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Transcript

Sam: Hello, and welcome to Avalere’s second episode in our Start Your Day with Avalere podcast series, focused on defining value in oncology. My name is Sam Ferguson, and I am a consultant in the market access practice here at Avalere. I am joined today by two of my colleagues—Megan Olsen, who is an associate principal in our Policy practice, and Michael Kearney, who is a consultant in our Market Access practice. In today’s episode, we will focus on how stakeholders are considering value when paying for durable therapies. Megan and Michael are experts on cell and gene therapy (CGT) and have been leading much of Avalere’s work in this space.

To get us started, I wanted to revisit some of the key questions that emerged in our last episode. These included how to appropriately define the value of durable therapies in oncology, and also how to pay for those therapies within our current healthcare system. With approximately 50 CGTs expected to enter the market by 2025, we recognize that these are becoming increasingly pressing questions.

So to start our conversation, let’s take a step back first and talk through some of the market and stakeholder dynamics influencing the space. Megan, let’s start with you. What are some of the different stakeholder perspectives when grappling with paying for a durable therapy?

Megan: Thanks, Sam. That’s a great question. There is certainly a lot of discussion on these topics in the CGT space across stakeholders. I’d say the price or cost of these therapies is specifically getting a lot of attention as we think about how the system will afford and adapt to these treatments, particularly given the robust pipeline that you mentioned. The dialogue specifically around price and value has a lot of voices in it right now, including the value assessment entities like Institute for Clinical and Economic Review (ICER). We know that ICER has adopted a value framework specifically for single and short-term therapies. We know the American Society of Clinical Oncology has its own value framework that it uses, and we know manufacturers are increasingly taking value-driven approaches to pricing and thinking about clinical benefit relative to current standard-of-care, medical, and drug costs offset over a longer time horizon.

One of the challenges, as we think about cost in the space, is that stakeholders experience cost differently. As we look ahead, it is important to think about how we can solve some of the unique challenges that stakeholders face. Addressing the challenges from the different perspectives will be critical to an adequate market moving forward.

• For instance, payers think about their own risk of unknown exposure to high-cost therapies. They are also thinking about the adequacy of their capitation payments and public programs.
• We have providers thinking about their own reimbursement and whether it will be sufficient to just cover their costs of providing the treatment.
• From the patient perspective, patients are exposed to different rates of out-of-pocket (OOP) costs, and that can be particularly significant when you are thinking about high-cost therapies. So, as you mentioned, it is important to think about these from all different stakeholder perspectives.

Sam: Thanks, Megan. I think that is a useful framework for thinking through value here. Michael, anything else to add?

Michael: Yeah, thanks Sam. Megan summed that up very nicely. It is no secret that, from the provider perspective, while they are looking to understand the safety and efficacy of products, it is also very important to be able to obtain adequate reimbursement to cover costs. And then, from the payer perspective, it is being able to show that there is that return on investment given the high up-front cost of these therapies and being able to show that downstream cost offset is really what insurance companies are looking for when thinking about payment. What is most interesting is that, with the rise of integrated delivery networks—health systems that have both provider and payer components—these somewhat competing priorities make the uptake a little more complicated in these types of organizations. I think that there is a real need for these stakeholders—along with the others across the healthcare landscape that Megan described earlier—there is a real need for them to collaborate in order to define and design evidentiary research to satisfy all of these respective needs.

Sam: Thanks, Michael. One of the perspectives that you highlighted just now is that of the provider. I want to take a few moments to dig into that a bit further. As we know, recently the Centers for Medicare and Medicaid (CMS) proposed significant changes to chimeric antigen receptor T cell (CAR-T) therapy reimbursement as part of the 2021 Inpatient Prospective Payment System rule. Specifically, the agency is proposing to create a new Medicare Severity-Diagnosis Related Groups (MS-DRG) for CAR-Ts. This would significantly affect hospital finances and patient access to these therapies.

I know inpatient reimbursement has historically been 1 of the key challenges in the CAR-T space, and so, with that, I have 2 questions that I want to discuss with you both on this development. First, can you tell me a bit more about this specific change and what it means for providers? And second, what are some of the broader implications for the durable therapy market? Michael, let’s start with you.

Michael: Great, timely question, Sam. The CMS is looking to work with providers to ensure that they receive adequate reimbursement for these therapies. Up until now, providers have received the base payment plus the New Technology Add-On Payment (NTAP). However, in most cases this payment has not been satisfactory from a cost-coverage perspective, so stakeholders have been pushing the CMS to create a new CAR-T-specific MS-DRG for the past few years. Up until now, the CMS has indicated that it did not have sufficient amounts of historical data to help make an informed decision, but after the last few years of accumulating data, they are moving forward in proposing MS-DRG 18, which is specific to CAR-T therapies. One notable point on this proposal is that this MS-DRG will no longer be eligible for NTAP. The two CAR-T-specific procedure codes that currently map to MS-DRG 16 will get remapped to this new MS-DRG 18.

One of the most important points of this is that they are now going to be taking clinical trials into consideration. When calculating the relative weight for this DRG, the CMS is proposing to exclude the average cost of clinical trials, given that there is typically no drug cost for providers in this instance, which would dramatically lower the cost of the entire case. One way to address this is by removing the clinical trial data from the relative weight calculation so that the relative weight value is not skewed downward. And finally, when providers that are participating in clinical trials submit for payment—because that relative weight calculation is then independent of that clinical trial cost—there will be a payment adjustment factor applied to the relative weight. This ensures that there is no overpayment for providers that are looking to submit requests for payment when they are in clinical trials. The CMS is evolving and will continue to evolve its thinking on reimbursement toward these therapies, and over time they will continue to address these needs of providers.

Sam: That is interesting, and you can immediately see how this would significantly change the landscape, particularly for those inpatient therapies. Megan, what are your thoughts on this?

Megan: Thanks, Sam. Building on what Michael said, I first want to underscore the significance of this development. Inpatient reimbursement has been something that stakeholders have been very concerned about since the launch of CAR-T products a few years ago, so this is a huge step forward in making that new DRG to offer providers greater predictability in terms of payment, particularly given the NTAP for these products was slated to expire soon. While I do think this largely addresses some of the concerns around Medicare CAR-T reimbursement in the inpatient setting in the near term, I do want to flag a couple things to think about in the longer term, when we think about reimbursement and access moving forward, including for some newer CAR-T products that will enter the market in the coming years.

The first is that, while overall we do see this as greater predictability for providers, it would also lead to differential impact and variable impact by hospital and by case. The proposed base rate for the new DRG will typically be in line with current total payment, including NTAP for current CAR-T. But, as we know, this can create a loss for providers in certain scenarios. Even accounting for adjustments that vary by hospital and case, there could still be circumstances where providers do see a financial wall. We will have to look into that a little more closely on a case-by-case basis.

Another thing that I would flag is that while this proposal is specific to Medicare and the inpatient setting, I think it is important to think about spillover implications to other markets. We know that other payers used similar bundled payments or DRG-like approaches in their systems. It will be interesting to see, moving forward as the CMS updates these coding mechanisms, if other payers adopt the same updates to their systems. We will be looking out for that in the coming months.

It is also worth thinking about how Medicaid programs might react to this. We know that they have taken varying approaches across states to cover and reimburse CAR-T products. In some scenarios, they are carving out the drug payment entirely from the bundled payments, so I am looking forward to seeing how states react to this and whether they continue to carve it out or whether they take a similar approach to what the CMS is doing here in Medicare.

The last thing I would flag is what this means for future CAR-T products. On the market today we have 2 products, but moving forward we know that there is a robust pipeline. As new products are launched and likely mapped to the new DRG, it is also likely that these other products will have different price levels and volumes that will impact the overall relative weight of the MS-DRG over time. You could see uniform reimbursement rates for cases. However ,there is significant variation in resource cost for those cases. It will be interesting to see how the CMS handles this moving forward particularly given the big pipeline that we have.

Sam: Really interesting! And we will be looking out at how things evolve in the next couple of years. Megan, you mentioned this spill-over into other markets, and I wanted to build in what you were discussing in the commercial sector a little bit more. There have also been some additional solutions that have been suggested as mechanisms to align payment for durable therapies with a product-specific value. What are some of the potential ideas that have been offered as ways to capture value when paying for a durable therapy, Michael?

Michael: Sure. Great question, Sam! As I mentioned earlier, the challenge is figuring out a way to weigh the high upfront cost of these therapies versus the downstream reduction of ongoing hospitalizations and treatments—and in some cases it can span multiple years. So it is the long-term view that is driving a lot of the thinking around payment.

• Outcomes based contracts (OBC), are the top of mind as being 1 method. Since these therapies are new and targeted to specific diseases, in some cases there is limited historical data that shows the efficacy of these therapies, although OBCs are a way to tie payment to that outcome to mitigate any concern of the payer or provider given how expensive these therapies are.
• Less implemented but more in the discussion phase are installment payment models. Payers would agree to cover cost based on a series of payments over a set timeline for specific patients treated to help alleviate some of the upfront cost burdens for payers.
• Finally, there is reinsurance. This puts third parties on the hook for these high-cost events. The idea is that, through the reinsurance partnerships, commercial payers could pool risk with other stakeholders—potentially the government or nonprofit organizations—to help keep premiums and cost-sharing down.

Sam: Thank you, Michael. Those are 3 interesting potential solutions to aligning with value. Megan, I am curious. How are you seeing these potentially play out in the market today?

Megan: Yes, that is a good question, Sam! There has certainly been questions and discussion around these models, particularly a pay-over-time component and an outcomes-based contract, potentially in combination, allowing the payer to ensure that the product works as intended and to shift that financial risk over a longer period of time. While there has been announcements of market testing to date, market uptake is relatively limited today. I think in part because this is early and relatively few products are on the market today, it is important to necessitate these models. I also think 1 of the big barriers from a regulatory perspective is the regulatory constraints that can limit adoption of these models or require that they are designed in certain ways that in combination can inhibit broader scale of these models.

A few that I would flag are the Anti-Kickback Statute and Medicaid best price. These are often cited as barriers to various innovative contracting arrangements, but acutely so when you are discussing financing the cost of a several hundred thousand-dollar treatment over a series of years and contingent on clinical outcomes. Medicaid best price essentially allows the Medicaid programs across the 50 states and Washington, DC, to access the lowest price available on the market. For instance, if a CAR-T therapy set a best price through a contract that had a full money-back guarantee component to it, that could be a massive barrier into entering that type of contract since there is a lot of risk there.

There is broad recognition across stakeholders in increasingly across policymakers as well. We have seen policy initiatives discussed to address these types of challenges, including, through the Senate, the Prescription Drug Pricing Reduction Act and the Patient Affordability Value and Efficiency Act, both of which have components to facilitate outcomes-based components or installment payment approaches in Medicaid or more broadly. And while we have not seen these advance to enactment, they have had great ongoing discussion, and that at the right time we could see Congress or the administration playing a role in facilitating arrangements where they have authority through the CMMI or otherwise. So that is something from a policy perspective that I am looking forward to seeing how it progresses.

I also think it is worth flagging the logistical and operational challenges to implementing these types of arrangements. We are talking about being able to track patients over a longer time horizon—rather than a couple of months, over about 5 years—being able to measure those outcomes over that period, tracking the patient. It is possible that they switch into other forms of insurance, as one of a host of barriers.

I suspect that as the pipeline moves to market, we could see broader adoption of some of these models, as this pipeline pushes the envelope and necessitates these types of arrangements in order for the system to absorb some of the cost. The broader adoption will be dependent on some of these policies that I mentioned.

Sam: Thank you, Megan. That is great insight on some of the policy barriers and enablers, while offering great depth into the conversation around market solutions. Building on this concept of tracking patients and understanding where patients fit into all of this, I want to ask how patients are fitting into these conversations around value and durable therapies. Are patients able to access and pay for these treatments? Michael, let’s start with you here.

Michael: Sure! Access is certainly a challenge but steps are being taking to address this. Given Medicare’s decision to cover this, this is one of the first steps. Typically, when it comes to payment and coverage, Medicare is usually the driving factor, and then the commercial market typically follows. We expect that access will continue to grow as this subtopic continues to evolve over time. Additionally, CAR-T has traditionally been an inpatient setting procedure. However, there has been recent conversation on having these procedures in an outpatient setting, which would change reimbursement and OOP costs for patients. For those OOPS costs, many providers today would leverage third-party foundations that offer OOP support to patients in order to help alleviate some of that financial burden.

Sam: Thank you, Michael. Some really important considerations around patient cost and access. Megan, what are some additional logistical considerations here?

Megan: Thank you, Sam. That is a really important question in this context. It is critical to think of the costs that a patient might incur that are outside of the costs directly associated with the treatment. It is important to recognize that there are a whole host of costs that patients might face when thinking about travel to a specialized treatment center, lodging, and costs that caregivers may face in accompanying the patient. We have seen some interesting policy developments around supporting patients through these treatments. A couple of months ago, we saw the Office of the Inspector General issue an advisory opinion for Kymriah, allowing the manufacturer to directly assist low-income patients with the expenses associated with travel and lodging for the treatment. I think this is an interesting development, and it will be important to see as other products launch into the market, if they similarly seek assistance for these types of services. We also saw the CMS issue an RFI a couple of months ago, seeking information about barriers to service for children in Medicaid who are receiving care across state lines. I think there is good attention on this around other types of barriers and costs patients could incur, particularly in the cell and gene space. And for CAR-T, this is a good place to watch.

Sam: Thank you, Megan. I appreciate this insight, and it will be interesting to see how these dynamics continue to shift and evolve over time. Megan and Michael, thank you so much for taking the time to discuss an important concept as more of the durable therapies come to market. Your insights have been invaluable to our listeners.

Thank you all for tuning in to Avalere Health Essential Voice. Please stay tuned for more episodes in our Start Your Day with Avalere series. If you would like to learn more, please visit us at Avalere.com.