A Survey of the Fast-Evolving Landscape for Cell and Gene Therapy Coverage in the United States

By Ankit Nanda

Health Watch, May 2024

Much is being said about the subject of cell and gene therapy. If you are a health reinsurance broker, you’ve probably spent countless hours perfecting your pitch on why your clients should care, sprinkled with a fair bit of scare. If instead you belong to the rarefied world of reinsurance, you’re (hopefully) still toiling away at trying to grasp the financial risk posed by these groundbreaking therapies, a long time coming but suddenly primed to break the bank. Priced for perfection with the highest of highs in the range of $4.25 million per treatment,[1] sticker prices for these therapies tend to inspire awe, respect, anger and some heartache. Approved for largely unresolved medical conditions that tend to be found among very select individuals, they invite comparisons to potions crafted for the special (perhaps unfortunate) few. Like them or not, you will be hearing much more about them in the days ahead.

In article 1 of this series, we introduce the phenomenon that seems to have taken the world of health (re)insurance by storm. In doing so, we don’t shy away from highlighting the eye-watering price tags that tend to accompany these therapies, for one can (must) argue that such prices carry the potential to speak volumes about (1) the efficacy and potency of a therapy, (2) manufacturing costs, (3) drug developers’ market strategies, (4) the availability of reasonable alternatives and (5) society’s prevailing opinion of what constitutes fair game as it relates to profit margin. Tracing their journey from ideation to the lab and on to commercial coverage, through a time frame unfamiliar to all but the most experienced of actuaries, we highlight key developments along the way.

An impending exponential increase in the number of U.S. Food and Drug Administration (FDA) approvals for similar therapies, coupled with an expanding patient population potentially within the scope of coverage, threatens to tear at the fabric of the health insurance system currently in place, prompting an urgent call to action by affected parties. It would not be amiss to argue that our very lives as stewards of health care financial systems, as well as general consumers of health care services, seem to have been forever altered in ways we are as yet unable to fathom with the introduction of these therapies. We encourage readers to join us in the exploration of what is likely to be a once-in-a-generation event, a culmination of many decades of thought, experimentation and a heaping of good luck.

Are We There Yet?

The success story around these new and novel therapies dates back to December 2017, when the FDA approved Luxturna, a gene therapy for the treatment of vision loss linked to inherited retinal disease. By delivering a normal copy of the defective RPE65 gene directly into retinal cells using an adeno-associated virus (AAV), the therapy worked by inducing the retinal cells to produce the missing protein. For patients with no reasonable alternatives and an eventual progression toward complete blindness, this one-time cure was widely hailed as a triumph by all metrics bar cost. The treatment was priced at $425,000 per eye,[2] or $850,000 for both eyes, an expensive proposition despite its overwhelming promise at alleviating a potential lifetime of patient suffering. The specific mutation for which Luxturna was approved was estimated to affect approximately 1,000 to 2,000 patients in the United States.[3] In recognition of its potential, the young biotech firm responsible for bringing the drug to market—Spark Therapeutics, founded in 2013 by a team of doctor-scientists working at Children’s Hospital of Philadelphia—was subsequently acquired by the Swiss multinational health care company Roche in 2019 for $4.8 billion.[4]

In a related development, the FDA approved Kymriah in August 2017 as the first chimeric antigen receptor (CAR) T-cell therapy for the treatment of pediatric and young acute lymphoblastic leukemia (ALL).[5] As the most common form of cancer among children, the condition is characterized by a gradual shutdown of bone marrow, the tissue responsible for producing healthy blood cells in the body. More than 3,100 new cases of ALL are expected in the United States each year. Aggressive regimens of chemotherapy are administered as a standard first course of treatment, often to no avail. Cell therapies are built to leverage a patient’s individual T cells, extracted and reengineered in a laboratory setting to amplify their potential at targeting and attacking certain cohorts of (cancer) cells, and then reintroduced into the patient’s body. Despite concerns, including a phenomenon called cytokine release syndrome (when the body stages a violent immune response to seemingly foreign cells), cell therapies carry a far higher success rate compared to current alternatives. A single dose of the treatment was originally priced by Novartis at $475,000,[6] with additional costs expected for post-therapy.

At the end of 2023, more than 30 cell and gene therapies had been approved by the FDA, with several thousand more in the pipeline at various stages of development. Costs for such therapies have generally been trending upward, with the notable recent additions of Zolgensma ($2.1 million, in May 2019[7]); Zynteglo ($2.8 million, in September 2022[8]); Skysona ($3.0 million, in September 2022[9]); Hemgenix ($3.5 million, in November 2022[10]); Elevidys ($3.2 million, in June 2023[11]); and Lenmeldy ($4.25 million, in March 2024[12]). Moreover, recent approvals are starting to target disease conditions with much higher prevalence in the general population compared to rare diseases that have traditionally been their focus.

We Knew It Was Coming

The journey toward a viable therapy based on the premise of correcting a faulty gene seems to have been many decades in the making. The 10th International Cancer Congress, held in Houston in May 1970, brought together more than 7,000 scientists with a goal of getting a handle on the condition being found in an increasing number of Americans—“a disease that in more than 100 forms strikes one American in four, and accounts for one-sixth of the deaths in this country.”[13] An important dimension of the work at the time involved trying to pinpoint a defect in deoxyribonucleic acid (DNA), the active substance of the genes of all living things, so the damage to cells could be repaired. Knowledge of the structure of human DNA was fast evolving; the trio of James Watson, Francis Crick and Maurice Wilkins had won the 1962 Nobel Prize in Physiology or Medicine for their research on the structure of nucleic acids. In addition to cancer, sickle cell disease (SCD) was considered a serious public health problem at the time due to the large number of Black Americans afflicted with the disease—an estimated 10% of the Black population was thought to carry the sickle cell trait, although not all cases led to health complications.[14] SCD was widely understood to have been caused by inheriting a double dose of incorrect genes. Attempts at “genetic engineering,” however, proceeded in fits and starts, with many a doctor-scientist urging caution and greater self-regulation. In 1981, a young Israeli woman afflicted with the condition was treated by an American scientist who tried to insert copies of a functional gene. Acting without prior approval from his university, the doctor received a severe reprimand in the process, for “attempting experimental gene therapy without approval.”[15] More than 40 years later, the FDA would approve its first-ever gene therapies for SCD: Casgevy (Vertex Pharmaceuticals) and Lyfgenia (Bluebird Bio) in December 2023, at list prices of $2.2 million[16] and $3.1 million,[17] respectively.

A Trial, a Death and a Reset

With the human genome nearly mapped by the turn of the century and a more nuanced understanding in the medical community as to the underlying drivers of genetic disorders, gene therapy trials seemed to gain momentum. In 1999, Jesse Gelsinger, an 18-year-old boy from Tucson, Arizona, suffered from a rare genetic metabolic disorder called ornithine transcarbamylase deficiency (OTCD), characterized by an unsafe buildup of ammonia levels in the blood. Surviving on a daily diet of pills, along with the occasional health scare, he volunteered to be part of a trial at the University of Pennsylvania, where researchers were trying to develop a fix for the OTC gene. After being given the adenovirus responsible for gene delivery, he suffered a severe immune reaction and died on day four of the trial.[18]

His death was considered a serious setback for the field of gene therapy, which was still in its infancy. It would be some time before trials would resume, under greater FDA supervision, and nascent efforts at advancing medicine based on the learned framework of human DNA would attempt to find their footing again.

In part 2 of this series, we will fast-forward to the present, beginning with a look at the prevailing regulatory climate for cell and gene therapies, and a focus on the evolution of FDA thinking as it relates to accelerated approval. We will then discuss current and envisioned coverage options for patients in various market pools—commercial, Medicare and Medicaid. In addition, we will shed vital light on strategies being employed by risk takers trying to manage the seemingly unmanageable risk offered by these ultra-expensive treatments using innovative payment models while preserving access for patients to their immense curative potential. Finally, we will dive into the hottest new development in the field—clustered regularly interspaced short palindromic repeats (CRISPRs)—and the promise and peril it encompasses.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.

Ankit Nanda, FSA, MAAA, is a senior reinsurance actuary at Lockton Re. Ankit can be reached at anknanda@gmail.com.

Endnotes