JULY 20 23
Accessing Cell and
Gene Therapies
Insights on Coverage, Reimbursement
and Emerging Models
Yelena Ofengeym, Senior Manager
Alexander Dworkowitz, Partner
Anthony Fiori, Senior Managing Director
Manatt Health
About Manatt Health
Manatt Health integrates legal and consulting services to better meet the complex needs of
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future. For more information, visit https://www.manatt.com/Health or contact:
Yelena Ofengeym
Senior Manager
Manatt Health
212.790.4630
yofengeym@manatt.com
Alexander Dworkowitz
Partner
Manatt Health
212.790.4605
adworkowitz@manatt.com
Anthony Fiori
Senior Managing Director
Manatt Health
212.790.4582
afiori@manatt.com
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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Introduction
Over the past five years, cell and gene therapies have increasingly
moved from the R&D pipeline to the health care setting, putting
lifesaving treatments for certain cancers and genetic diseases
within patients’ reach. Over ten cell and gene therapies have been
approved by the FDA in the past five years
1
and over 500 gene-
based therapies are in clinical development
2
as of 2023. Based on
current pipeline and product success rates, the FDA anticipates
approving 10–20 a year by 2025,
3
with spending expected to reach
$25billion annually over the next ten years.
4
With the emergence of these transformative treatments, payers are facing a practical reality of paying for
them, with list prices ranging from $400,000 to $3.5million per course of treatment. Payers are looking for
predictable financing solutions for these large often one-time payments and for proof of therapeutic efficacy
via value-focused payment approaches.
Cell and Gene Therapy Today
Cell and gene therapies seek to modify genetic material in order to treat
an inherited or acquired disease. Preparing and administering cell and
gene therapies is a complex and expensive process. Cell therapy aims
to infuse whole cells into a patient’s body to replace or repair damaged
tissues and may involve blood transfusion or transplantation of stem
cells to create bone marrow. Gene therapy aims to modify a mutated
gene or introduce a new copy of a gene; different types of gene therapy
include gene addition, silencing, reprogramming or elimination.
5
Once a therapy gains FDA approval, a patient’s journey typically involves (1)an assessment of eligibility,
risks and benefits of a particular therapy, (2)insurance coverage authorization, (3)preparation of any
personalized gene therapy, (4)treatment, potentially as an inpatient or outpatient procedure, and (5)a follow-
up recoveryperiod.
Various cell and gene therapies have gained market approval over the past five years (see Exhibit1), creating
the need for state Medicaid agencies and commercial payers to find financing solutions to cover therapy
costs that have currently reached as high as $3.5million per course of treatment.
Over 10 cell and gene therapies
have been approved by the
FDA in the past five years and
over 500 gene-based therapies
are in clinical development
asof2023.
Payers are looking for
predictable financing
solutions to support
patient access to these
lifesaving treatments.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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Exhibit 1. FDA-Approved Cell and Gene Therapies 2017–2023
6
Product
Name Disease
Year First
Approved Company
Elevidys Duchenne muscular dystrophy 2023 Sarepta Therapeutics
Adstiladrin Bladder cancer 2022 Merck
Hemgenix Hemophilia B 2022 CSL Behring
Carvykti Multiple myeloma 2022 Janssen Biotech
Skysona Early cerebral adrenoleukodystrophy (CALD) 2022 Bluebird Bio
Abecma Multiple myeloma 2021 Bluebird Bio
Breyanzi Diffuse large B-cell lymphoma; follicular lymphoma 2021 Celgene (Bristol Myers Squibb)
Tecartus Mantle cell lymphoma; acute lymphocytic leukemia 2020 Kite Pharma (Gilead)
Zynteglo Transfusion-dependent beta thalassemia 2022 Bluebird Bio
Zolgensma Spinal muscular atrophy 2019 Novartis
Kymriah Acute lymphocytic leukemia; diffuse large B-cell
lymphoma; follicular lymphoma
2017 Novartis
Yescarta Large B-cell lymphoma 2017 Kite Pharma (Gilead)
Luxturna Leber’s congenital amaurosis; retinitis pigmentosa 2017 Spark Therapeutics (Roche)
Medicaid Coverage
State Medicaid programs are required to cover all FDA-approved drugs if the drug manufacturer has signed a
federal Medicaid rebate agreement.
7
In practice, states sometimes delay coverage of newly approved drugs,
and cell and gene therapies are almost always subject to prior authorization given their price point. There
is significant variability in whether or how states cover cell and gene therapies. For instance, some states
limit eligibility to more narrow clinical trial criteria rather than relying on the FDA label.
8
Reimbursement
and access are further complicated by out-of-state (OOS) dynamics, since many patients will need to travel
to another state to get cell and gene therapies. OOS providers are often paid at a lower rate and may lack
supplemental funding available to in-state providers; they also have to enroll in every state Medicaid program
to which they provide services, further reducing incentives to provide OOS care. Additionally, limited
Medicaid coverage of travel benefits may make such travel cost-prohibitive for patients.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
Manatt Health manatt.com 5
Most Medicaid programs use a diagnosis-related group (DRG) system to reimburse hospitals for inpatient
services, where a hospital receives a bundled payment for both the services provided and any drugs
administered. Since the costs of cell and gene therapy to hospitals may be significantly higher than such
reimbursement, such reimbursement structure could disincentivize hospitals from offering cell and gene
therapies to patients. To ensure adequate reimbursement to hospitals and patient access to cell and gene
therapies, some state Medicaid agencies implement separate payment policies, where a cell preparation or a
drug itself is paid separately from inpatient drug administration. Often the reimbursement rate is close to the
hospital’s acquisition cost for the drugs.
Over ten states have published policies indicating they make separate payments for at least some cell and
gene therapies. These states represent nearly half of all Medicaid enrollees. States that have developed
separate payment policies for cell and gene therapies are more likely to cover these therapies, resulting in
greater access bybeneficiaries.
Another emerging approach to balancing costs and patient access is value-based arrangements, where
performance-based contracts are linked to targets around efficacy and durability of patient response. Fifteen
states
9
have established Medicaid pharmacy supplemental rebate agreements that provide them with legal
authority to enter into value-based payment (VBP) arrangements. As of February, two states—Massachusetts
and Arizona—have applied this authority to implementing cell and gene therapy specific VBP arrangements.
10
Several states are using reinsurance programs to manage
cell and gene therapy costs. These programs are intended to
provide protection to Medicaid managed care organizations
(MCOs), which, depending on their size, can face financial
troubles if they pay a higher-than-expected number of cell
and gene therapy claims. Some states mandate that MCOs
obtain reinsurance coverage for specific therapies through
private reinsurers. Other states provide reinsurance protection
themselves by, for example, withholding a portion of the capitation payment to the MCO as the reinsurance
premium and then paying to the MCO all or a portion of cell and gene therapy claims. Other states have gone
further, carving out certain cell and gene therapies from the managed care benefitentirely.
State calculus for offering separate payments for cell and gene therapies may change in the future given
a proposed rule issued by Centers for Medicare and Medicaid Services (CMS) in May 2023,
11
which could
trigger rebate liability from the drug manufacturer to the state for drugs that are reimbursed as part of a
bundled payment. Currently, a drug provided as part of a bundled payment is not considered a “covered
outpatient drug” (COD) and as such is exempt from rebates.
12
The CMS rule proposes that a drug provided as
part of a bundled payment would be eligible for rebates, making separate payment options potentially less
attractive to states than they are now.
State Medicaid agencies use
separate payment policies, VBP
arrangements and reinsurance
programs to manage cell/gene
therapy costs and patient access.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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The same rule proposes another cost control mechanism—a new “drug price verification survey,” which
would collect cost, utilization and pricing data for high-priced therapies (cell and gene therapies were
specifically called out as an area of focus). Alternatively, manufacturers can provide higher supplemental
rebates in exchange for being exempt from the survey and its time-consuming transparency data
requirements.
Another proposed federal initiative is the Cell and Gene Therapy Access
Model, in which CMS would coordinate and administer outcomes-based
agreements with participating manufacturers for certain cell and gene
therapies on behalf of state Medicaid agencies.
13
These agreements
could be in the form of outcomes-based payments, rebates or annuities,
where continued payment is based on durability of benefit. This model
may initially be targeted to a specific therapy (e.g.,sickle cell disease),
and further details will be released in 2024/2025, with implementation
expected in 2026. The proposal is a step toward “federalizing” the cell
and gene therapy benefit, with states ceding some control over rebate
negotiations in exchange for less administrative burden in managing
these drugs.
Medicare Coverage
Medicare covers services that are “reasonable and necessary for the diagnosis or treatment of an illness or
injury,”
14
with most coverage policies decided by local Medicare Administrative Contractors (MACs), some
determined on the national level (national coverage determinations), and some determined on a case-by-
casebasis.
Medicare is somewhat behind Medicaid in its flexibility to cover and
reimburse high-price transformative therapies. Medicare may pay
additional funds to a hospital for a newly launched high-price therapy
via New Technology Add-On Payments (NTAP) or outlier payments in
the case of inpatient therapies or pass-through payments in the case
of outpatient payments. Medicare has also established a new DRG for
chimeric antigen receptor (CAR) T-cell and other immunotherapies.
The Medicare program, however, has not experimented with VBP
arrangements or separate payments for therapies provided in the inpatient setting. In the case of CAR T
therapies, it took over three years to establish a new DRG, given the need to accumulate sufficient data and
the timing of the rulemaking cycle. Cell and gene therapy would likely face similar hurdles, with patient access
potentially limited in the meantime.
On the federal level, CMS
has proposed Cell and
Gene Therapy Model,
in which CMS would
coordinate outcomes-
based agreements with
drug manufacturers for
cell and gene therapies
on behalf of states.
Medicare is somewhat
behind Medicaid in its
flexibility to cover and
reimburse high-price
transformative therapies.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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In its August 2022 Inpatient Prospective Payment System (IPPS) rule,
15
CMS indicated that it would
consider a new DRG for cell and gene therapies in future rulemaking but is not yet ready to make structural
reimbursement changes to accommodate cell and gene therapies. In the meantime, including new therapies
in an existing DRG presents a challenge, given some therapies have list prices above $2million while the
CART DRG base payment rate is approximately $300,000.
In February 2023, the Center for Medicare and Medicaid Innovation issued a report describing the innovation
models it has selected for testing based on affordability, accessibility and feasibility of implementation.
16
As
opposed to an outcomes-based access model suggested for Medicaid, CMS suggests a bundled payment
approach for Medicare—a model that would replace fee-for-service billing during cell/gene therapy care
episodes. The proposal appears aimed at controlling costs provided to a Medicare beneficiary post receipt
of the cell and gene therapy and does not focus on the question of how to balance affordability with the
needforaccess.
Commercial Coverage
In commercial coverage, there are no federal requirements for plans to cover specific drugs, although plans in
the individual and small group market are required to cover essential health benefits (EHBs) that set minimum
standards for prescription drug coverage.
17
With the emergence of cell and gene therapies, plans and
employers are looking for ways to enable access for their beneficiaries while managing high upfront costs.
Given the legal flexibility to define the benefit package provided under large group health plans, some
employers have considered excluding coverage of cell and gene therapies from their benefit packages
entirely, although that approach does not appear to be widespread.
Obtaining reinsurance for cell and gene therapies is critical for
commercial payers. Since general reinsurance policies may exclude
cell and gene therapies, secondary reinsurance policies have been
established specifically for these therapies. For example, Cigna/
Express Scripts, United Healthcare/Optum and Aetna/CVS all offer
cell and gene therapy reinsurance programs, which allow self-
insured plan sponsors to pay a fixed per member per month fee, in
exchange for transferring claim risk for cell and gene therapies.
Similar to reinsurance products, United Healthcare and Optum offer to self-insured plans a stop-loss product,
called Gene Therapy Risk Protection, for several gene therapies (e.g.,Luxturna, Zolgensma, Lenti-D and
NSR-REP1
18
)—this product provides claim protection once a deductible is met. The program includes prior
authorization and utilization management, risk analytics and other support.
VBP arrangements for pharmaceuticals are getting off the ground, but as with Medicaid, progress has been
in part limited by Medicaid rules, requiring drug manufacturers to provide “best price” to state Medicaid
agencies. In 2022, a CMS rule that allows manufacturers to report separate pricing in the context of value-
based arrangements (multiple “best prices”) opened the door to such arrangements in the commercial
market. Under that rule, if a manufacturer enters into a VBP arrangement with a commercial payer, as long as
Commercial payers generally
use secondary reinsurance
policies and stop loss
products to manage cell and
gene therapy costs.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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it offers a similar arrangement with the same pricing to state Medicaid programs, it can report multiple VBP
and non-VBP best prices.
19
But manufacturers have not yet embraced such arrangements; as of the end of
2022, no such arrangements had been reported to states.
Nevertheless, some commercial payers have experimented with VBP arrangements, even if those have not
focused on cell and gene therapies. As of 2021, approximately half of commercial payers are estimated to
have entered into an outcomes-based contract, with the majority of those indicating two to five outcomes-
based contracts.
20
Challenges include required investments into infrastructure as well as operational hurdles,
such as patients staying on average 3–4 years with the same insurer (e.g.,deciding which insurer receives the
rebate if outcomes are not met may be problematic).
Looking Ahead
Anticipating a growing cell and gene therapy market, payers are increasingly thinking about using innovative
cost management strategies. According to the 2022 national Magellan Rx Medical Pharmacy Report, gene
therapies represent a top concern for half of the surveyed payers.
21
Similarly, state Medicaid agencies reported in a recent survey that addressing the costs of cell and gene
therapies is a key priority, with separate payments and the use of the National Medicaid Pooling Initiative for
supplemental rebates among state strategies.
22
Cell and gene therapies offer life-changing opportunities for patients suffering from blood cancers, genetic
diseases and rare diseases. Protecting patient access, managing costs and linking payments to quality will be
top of mind for payers as they adopt new cell and gene therapy payment models going forward.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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1
Cell and gene therapies approved by the FDA over the past three years include Elevidys for Duchenne muscular dystrophy, Adstiladrin
for bladder cancer, Skysona for neurological dysfunction with active cerebral adrenoleukodystrophy, Zynteglo for beta-thalassemia,
Hemgenix for hemophilia B, and Breyanzi and Carvykti for blood cancers/disorders, among others. The first three therapies—Kymriah,
Luxturna and Yescarta—were approved by the FDA in 2017.
2
ASGCT & Citeline. (2023). Gene, Cell, & RNA Therapy Landscape. ASGCT. https://asgct.org/global/documents/asgct-citeline-q1-2023-
report.aspx
3
Gottlieb, S. (2019, January 15). Statement from FDA Commissioner Scott Gottlieb, M.D., and Peter Marks, M.D., Ph.D., director of the
Center for Biologics Evaluation and Research on new policies to advance development of safe and effective cell and gene therapies.
U.S. Food and Drug Administration. https://www.fda.gov/news-events/press-announcements/statement-fda-commissioner-scott-
gottlieb-md-and-peter-marks-md-phd-director-center-biologics
4
Becerra, X. (2023, February 14). A Report in Response to the Executive Order on Lowering Prescription Drug Costs for Americans.
Centers for Medicare & Medicaid Services. https://innovation.cms.gov/data-and-reports/2023/eo-rx-drug-cost-response-report
5
American Society of Gene + Cell Therapy. (n.d.). Gene & Cell Therapy FAQs. ASGCT. https://asgct.org/education/more-resources/
gene-and-cell-therapy-faqs
6
U.S. Food and Drug Administration. (2023, May 19). Approved Cellular and Gene Therapy Products. FDA. https://www.fda.gov/
vaccines-blood-biologics/cellular-gene-therapy-products/approved-cellular-and-gene-therapy-products and see Endnote2.
7
The Medicaid Drug Rebate Program (MDRP), authorized by Section 1927 of the Social Security Act, requires drug manufacturers to
enter into a National Drug Rebate Agreement with HHS in exchange for state Medicaid coverage of most of the manufacturer’s drugs. It
includes CMS, state Medicaid agencies and ~780 drug manufacturers. For more information, see https://www.medicaid.gov/medicaid/
prescription-drugs/medicaid-drug-rebate-program/index.html.
8
In its 2022 state and national MCO survey of coverage policies for cell and gene therapies, the American Society of Gene and Cell
Therapy (ASGCT) identified coverage and access barriers related to Luxturna, Zolgensma and Kymriah. For more information, see
https://doi.org/10.1016/j.ymthe.2022.08.009.
9
AL, AZ, AR, CO, LA, MA, MI, NC, OH, OK, TN, TX, WA, NY and PA.
10
See Endnote 4.
11
Centers for Medicare & Medicaid Services. (2023, May 26). Medicaid Program; Misclassification of Drugs, Program Administration
and Program Integrity Updates Under the Medicaid Drug Rebate Program. Federal Register. https://www.federalregister.gov/
documents/2023/05/26/2023-10934/medicaid-program-misclassification-of-drugs-program-administration-and-program-integrity-
updates
12
CMS proposes that a drug provided as part of a bundled payment could be a COD eligible for rebates “if the drug and the itemized
cost of the drug are separately identified on the claim.” This is a significant change from current practice, where drugs paid for under
DRGs and other bundled payments generally are exempt from rebates. CMS appears to be saying that so long as a claim references
the provision of a drug and there is a charge for that drug on that claim (whether that charge is for $1 or for $10million), that is enough
to trigger rebate liability. For more information, see the Manatt on Health Analysis from May 30, 2023 titled “CMS Proposes Drug Price
‘Verification’ in Medicaid Rule.”
13
See Endnote 4.
14
Centers for Medicare & Medicaid Services. (n.d.). Medicare Coverage Determination Process. CMS. https://www.cms.gov/Medicare/
Coverage/DeterminationProcess
15
Centers for Medicare & Medicaid Services. (2022, August 10). Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2023 Rates;
Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals;
Costs Incurred for Qualified and Non-Qualified Deferred Compensation Plans; and Changes to Hospital and Critical Access Hospital
Conditions of Participation. Federal Register. https://www.govinfo.gov/content/pkg/FR-2022-08-10/pdf/2022-16472.pdf
16
See Endnote 4.
Accessing Cell and Gene Therapies:
Insights on Coverage, Reimbursement and Emerging Models
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17
For prescription drugs included in the EHB, cost-sharing is capped by a plan’s maximum annual limit on cost-sharing. For those
drugs or plans not subject to EHB (e.g.,large group or self-insured plans) patients’ out-of-pocket costs for cell and gene therapies
maybeprohibitive.
18
UnitedHealthcare (2021, March 9). Gene Therapy Risk Protection may help cover therapies and manage financial risk. UHC. https://
www.uhc.com/broker-consultant/news-strategies/resources/gene-therapy-risk-protection-may-help-cover-therapies-and-manage-
financial-risk
19
Centers for Medicare & Medicaid Services. (2022, March 23). Technical Guidance – Value-Based Purchasing (VBP) Arrangements for
Drug Therapies using Multiple Best Prices. CMS. https://www.medicaid.gov/prescription-drugs/downloads/mfr-rel-116-vbp.pdf
20
McCarthy, K., Cricchi, L., Shvets, E., Santiesteban, D. (2021, November 4). Avalere Survey: Over Half of Health Plans Use Outcomes-
Based Contracts. Avalere. https://avalere.com/insights/avalere-survey-over-half-of-health-plans-use-outcomes-based-contracts
21
The national report covers 152 million lives across 40 payers that include Medicaid state agencies, Medicare and commercial payers.
For more information, see https://www1.magellanrx.com/documents/2022/12/medical-pharmacy-trend-report-2022.pdf.
22
Hinton, E., Guth, M., Raphael, J., Haldar, S., Rudowitz, R., Gifford, K., Lashbrook, A., Nardone, M., Wimmer, M. (2022, October). How
the Pandemic Continues to Shape Medicaid Priorities: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2022
and 2023. KFF. https://files.kff.org/attachment/REPORT-How-the-Pandemic-Continues-to-Shape-Medicaid-Priorities-Results-from-an-
Annual-Medicaid-Budget-Survey-for-State-Fiscal-Years-2022-and-2023.pdf
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