “We are seeing powerful therapies, and as these prove their clinical worth, we expect to see more.”

The challenge: These drugs can come with unprecedented price tags. One therapy for a muscle-wasting disease costs more than $2 million for a one-time dose. A gene therapy for a hereditary form of blindness costs $425,000 per eye. A recent CVS Health study estimated gene therapies treating just 11 conditions could add an additional $45 billion to health care costs over the next five years.

As these game-changing treatments enter clinical practice, it’s up to the entire industry — payers, providers, drug manufacturers and other health care stakeholders — to get them to patients without bankrupting the system. A number of innovations on the payment side are aiming to do just that.

Value-Based Contracting

The idea behind value-based contracting is simple: Reimbursement for an expensive drug is tied to whether it performs as promised. “Though the drug may promise to cure these patients for life, these are early days in their use,” says Armstrong. “What we’re saying is, show us the clinical value proposition first.” For their part, manufacturers are open to strategies like this as a way for patients to gain access to their product — and indeed, many have already been experimenting with models like this on their own. Novartis, the maker of the $2 million drug, is offering insurers a five-year installment payment plan, with refunds if the gene therapy doesn’t perform as expected. CVS Health has drafted a number of these contracts, and the formula for both parties can be complex, taking into account how the drug is administered, expectations for recovery and the role of side effects and other clinical issues.

Medical and Network Management

With the financial stakes of a high-cost drug, it’s critical to see that the treatment is administered in the best way and to someone who has the greatest potential to benefit. “We want to make sure these high-cost drugs are going to the right patients in the right setting,” says Armstrong. One effort takes a page from a CVS Health protocol improving outcomes for members who need bone marrow and organ transplants. The National Medical Excellence (NME) program partners Aetna case managers with experts at hospitals and other health care settings that have demonstrated superior track records and medical standards, ensuring that a major procedure is administered with the greatest chance of long-term success.

In the case of gene therapy, for example, that medical management partnership would apply in many of the same ways, but also extend to collaborations with the manufacturer. Additionally, CVS Health is forming a designated network of gene therapy, cellular and other innovative therapies (GCIT™) providers who meet product, quality and economic standards.

Headshot of Joanne Armstrong

“The drug pipeline is very exciting from a clinical point of view.”

Joanne Armstrong, M.D., M.P.H., Chief Medical Officer for Women’s Health and Genomics, CVS Health

Financial Protection Plans

One place a multimillion-dollar bill would be felt immediately is among smaller payment pools, such as self-funded employers. Stop-loss insurance is a way to cap those out-of-pocket expenses for claims at an agreed amount. CVS Health recently made available a gene therapy stop-loss program to Aetna and CVS Caremark PBM self-insured employers who do not otherwise have coverage. A separate, installment payment plan for select gene therapy products can also spread the payment of high-cost claims over several years. “These strategies give plan sponsors an approach to prevent them from the alternative — not covering these therapies at all,” Armstrong says. “That just wouldn’t be good for medicine.”

Since many of these payment strategies are so new, the coming year will bring a test of their success in managing costs for employers and patients. But industry experts see more value-based contracting as a way to prepare for paying for the next generation of pricey drugs. As other, larger patient populations with costly diseases — such as hemophilia — enter the payment pool, this kind of innovation will become even more critical to pursue.