An emerging new generation of cell and gene therapies has insurers concerned about the effect on the cost of health coverage.
The new cell and gene therapies that began coming to market in the last few years — and the many more that are on the way — hold incredible promise medically to treat complex diseases. However, they come with a steep price that will add to the already high cost of health care. Ultimately, these costs will be fixed into the premiums that employers pay for employee health coverage.
“These are amazing, life-saving, life-altering treatments, but they also come at a very high cost,” Adam Dee, vice president for health plan business at Blue Cross Blue Shield of Michigan, said this week during an annual seminar hosted by Advantage Benefits Group in Grand Rapids. “This is something we’re going to have to manage into 2024.”
Dee, along with Priority Health Vice President and Chief Underwriter Chase Osbourne, raised the issue during the March 14 seminar when discussing factors that will affect rate proposals for 2024. Those proposals are due to state regulators this spring.
Pharmaceutical companies presently plan to spend $48 billion in R&D by 2026 to develop new cell and gene therapies, Osbourne said. Fifteen new gene and cell therapy treatments are expected to earn U.S. Food and Drug Administration approval this year, adding to a market that’s forecasted to hit $21.3 billion by 2026, he said.
Of the three gene and cell therapies approved since August last year, each has a list price of $2.5 million to $3 million, Osbourne said. That equates to about $12,000 in spending per Priority Health member annually, “which is absolutely not sustainable long term, and everybody knows that,” he said.
“Gene and cell therapies are miracle treatments. They find ways to cure, treat, and lessen the severity of symptoms that we probably never thought would be covered, but they come with extraordinarily high expenses,” Osbourne said. “It’s an alarming pipeline of medications coming down.”
A December report from Research and Markets estimated that the gene and cell therapy market will grow quickly from $4.99 billion in 2021 to $36.9 billion by 2027 as new treatments come to market, a compound annual growth rate of 39 percent. Gene therapy is being explored to treat a range of diseases, including cancer, cystic fibrosis and heart disease.
Priority Health is monitoring about 30 gene and cell therapies that it expects to hit the market in the next 12 to 24 months, Osbourne said. The therapies will become “one of the principal drivers” for overall pharmacy spending in the next couple of years, he said.
As more gene and cell therapies emerge, the use of high-cost specialty drugs continues to rise as well. In his presentation, Osbourne cited one outlook that forecasts the market for specialty drugs to grow more than 35 percent by 2027.
More than 100 specialty drugs for oncology alone were introduced last year, he said.
“We’re seeing both levers going in the wrong direction. The cost goes up every year for specialty drugs and we’re seeing more and more people using them. Part of that is the pipeline of these specialty medications hitting the market,” Osbourne said. “Priority Health is paying quite a bit of attention to what’s happening in the pharmacy space just because the costs have been going up.”
Likewise, Blue Cross Blue Shield of Michigan is paying a “lot of attention” to pharmacy trends as spending increased for specialty drugs to treat, for example, arthritis, obesity and psoriasis. Blue Cross Blue Shield is working on programs and initiatives to curb those costs for employers, Dee said.
Employers that self-fund their health coverage can exclude cell and gene therapies, although “it’s not something that we encourage,” Dee said. Blue Cross Blue Shield “has less than a handful of customers who’ve gone down that path,” he said.
Blue Cross Blue Shield’s stop-loss coverage does include gene and cell therapy, Dee said. The insurer also can pool individual groups together to spread the costs, he said.
Managing these rising costs over time is “going to be a growing issue,” Dee said. “Longer term, this is going to be an issue that the entire industry and economy, frankly, is going to have to face and come up with solutions.”
Asked specifically about a gene therapy the FDA approved in November for the genetic blood-clotting disorder hemophilia B that costs $3.5 million for a one-time treatment, Osbourne said that it will be “imperative that the drug is going to be helpful to the member” before it’s covered.
Pharmacy programs that insurance carriers have in place “are going to do a lot to help ensure that if somebody does take a $3.5 million drug, it will have a beneficial impact,” he said. “There will be tight controls in place to ensure that only the member who will see that value and the benefit are able to get the treatment. If the treatment is needed for them, of course, we will cover it.”
The high cost for specialty drugs and the new cell and gene therapies are just part of what goes into determining rate proposals for the coming year. Osbourne also cited higher costs for hospitals, including a 21-percent increase for labor, a 14-percent increase for supplies, and an 11-percent increase for drugs from December 2019 to August 2022.
As well, insurers are factoring the costs for testing, treating and vaccinating people for COVID-19 into rate proposals, a practice that began a year ago for 2022 rates.
“COVID, I think, is now just part of the everyday cost structure. It’s built into everybody’s rates,” Osbourne said.
Priority Health last year spent $267 million to test and treat members who were sickened by the virus and for administering vaccines. Blue Cross Blue Shield of Michigan, the state’s largest health insurer, paid $739 million in COVID-related medical claims in 2022.