Considering Financial Perspectives With Gene Therapy Breakthroughs

Pharmacy Practice in Focus: Health SystemsMay 2024
Volume 13
Issue 3

This issue of Pharmacy Practice in Focus: Health Systems provides an overview of the considerations for the implementation of CRISPR and Cas9 cell-based gene therapies in sickle cell disease.

In this issue of Pharmacy Practice in Focus: Health Systems, Sophia Humphreys, PharmD, MHA, BCBBS, provides a concise overview of the many considerations for the implementation of clustered regularly interspaced short palindromic repeats (CRISPR) and CRISPR-associated protein 9 (Cas9) cell-based gene therapies for curative potential in sickle cell disease. As cellular and gene therapies for rare diseases rapidly expand, with many additional treatments in late-stage clinical trials, there is no doubt that this innovation has introduced a new and exciting treatment era. However, Humphreys also notes the high individualcost of these therapies, which can exceed $3 million per patient for novel agents, not including the cost of the complex care needed to support the patient. In Gene Therapy, Wong et al estimated that the annual cost of gene therapies will exceed $20 billion, which they noted is a conservative estimate based on an analysis of agents in late-stage clinical trials and the prevalence of disease states being treated.1

Gene therapy-- Image credit: nobeastsofierce |

Image credit: nobeastsofierce |

Two important financial considerations for gene therapy are that of the payer/patient shared perspective and the health system provider perspective. Much of the ongoing conversation of the financial implications has been from the shared payer/patient perspective, which is trying to address the question of how this is going to be paid for. In Health Affairs, Horrow et al summarized 3 main approaches to innovative payment models: amortization, risk spreading, and performance-based payment.2

Amortization, which refers to multiple potential payment models that would spread out the cost over time, may include amortized payments directly to the manufacturers, or more likely involve a third party who would collect payments on a loan that provides an up-front payment to the manufacturers. Although an amortized approach may assist with budgeting early in the implementation of gene therapies, one concern is that with continued growth of this therapeutic category, overall costs will be higher and will negatively impact future costs of care.

The risk-spreading approach could also come in many forms. One model would be the formation of a risk pool across multiple payers that is then used to pay high-cost claims for gene therapy. Payers will essentially pay premiums into this insurance model to cover these high-cost treatments. This may also involve third-party reinsurance for the coverage of unexpected catastrophic costs. Additionally, payers may consider negotiating a shared risk, cost-capping model with manufacturers, which would potentially lower individual patient costs when certain volume thresholds are reached or exceeded. These agreements could be structured as a price-volume model or an expenditure cap model.

Lastly, performance-based payment models have gotten the most attention to date. Given the clinical uncertainty from early trial data, payers may prefer to negotiate payment models based on individual- or population-based outcomes data. This is another form of risk sharing with the manufacturers and could be structured as either delayed payment or rebate-based models. The CMS has proposed a voluntary performance-based payment model for state Medicaid agencies and manufacturers to consider, with a targeted implementation in early 2025.3

All these models raise a lot of concerns around complexity in design, as well as how to approach execution so that all parties’ interests are protected. What ultimately comes forward is likely to vary by payer-manufacturer combinations and the willingness of each party to enter these alternative payment models. However, what is clear is that the traditional claims models currently in place are not likely sustainable in this new era of cellular and gene-based therapies.

The second important financial perspective is that of the health systems. The delivery of these therapies will often require the sophistication and complex delivery systems that exist in large academic medical centers. The payment models that will evolve between payers and manufacturers are likely to be independent of reimbursement models for those actually providing the patient care. A traditional outpatient “buy and bill” or inpatient prospective payment model for claims are unlikely to be sustainable for the provision of this specialized care. Current cellular and gene therapies are often being reimbursed at actual acquisition or invoice cost, with the health system being reimbursed at usual outpatient or inpatient rates for other aspects of care. In addition, many of these patients will be covered by governmental insurance where current prospective payment models do not cover the cost of care. Financially, this is not a sustainable model for the treatment of patients with complex cases. At least 1 manufacturer has proposed the use of a third-party specialty pharmacy to manage the financial transaction between a state Medicaid agency and the manufacturer under the pharmacy benefit, and essentially carve out the health system provider.

Although the specialty pharmacy will never actually touch the product, it will be a virtual “white bagging” arrangement. Some health systems may welcome being isolated from the financial risk of not getting paid, noting that a zero-margin provision of complex care beats a negative margin.

The other concern for health systems relates to cash flow. If the health system is at financial risk for multimillion-dollar treatments, the speed of payment relative to the time line of paying the manufacturer could have a big impact on cash flow and days on hand. The current payer climate of “delay, delay, deny” will be crippling to health systems that have outlaid tens of millions of dollars and are waiting on reimbursement—a single denial of payment would be hard to recover from. Most health systems are currently requiring single case agreements for these cases, but that is no guarantee of timely payment. The traditional contracting approaches between payers and health systems are not going to be viable in the era of cellular and gene-based therapies.

About the Editor

Curtis E. Haas, PharmD, FCCP, is chief pharmacy officer for the University of Rochester Medical Center in New York.

As reviewed by Humphreys, we are seeing the dawn of an exciting new era for the treatment of devastating rare diseases, but we are not yet prepared to survive the financial impacts that come with these therapeutic advances. There is much work to be done from both the financial perspective of the payer/patient and the health system to make this a sustainable option for the many patients that will benefit.


1. Wong CH, Li D, Wang N, Gruber J, Lo AW, Conti RM. The estimated annual financial impact of gene therapy in the United States. Gene Ther. 2023;30(10-11):761-773. doi:10.1038/s41434-023-00419-9
2. Horrow C, Kesselheim AS. Confronting high costs and clinical uncertainty: innovative payment models for gene therapies. Health Aff (Millwood). 2023;42(11):1532-1540. doi:10.1377/hlthaff.2023.00527
3. Cell and gene therapy (CGT) access model. CMS. January 30, 2024. Accessed April 16, 2024.
Related Videos
Practice Pearl #1 Active Surveillance vs Treatment in Patients with NETs
© 2024 MJH Life Sciences

All rights reserved.