Three trends that will help show the value of CAGTs to payers

Cell and gene therapies (CAGTs) do not fit existing frameworks for valuing, pricing, and reimbursing pharmaceuticals. Designed to deliver a lifelong cure—or durable disease-modifying benefits—they enter a healthcare marketplace that runs on annual budgets. For payers, the presumed one-time, front-loaded cost of CAGTs has almost no precedent. There is no clear solution, although new payment models are emerging. 

Expanded use of surrogate endpoints

The FDA will increasingly rely on accelerated approval (AA), surrogate endpoints, and biomarkers to bring CAGTs to patients faster, according to Peter Marks, Director of the agency’s Center for Biologics Evaluation and Research (CBER)¹. Parexel data show that two of the 12 novel CAGTs approved by the FDA from 2017 to 2022 used the AA program for the original indication.

Because CAGTs often have long-term effects that may not be measurable in the short term, surrogate endpoints via AA could be critical for expediting patient access. For example, a gene therapy that corrects a genetic defect may not show immediate results but could prevent or delay disease onset or provide a long-term cure. As developers and the medical-scientific community identify more novel surrogate endpoints and biomarkers, the science is at risk of outpacing the regulatory and reimbursement infrastructure. Sponsors can manage that risk proactively. While the FDA works to address the issue, payers may choose to wait out the uncertainty. They may argue that, without a complete scientific and clinical understanding, they cannot reimburse AA products approved based on “experimental” surrogate endpoints, and require a larger body of real-world evidence (RWE) to substantiate long-term value to patients and the healthcare system. 

Gene therapies will continue to push the envelope on novel endpoints. For example, in June 22 2023, Sarepta Therapeutics announced the FDA's accelerated approval of ELEVIDYS, their new gene therapy to treat ambulatory Duchenne Muscular Dystrophy (DMD) patients with a confirmed mutation in the DMD gene. Sarepta developed SRP-9001 using a novel surrogate endpoint—micro-dystrophin expression—and argued it is “reasonably likely” to predict clinical benefit².Using a dystrophin endpoint, Sarepta won AA for three other DMD products (EXONDYS 51, AMONDYS 45, and VYONDYS 53). But micro-dystrophin is a shortened, functional form of the protein (full-size dystrophin is too large to deliver via gene therapy). As new endpoints such as this are validated and accepted by regulators, how will payers respond? 

What if HTA decisions were not fixed but dynamic documents that evolve as real-world data accumulate?

Emergence of dynamic health technology assessments

In Europe, health technology assessment (HTA) agencies determine market access. They decide whether new products address an unmet need, deliver clinical benefits versus the standard of care (SOC) in each country, and are cost-effective for the healthcare systems. The magnitude and durability of clinical benefits inform reimbursement negotiations. 

For CAGTs, it may take years or decades to demonstrate that a debilitating or high morbidity condition has been prevented or stabilized. HTA bodies can’t calculate the value and systemic impacts without long-term outcomes data, so they issue decisions based on the evidence available at the time of evaluation. At industry conferences recently, I have heard fresh thinking and healthy debate. For example: What if HTA decisions were not fixed but dynamic documents that evolve as real-world data accumulate? Developers could submit evidence from long-term follow-up or registry studies, and payers could adjust the risk-benefit profile accordingly. 

If regulators approve more CAGTs using surrogate endpoints, an evolving assessment may capture value more quickly and accurately, increasing patient access. Some HTA agencies already take a semi-dynamic approach. For example, the UK’s Cancer Drugs Fund (CDF) provides temporary reimbursement for innovative cancer drugs initially declined by the National Institute for Health and Care Excellence (NICE). The CDF also offers a route for RWE collection: If the data are compelling, they can ask NICE to take another look. From July 2016 through April 2022, the CDF provided patient access to 53 products: NICE reappraised 26 of them and approved 22 for routine use in the National Health System (NHS). In June 2022, the UK established a comparable framework for non-cancer drugs, the Innovative Medicines Fund, to provide a managed access process for advanced therapy medicinal products such as CAGTs.

From 2025 forward, an EU-wide joint clinical assessment (JCA) will form the basis of CAGT reimbursement decisions³. Post-approval RWE collected in each country may be a mechanism to support EU-wide reimbursement decisions. Dynamic HTA evaluations could track a product’s performance over time, documenting outcomes such as slower disease progression and fewer adverse events, capturing patient benefits that one-time decisions may not. Developers should expect U.S. arbiters of cost-effectiveness, such as the Institute for Clinical and Economic Review (ICER), to follow Europe’s lead. 

Increased investigation of CAGTs in non-orphan conditions

If CAGT technology proves effective for treating widespread, chronic diseases such as angina, diabetes, or frontotemporal dementia, far more patients will have access to life-changing therapies. While demonstrating long-term value may support pricing that rewards R&D investment and risk, the cost of paying for CAGTs to treat large prevalent populations will put considerable pressure on health systems and payers. 

Sponsors must be strategic to avoid developing drugs that are too expensive relative to the SOC. For example, in the biologics category, PCSK9 inhibitors to treat hypercholesterolemia were initially priced at a premium to highly efficacious statins. As a result, payers imposed paperwork and onerous preauthorization requirements that slowed adoption. In time, manufacturers dropped prices substantially to meet payers’ needs and support broader access. In hindsight, this drug class might have seen faster uptake if sponsors had adopted a holistic approach to aligning price, value, and clinical evidence with patient, provider, and payer needs.

CAGTs may reach new populations, but not all of these populations will be equally valuable or “worthy” in the eyes of economists and payers. For instance,  the younger the patient, the higher the lifetime value. When we advise rare disease companies that seek to diversify into chronic conditions, we caution them that regulators and payers will demand a demonstration of efficacy, long-term safety, and cost-effectiveness against the SOC. CAGTs will not be exempt from this requirement even if they deliver breakthrough science and patient benefits. So far, CAGTs have addressed conditions that lack a SOC or where the SOC is expensive and inadequate, such as hemophilia and SMA. For prevalent chronic conditions with existing cost-effective therapies, the calculus is dramatically different.

The competition will increase as CAGTs expand to non-orphan conditions. According to Parexel data, all novel CAGTs and supplemental indications approved by FDA between 2017 and 2022 (n=18) were orphan-designated. If two or more therapies are entering a market within six months of each other, will payers be incentivized to wait and compare them before deciding on coverage? Will they slow down evaluations in response? In that scenario, we would have a marketplace rather than a monopoly. Further, safer delivery technologies and gene-editing platforms such as CRISPR may enable second- and third-generation products to achieve durable outcomes at a lower cost. 

Contributing Expert