CGT Payment Changes Proposed in FY 2025 IPPS Proposed Rule

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Medicare CAR-T payment remains stable; CMS proposed structural changes for New Technology Add-on Payments (NTAP).

The Centers for Medicare & Medicaid Services (CMS) proposes to continue using its Medicare Severity Diagnosis-Related Group (MS-DRG) for chimeric antigen receptor T-cell (CAR-T) treatment stays in fiscal year (FY) 2025. CMS also proposes to continue providing differential reimbursement based on whether a drug was provided as part of a clinical trial, with a significant overall increase proposed this year. The financial impact of changes in the FY 2025 Inpatient Prospective Payment System (IPPS) proposed rule would vary by hospital, and reimbursement could continue to fall short of fully recognizing provider costs of treatment in some cases. Substantial changes to New Technology Add-on Payments (NTAP) are proposed in this rule with implications for manufacturers preparing applications and for providers seeking additional reimbursement. In particular, manufacturers of recently launched gene therapies may benefit from changes to NTAP maximums. Comments on the rule are due on June 10, 2024.


Since the first Food & Drug Administration (FDA) approval of a CAR-T product in 2017, concerns have persisted over how the Medicare program would reimburse for these products, which are commonly administered in the inpatient setting and have a significant cost for providers (e.g., average sales prices exceeding $400,000). Hospital inpatient reimbursement is calculated on a case basis using an MS-DRG base payment rate that is adjusted for factors such as hospital geography, diagnosis, case severity, and discharge status. Additional reimbursement can be provided through new technology add-on payment (NTAP) and outlier payments.

For FY 2024, inpatient stays with CAR-T treatment are currently assigned to MS-DRG 018, which has a base reimbursement rate of $257,958. Outlier payments are available to hospitals to cover extremely costly cases when the costs exceed the total of the MS-DRG payment, the NTAP amount (if applicable), and the current fixed-loss threshold of $42,750. Even with these adjustments, Medicare reimbursement for CAR-T cases today sometimes fails to cover total hospital costs, which could negatively impact provider uptake and patient access.

For FY 2025, CMS proposed several policies that would impact provider reimbursement for CAR-T and other cell and gene therapies (CGTs).

Payment Changes for CAR-T Cases

As a result of an increase to the base operating and capital rates for all IPPS payments and an increase in the proposed relative weight for MS-DRG 018, the proposed base payment for CAR-T cases in FY 2025 would increase by 6.4% to $274,413.

High-Cost Outlier Payments

The proposed fixed-loss threshold for FY2025 is $49,237, a 15% increase over the current threshold. For CAR-T cases, which are more likely than other inpatient stays to qualify for outlier payments, this would require hospitals to incur more losses before qualifying for an outlier payment. However, the higher overall MS-DRG base rate may mitigate some negative impacts.

Adjustment for Clinical Trial Cases

CMS reimburses CAR-T clinical trial cases, which do not incur drug costs, at a lower rate than non-clinical trial cases. Using its standard approach to analyze the latest update of the 2023 Medicare Provider Analysis and Review data, CMS found that clinical trial cases for CAR-T treatment incur 34% of the costs of non-clinical trial cases. Therefore, the agency proposes an adjustment factor of 0.34 to the relative weight of MS-DRG 018 for these cases (an increase over the current adjustment factor of 0.27). This would result in a base rate for clinical trial cases of $93,300, an increase of 34% over FY 2024.

Product NTAP Assessments

CMS is evaluating several CGT products for potential NTAP status in FY 2025. However, none of these products are anticipated to map to MS-DRG 018:

  • Exa-cel (CasgevyTM) for the treatment of sickle cell disease (SCD)
  • Lovo-cel (LyfgeniaTM) for the treatment of SCD
  • Donislecel-jujn (LantidraTM) for the treatment of type 1 diabetes
  • Lifileucel (AMTAGVITM) for the treatment of melanoma

NTAP Eligibility Changes

CMS proposed several changes related to NTAP eligibility and payment, which could impact future NTAP submissions and products being considered for NTAP in FY 2025:

  • Starting in FY 2026, CMS proposes to revise the newness period assessment of products receiving NTAP based on an October 1 cutoff rather than April 1, broadening the window in which products are deemed to still be in their newness period.
  • CMS proposes a change to its rule that requires applicants to have a “complete and active” FDA market authorization request prior to applying for NTAP to no longer consider “hold status” to be an inactive status for the purposes of eligibility in FY 2026.

NTAP Maximum Payments

CMS proposes to increase the maximum NTAP payment for gene therapies treating sickle cell disease (SCD) from 65% to 75% of product costs. Currently, the only other products subject to the 75% maximum are Qualified Infectious Disease Products or products approved under the Food and Drug Administration’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD).

Figure 1. Hospital Reimbursement Example for CAR-T Cases Under IPPS: Proposed FY 2025 vs. Final FY 2024

FR: Final Rule; PR: Proposed Rule.
• Hospital charges for CAR-T episode are kept constant across all examples, consistent with the geometric mean charges included in the FY 2025 Proposed Rule after outliers removed (AOR) file ($1,557,682)
• Hospital has an average operating and capital cost-to-charge ratio of 0.3, which influences CMS calculations of hospital costs.
• Hospital receives add-on payments that stem from payments for indirect medical education adjustment (IME) and disproportionate share hospital (DSH) adjustments, which are calculated as a percentage of the base MS-DRG. In this figure, there is an assumed IME factor of 0.2 and DSH adjustment of 0.05
• Hospital area wage index is 1.0, meaning no adjustment is made to the labor-related share of the standardized amount.
• Hospital received outlier payment, which is only made once hospital losses exceed the fixed-loss amount. Outlier payments provide 80% of excess costs beyond this threshold.

Key Considerations

Stakeholders should consider several implications stemming from proposed FY 2025 changes for existing assets and for future cell and gene therapies.

  • Stability of MS-DRG 018: While the proposed FY 2025 base rate for MS-DRG 018 would represent an increase over FY 2024, continued growth in the proposed fixed-loss threshold may reduce benefits for inpatient stays that incur an outlier payment. Total reimbursement will vary by hospital and case, with adequate reimbursement in some cases but potential financial risk for hospitals on significantly costly cases. The number of cases represented in the data to set the base rate increased this year (to 1,099), reflecting more on-market products and increased utilization. In the future, inclusion of additional immunotherapies may lead to fluctuations in the base rate and may lead CMS to consider splitting the MS-DRG depending on the number of cases and differences in resource costs. In this proposed rule, CMS did note that a request to rename MS-DRG 018 to recognize the use of “other autologous gene and cell therapies,” CMS did not propose any revisions and is current proposing continued use of its broader “Other Immunotherapies” language. With a robust pipeline of cell and gene therapies, CMS may have to confront reimbursement challenges or consider alternative approaches.
  • NTAP Eligibility: Several significant changes for NTAP eligibility are proposed in this rule. The proposal to move the newness period cutoff to October 1 would increase the time that providers may benefit from NTAP payments, which may help to support uptake of these products. Additionally, the proposal to make an exception for products with “hold status” when assessing whether a product has an “active” marketing authorization request would likely benefit manufacturers and recognizes that a hold status may be brief and therefore may not preclude a product from NTAP consideration.
  • Gene Therapy Payment Considerations: A proposal to increase the maximum NTAP payment for SCD gene therapies may set a precedent for how gene therapies are addressed under inpatient payment methodologies. A proposed increase is notable, but the change would not fully address gaps that providers may encounter in payment, especially since list prices of SCD products currently being considered for NTAP have a per-treatment price between $2.2-3.1 million. The MS-DRGs that SCD gene therapies map to (016 and 017) have base rates that fall far below the costs of each product (i.e., ~$43,000). The specific focus on SCD in this proposed rule aligns with broader efforts of the administration, including the CGT Access Model currently being implemented by the CMS Innovation Center (CMMI) that would allow for CMS to negotiate outcomes-based agreements on behalf of states for SCD gene therapies in the Medicaid program. CMMI may also consider alternative reimbursement approaches in Medicare fee-for-service for CGTs, such as bundled payments or site-neutral payment. However, no models or additional details have been released to date.
  • Site-of-Care Shifts: Differences in Medicare reimbursement methodology for the inpatient versus outpatient setting can sometimes result in higher reimbursement for CAR-T in the outpatient setting, where CAR-Ts are typically separately paid at average sales price plus 6%. However, assuming that a CAR-T therapy can be safely administered in an outpatient setting, shifts toward outpatient care may increase focus on Medicare’s outpatient drug payment methodology, as the 6% add-on payment could be significant given pricing of CAR-T products.

Carefully monitoring reimbursement for these innovative products will allow CGT manufacturers, providers, and payers to engage other stakeholders based on anticipated developments. To discuss how Avalere can support your business on issues related to commercialization, NTAP proposal submissions, provider reimbursement, or policy developments, connect with us.


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