Could outcome-based annuity payments, in which cell and gene therapies are paid for over-time as benefits materialise, increase patient access to these innovative and potentially revolutionary therapies?
Cell and gene therapies have the potential to revolutionise medicine. However, the current high costs of researching, developing, manufacturing and delivering this new class of therapies to patients translates into prices that may challenge healthcare budgets.
The prices set for two CAR T-cell therapies that have recently been approved by the FDA, $475,000 for Novartis Kymriah and $373,000 for Kite’s Yescarta, have generated considerable attention. High-cost therapies if charged in full upfront can have a substantial impact on healthcare budgets, even if in the long-term costs are justified.
The Health Economics and Market Access team at Cell and Gene Therapy Catapult have published a paper exploring how different payer mechanisms can affect patient access to cell and gene therapies, the full paper published in the Journal of Market Access and Health Policy can be viewed here.
Addressing the affordability challenge
There are several payment methods that aim to address the challenge created by high-cost therapies they include:
Cost-based agreements include reducing the price of the therapy through discounts or providing a certain number of treatment rounds for free. These agreements help payers reduce expenditure, but in the case of cell and gene therapies they have a negative impact on potential revenue, and thus dissuade developers.
These agreements limit the number of patients that are eligible for the treatment to identifiable subgroups in which the therapy meets the cost-effectiveness threshold. This creates an incentive for the development of treatments where therapeutic benefit is maximised but reduces the return on investment if patient volumes are reduced.
Commonly referred to as ‘risk-sharing agreements’, these agreements aim to ensure rapid access to new therapies, obtain value-for-money and ensure affordability. The agreements tie manufacturers payments to clinical outcomes. This reduces payers’ uncertainty around clinical outcomes while allowing manufacturers to be paid for the value their products deliver.
The potential of annuity payments
One type of outcome-based payment is annuity payments, whereby a constant amount of money is paid to manufacturers per year for a specified period of time. Under this arrangement, high-value, one-off therapies are paid for as if they were ongoing treatments, rather than charging the full amount up front. This reduces the annual budget impact for payers, as well as the uncertainty around long-term performance and value.
Findings based on an exemplar therapy
In March 2017, a budget impact test was introduced in England which assesses whether a new therapy’s additional cost to the healthcare system exceeds £20m per year. The HEMA team explored how this might affect patient access to a high-value, one-off cell and gene therapies, and how different payment methods could improve access.
The exemplar therapy used in the publication replaces a relatively low-cost chronic treatment; the number of patients that could be treated without exceeding the £20m net budget was calculated and compared the results for where a full upfront payment was used, and where an annuity payment was used.
This exemplar shows that annuity-payments provide a solution that can improve patient access below the net budget impact test. Rewarding manufacturers for the development of therapies, mitigating payer risk and increasing the number of patients that can access the therapeutic innovation in a timely manner.
The full paper titled ‘Annuity payments can increase patient access to innovative cell and gene therapies under England’s net budget impact test’ can be viewed here.