SummaryAvalere’s assessment highlights a diverse set of over 200 products in development that could challenge payment models across care settings and payers.
Assessment of the Transformative Therapy Pipeline
In recent years, the number of transformative therapies that have been approved by the US Food & Drug Administration (FDA) and that are under development by product sponsors has grown substantially. Transformative therapies, including cell and gene therapies, offer new treatment options for patients, often for conditions that currently have limited or no treatment options available. However, these therapies also present challenges related to payment and access that vary by payer market and setting of care.
To better assess the potential impact that the transformative therapy pipeline will have on healthcare stakeholders—including payers, providers, and patients—Avalere assessed the number and type of transformative therapies by clinical trial phase, therapeutic area, primary payer, and primary site of care. Avalere focused its analysis on therapies that met a series of criteria including at least one special FDA designation, a unique mechanism of action, and a one-time or limited-duration treatment cadence. See the methodology section below for additional inclusion and exclusion criteria.
Based on these criteria, Avalere assessed a total of 214 product/indication combinations, representing 200 unique transformative therapies.
Transformative Therapy Pipeline Characteristics
Of the 214 combinations analyzed, more than three-quarters are in Phase I or II trials (Figure 1). Many of the combinations have received more than one special FDA designation, including 160 (75%) combinations with an orphan drug designation and 109 (51%) with a fast track designation.
Of the 214 product/indication combinations, more than one-third are indicated to treat cancer, with therapies treating neurologic, metabolic, ophthalmologic, and autoimmune conditions each accounting for an additional 10% or more of the combinations analyzed (Figure 2). Additionally, 82% of the combinations were estimated to be intended for one-time administration based on clinical-trial and other publicly available information.
Estimated Settings of Care and Payer Mix for the Transformative Therapy Pipeline
Avalere used clinical-trial information, publicly available information on the product and its route of administration, and clinical expertise to estimate the likely setting of care for each pipeline product/indication. Of the 214 product/indication combinations analyzed, the vast majority (89%) are estimated to be administered in a hospital setting (Figure 3). More than one-third of the combinations are expected to be primarily administered in outpatient settings (hospital outpatient or physician office), with another 36% that could potentially fall in the inpatient or outpatient setting pending additional safety information, and 28% anticipated primarily for use in an inpatient hospital setting.
The primary payer mix was assigned based on the typical age of disease onset for the product’s indicated condition. Products with indications treating diseases that first present in infancy or in early childhood were assigned to primary coverage by Medicaid and the Children’s Health Insurance Program (CHIP). Therapies that treat conditions with an average age of onset of around 65 or above (i.e., the Medicare-eligible patient population) or that were indicated for diseases that automatically qualify an individual for Medicare (e.g., amyotrophic lateral sclerosis) were assigned to Medicare. Therapies with target conditions impacting broader patient populations ranging from age 18 to 65 were assigned to commercial insurance as a primary payer.
Based on these classifications, Avalere estimates that 35% of the transformative therapy pipeline analyzed will have Medicaid/CHIP as a primary payer and that more than two-thirds of the transformative therapy pipeline will have government-sponsored insurance as a primary payer (Figure 4). This compares to the overall coverage for the US population of more than 50% for commercial insurance and about 20% for Medicare and Medicaid. The potential for a higher percentage of patients with government-sponsored insurance to be treated by transformative therapies raises important considerations for state and federal budget impact of the growing transformative therapy pipeline.
Future of Transformative Therapy Payment Models
Due to the unique characteristics of transformative therapies (e.g., potentially durable nature, novel mechanisms of action, up-front treatment costs) stakeholders have raised the need for alternative payment and financing approaches that better account for these characteristics by recognizing both payer financing pressures and clinical value of the products.
Traditional payment models, such as the bundled payments used under Medicare Fee-for-Service (FFS) in the inpatient setting, were not designed to accommodate many of the particular characteristics of transformative therapies. While the Centers for Medicare and Medicaid Services (CMS) has continued to refine inpatient payment approaches, reimbursement in the inpatient setting may be insufficient to cover all provider costs. Payment models in other settings (e.g., hospital outpatient) present fewer risks for providers. Medicaid FFS programs use a range of inpatient and outpatient payment methodologies and vary widely in how well provider costs are covered. While innovative payment arrangements (e.g., outcomes-based contracts [OBCs]/value-based arrangements, employer benefit protection programs) have been explored by payers, including state Medicaid programs and commercial payers, uptake of these alternative payment and financing approaches has been relatively limited to date for on-market transformative therapies.
Given these challenges, stakeholders are also considering broader payment solutions in federal programs that aim to mitigate budgetary pressure of the growing pipeline and address existing administrative barriers associated with value-based arrangements. In 2021, the Medicaid and CHIP Payment and Access Commission (MACPAC) considered a proposal to implement a federal carve out for cell and gene therapies (CGTs) that would pool coverage and consolidate purchasing power for these products across state Medicaid programs. Although proposed for Medicaid, MACPAC noted this structure could also be applied across both Medicare and Medicaid.
Most recently, the Department of Health and Human Services (HHS) issued a report in February instructing the Center for Medicare and Medicaid Innovation (CMMI) to advance a cell and gene therapy access model. The model would allow states to assign ability to negotiate multi-state OBCs for selected CGTs to the CMS. In assigning these contracts to CMS, the model aims to pool state bargaining power for CGTs, condition the cost of CGTs on outcomes, and shift the burden of administering OBCs from state Medicaid agencies to CMS. HHS noted that the model could start with a single indication such as sickle cell disease and expand to other therapies/conditions. However, the report included limited details on other model parameters, including potential outcomes, execution of OBCs, coverage, and reimbursement for selected products. HHS also directed CMMI to explore a Medicare FFS payment model for CGTs that could test alternative payment approaches such as bundled payments, site-neutral payments, and quality-adjusted payments for providers.
The report instructs the CMMI to begin development of the Medicaid CGT model in 2023, announce specifications in 2024 or 2025, and launch the model as soon as 2026. With the Medicaid model still in the early stages of development and a Medicare approach still being explored, this presents stakeholders with an opportunity to engage CMMI to proactively shape model design.
Given the robust transformative therapy pipeline, innovative coverage and reimbursement approaches will likely be needed to support market entry, address current administrative barriers associated with value-based arrangements, mitigate payer budgetary impact, and ensure appropriate patient access to these therapies in the coming years.
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Funding for this research was provided by The Biotechnology Innovation Organization. Avalere retained full editorial control.
Avalere leveraged data sets available via subscription, publicly available information from manufacturers, press releases and journal articles, and publicly available clinical trial design details (e.g., clinicaltrials.gov) to identify therapies in the transformative pipeline that had at least one special FDA designation including orphan drug, regenerative medicine advance therapy, breakthrough, fast track, or priority review status. Exclusion criteria included:
- Products that are administered orally, sublingually, topically, or subcutaneously
- Infectious disease products, pain management drugs, antihistamines, diuretics, or contraceptives
- Products that were determined to be maintenance therapies/ongoing treatment
- Therapies that did not have a novel mechanism of action
- Bioengineered parts
To assign primary payer mix, Avalere used publicly available sources (e.g., Centers for Disease Control and Prevention, National Institutes of Health, journal articles) to determine demographic information of the patient population for each product’s indication.
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