NPC in Health Affairs: Payment Innovation Not Keeping Up

Innovative treatments that treat – and often cure – orphan diseases are some of the most remarkable on the market today. In many cases, these are one-time treatments that completely change a patient’s life, reaping benefits far beyond when the drug is taken. Innovation on the medicine side, however, is far outpacing innovation on the reimbursement side, jeopardizing patient access.

In a new Health Affairs article, NPC’s Mike Ciarametaro and Brian Sils, along with MIT’s Mark Trusheim and Casey Quinn, outline how a new rule from the Centers for Medicare & Medicaid Services may fall short of what is needed to improve patient access to durable cell and gene therapies that target orphan conditions. 

As these new therapies come on the market, manufacturers and payers are increasingly looking to value-based payment agreements to ensure patients with orphan ­– and sometimes fatal – conditions can benefit from these drugs.

The value-based arrangements tie reimbursement to the actual benefits that patients receive, and they alleviate the significant risk payers take on when they reimburse the large upfront costs of these treatments.

However, federal regulations, especially the Medicaid Best Price rebate program, often get in the way of those agreements. The new CMS rule tries to address these challenges by offering multiple options for determining best price, and while it is a significant improvement, it may not fully enable value-based agreements for durable cell and gene therapies.

These types of drugs are often “one-and-done” products, and as the Health Affairs article points out, the bundled sales approach under the new rule may not significantly reduce volatility in the Medicaid Best Price rebate program – rebate volatility is already a challenge with these drugs, given the small number of patients who can be impacted from quarter to quarter. Additionally, a second option, creating Multiple Best Prices, may make value-based agreements even more complex than they already are.

The nuances of the Medicaid rebate rules are the critical factor, because these rules are the single biggest barrier to implementing new payment approaches. This may not seem like a significant concern now for durable cell and gene therapies, since there are only a handful of drugs currently on the market, but by the end of 2030, we predict there could be nearly 75 treatments of this type approved for use in the United States. 

That means there could be many thousands, even hundreds of thousands, of patients who would benefit from treatment. The increasingly large number of therapies means there could be thousands of value-based payment arrangements executed for these products alone.

The NPC-MIT team writes in Health Affairs that changes to the Medicaid Best Price rule – either by CMS or in legislation from Congress -- that would redefine how sales are defined and calculated could reduce volatility in rebates and give manufacturers more opportunities to offer value-based agreements to commercial payers and Medicaid.

This would achieve what we think is everyone’s end goal: increased patient access to durable and potentially curative cell and gene therapies.