2:01 PM
Feb 01, 2019
 |  BioCentury  |  Politics, Policy & Law

Focusing on cures

Payers, manufacturers, patients and academics are piloting financing options for curative therapies

A Massachusetts Institute of Technology-led consortium is finalizing pilot programs that are intended to serve as models for overcoming two major hurdles to implementing performance-based contracts for curative therapies in the United States. The goal is to test a series of financial engineering concepts the consortium calls “precision financing.”

One pilot seeks to make multiyear performance-based annuity contracts portable, so they can be handed off when patients who are receiving potentially curative therapies switch insurance companies.

The other pilot attempts to make milestone-based contracts viable for state Medicaid programs, including finding workarounds for the Medicaid Best Price rule.

Both programs will be presented at the Paying for Cures conference in Washington, D.C. on February 12.

The pilots are being led by a project of MIT’s NEWDIGS (NEW Drug Development ParadIGmS) program dubbed FoCUS (Financing and Reimbursement of Cures in the U.S.), which includes biopharma manufacturers, payers, providers and patient advocates.

FoCUS does not consider or attempt to assess how drug prices are set, but assumes that curative therapies will be so costly that creative financing options will be required to pay for them.

“Value is a function of durability,”

Michael Sherman, Harvard Pilgrim Health Care

Mark Trusheim, strategic director at NEWDIGS, describes FoCUS as a “collaborative stealth project that has been going on for two years that is moving these concepts into action. Not just talking academically but moving into real pilots and demonstrating what can be done.”

The group conducted a pipeline analysis that suggests about half a million patients will have been treated in the U.S. with 40 to 60 approved curative therapies by 2030 (see “Cures in the Pipeline”).

Sidebar: Cures in the pipeline

The FoCUS teams haven’t reached final agreements on details for either pilot, but they face external and self-imposed deadlines to wrap up quickly.

The test of performance-based contract transferability will require participating commercial insurance companies in Massachusetts to agree on terms for handing off liability to pay for Zolgensma onasemnogene abeparvovec (AVXS-101). The FoCUS team would like to have its pilot in place by May, when FDA is expected to issue a decision on the gene therapy for spinal muscular atrophy (SMA).

Novartis obtained Zolgensma through its $8.7 billion acquisition of AveXis Inc. last year.

The Medicaid milestone pilot is being crafted as a model contract for a hypothetical CAR T cancer treatment, but the FoCUS team hopes to persuade a drug company to adopt it for a marketed product. The team’s goal is to have model contract terms for a fictional or real product finalized by April (see “Piloting Cures Through Medicaid”).

Sidebar: Piloting cures through Medicaid

The portability problem  

FoCUS’s Massachusetts pilot is designed to mitigate the risk and upfront cost of paying a high price for a therapy.

“As we see the prices of new innovative therapeutics creep up to prices we’ve never seen before, to $1- $2 million dollars or more, it raises questions about value,” Michael Sherman, SVP and CMO of Harvard Pilgrim Health Care Inc., told BioCentury. Sherman is a participant in NEWDIGS and has been involved in designing the pilot, which Harvard Pilgrim plans to join.

For therapies that are being priced as cures, “value is a function of durability,” Sherman added. “In many cases we don’t know at the onset how long the therapy will last, and we don’t want to wait years to find out when there is unmet need and suffering.”

The desire of payers to make payments for curative therapies contingent on the durability of outcomes, and to spread costs over several years, has led them to negotiate performance-based annuity contracts with product developers (see “Breaking Ground”).

However, the process of figuring out how to put ideas like value-based contracts into practice uncovers unexpected roadblocks. “A distinguishing factor is that these things are easy to say but difficult to do,” Trusheim said.

The NEWDIGS team has found that there are no universal solutions as capabilities, needs and challenges vary among different kinds of payers.

One problem with paying over time for payers other than Medicare is that in the U.S. patients don’t always stick with the same insurance provider.

When patients who receive a durable, curative therapy move to a new plan, the first payer could be stuck paying the full price for a treatment that reduces costs for many years while subsequent payers get a free ride.

It is also difficult to track outcomes of patients when they move to a new payer. If outcomes can’t be reliably reported, it would be impossible to adjudicate a performance-based annuity payment.

“A distinguishing factor is that these things are easy to say but difficult to do,”

Mark Trusheim, MIT

The issue of portability came up, Sherman said, when Harvard Pilgrim negotiated a 30-month performance-based contract for gene therapy Luxturna voretigene neparvovec, a gene therapy from Spark Therapeutics Inc. that treats patients with vision loss due to genetic mutations in both copies of the retinal pigment epithelium-specific protein 65kDa (RPE65) gene.

In the absence of an agreement among payers that makes contracts portable, there are two ways for the insurance company to cope with a patient leaving during the 30-month contract period and neither of them is ideal, Sherman said.

One is to pay the balance due, which means Harvard Pilgrim would pay for a treatment that might not be durable.

“The other, which was done with Luxturna, is for Harvard Pilgrim to stay on the other side of the deal and if the patient doesn’t continue to experience a response, Spark is on the hook for a rebate payment to us,” said Sherman. This alternative requires tracking the patient after he or she switches plans.

The Massachusetts pilot 

FoCUS is designing a pilot program to address the issue of portability for patients receiving Zolgensma who switch insurance plans within Massachusetts.

Under the program, when a patient switches to another insurance plan that is part of the pilot, the second insurance company will make the annual payment for Zolgensma if the patient benefit continues to meet the prespecified outcomes.

Daniel Mytelka, director of simulation and policy research for the FoCUS project, told BioCentury FoCUS is in discussions with “payers who represent the majority of the commercial, fully insured population for Massachusetts” to participate in the pilot program.

To avoid violating antitrust laws, the insurance companies have not and will not compare notes on the price they pay for Zolgensma.

“The structure we are putting forward still has each payer negotiating their own separate price for the therapy. It doesn’t require a single buying consortium,” said Trusheim.

Sherman said that in theory, each company could pay a different price for the therapy, but in practice this is unlikely because payers will have little leverage for products that have no therapeutically equivalent alternatives.

Novartis hasn’t announced a price for Zolgensma. The pharma has publicly noted that an Institute for Clinical and Economic Review (ICER) report determined that Zolgensma would be cost-effective up to $5 million.

Novartis and participants in the pilot are contemplating a contract with five equal performance-based payments, Trusheim told BioCentury. This puts the company at substantial financial risk if benefits of the therapy don’t persist. It also allows payers to avoid sticker shock by converting the cost of a rare event like SMA into a series of smaller payments.

In the event that patients leave the state, move to a plan that isn’t participating in the pilot, or transition to Medicaid coverage, insurance companies will choose between paying Novartis the entire unpaid balance, or tracking the patient and making annual payments only if he or she continues to respond to treatment.

“We are moving towards term sheets and actual contract language,” Trusheim reported. “No one has signed anything at this point. Nothing is finalized, due to having to work through various operational, policy and risk issues.”

Unresolved issues include agreement between payers and Novartis on how to assess the durability of the therapy, mechanisms for reporting outcomes to payers, and whether it will be possible to work around a Medicaid rule that has limited the amount of financial risk drug companies can accept.

According to Sherman, participants in the pilot have not reached consensus about performance measures. Outcomes under consideration include survival, ventilator use, clinical scores and use of other drugs.

FDA’s requirements that gene therapy companies track patients for at least five years gives payers assurance that outcomes data will be available to Novartis.

The pilot could become a template for other gene therapies and could be extended beyond Massachusetts, Sherman said.

Best-Price hurdle 

The biggest challenge to making the Massachusetts pilot work is overcoming a CMS rule that requires drug companies to provide their “best” price to state Medicaid programs.

Under the best price rules, any performance-based rebate or discount that exceeds 23.1% of the price of a medicine for adults, or 17.1% of a pediatric medicine, would create a new price floor. Manufacturers would have to sell the product to all state Medicaid plans at that price, even for patients who have outcomes that wouldn’t trigger a rebate or discount.

For a drug that is expected to cost well over $1 million, payers want to reduce their exposure by far more than 17% or 23% if the therapy isn’t performing as expected, Sherman said.

The FoCUS team has been meeting with CMS and CMS’s Center for Medicare and Medicaid Innovation (CMMI) “to come up with a solution that would meet the spirit and letter of the law without legislative changes,” Sherman said.

HHS Secretary Alex Azar and CMS Administrator Seema Verma have publicly endorsed performance-based contracts and said they want to find ways to make them compatible with the Medicaid best price requirement.

As of the last week of January, the FoCUS team hadn’t found a best price workaround, and Sherman said it was not possible to predict whether one would be found before Zolgensma launches.

“It is challenging because current Medicaid Drug Rebate rules were not written for products with variable pricing, where cost for one patient may be very low because the patient did not respond to treatment rather than because the manufacturer gave them a particularly low price,” MIT’s Mytelka said.

Beyond the pilot 

While the FoCUS team has been discussing administrative solutions to the Medicaid best price problem, there is also movement on Capitol Hill.

Sens. Bill Cassidy, M.D. (R-La.) and Mark Warner (D-Va.) released draft legislation on Jan. 29 that would exempt value-based arrangements from Medicaid’s best price rule. They have requested public comment on the proposal by Feb. 19.

The legislation will not be enacted prior to the anticipated launch of Zolgensma.

Whether or not the FoCUS pilot is in place when Zolgensma launches, insurance companies are already negotiating performance-based contracts with Novartis.

Harvard Pilgrim, for example, is crafting a performance-based contract that is independent of the FoCUS pilot for its beneficiaries who live outside of Massachusetts, Sherman said.

Speaking on an earnings call on Jan. 30, Novartis Pharmaceuticals CEO Paul Hudson suggested that the company is willing to accept risk. “I can assure you that constructive conversations both to regulators and payers have brought us to a position where we feel we will be able to deliver on the scientific and clinical promise and find a best way either through the price or the ability to pay over a period of time to give the patients the best possible access.”

Companies and Institutions Mentioned 

Centers for Medicare and Medicaid Services (CMS), Baltimore, Md.

Gilead Sciences Inc. (NASDAQ:GILD), Foster City, Calif.

Harvard Pilgrim Health Care Inc., Wellesley, Mass.

Institute for Clinical and Economic Review, Boston, Mass.

Novartis AG (NYSE:NVS; SIX:NOVN), Basel, Switzerland

Massachusetts Institute of Technology (MIT), Cambridge, Mass.

Spark Therapeutics Inc. (NASDAQ:ONCE), Philadelphia, Pa.

U.S. Food and Drug Administration (FDA), Silver Spring, Md.

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