Value-Based Contracts Provide Options for State Medicaid Programs to Cover Gene Therapies

State Medicaid programs have faced challenges in providing high-cost gene and therapies to beneficiaries. As a result, Medicaid coverage for these therapies is sometimes delayed and has been inconsistent with federal legal requirements, one recent study has found. (See Sidebar below for Medicaid facts.)

The challenges of providing gene therapies are not going away. More gene therapies are expected. The IQVIA Institute for Human Data Science expects that 55 to 65 cell-, gene- and RNA-based therapies will launch globally by 2027, and U.S. spending on such therapies could rise to $12 billion by then.

These therapies treat patients with cancer and serious diseases who have limited or no treatment options. But they come at a high cost. In June 2023 alone, gene therapies were approved by the FDA: Elevidys (delandistrogene moxeparvovec-rokl) to treat patients with Duchenne muscular dystrophy has a price of $3.2 million and Roctavian (valoctocogene roxaparvovec-rvox) to treat adults with severe hemophilia A as a $2.9 million price.

We could see at least three more gene-based therapies by the end of the year, including two for sickle cell disease and another for advanced melanoma. One of these therapies, if approved, would be the first CRISPR-based, gene-edited therapy.

One study published in 2021 in JAMA Pediatrics found that if a $1.85 million sickle cell was administered to 7% of eligible patients, the average one-year budget impact per state Medicaid program would be nearly $30 million.

Meredith Delk

“We’ve heard from our Medicaid agencies that they want to provide access to these is very high cost drugs coming to market,” Meredith Delk, senior vice president and general manager, state government solutions at Magellan Rx, said in an interview.

She said Medicaid administrators have been concerned that these high-cost therapies are not proven and there isn’t longitude data that they actually work. “Medicaid agencies want budget certainty,” she said. “But there is concern that these $2.5 million therapies that may or may not work.”

The Centers for Medicare and Medicaid Services, Delk pointed out, is moving away from unit costs to outcomes-based care, especially for high-cost therapies. “The reality is that Medicaid is required to cover many of these drugs if the therapy is deemed medically necessary for a patient.”

In 2020, CMS proposed a rule change to create flexibility for value-based contracting in Medicaid, specifically addressing the “Medicaid Best Price” rule. Under this rule, value-based transactions in which manufacturers are paid on a sliding scale, based on whether a costly therapy works would not be allowed. More recently, CMS announced that it was testing a program in which states could assign CMS to coordinate and administer multi-state, outcomes-based agreements with manufacturers for certain cell and gene therapies.

The flexibility in rules, especially allowing for value-based contracting, has allowed for new solutions. One such solution is Magellan Rx Management’s Value Plus, which is designed specifically for value-based contracting in the Medicaid fee-for-service market. This multi-state approach uses scale to benefit states with budgets of all sizes, because even 1-2 patients using CGTs can disrupt already tight budgets.

MRx Value Plus aims to link outcomes with cost effectiveness of the gene and cell therapies. States that contact for MRx Value Plus can have Magellan negotiate with manufacturers for value-based agreements that are based on outcomes. If health outcomes are not realized, the manufacturer will refund a portion of the cost of the drug back to the state.

So far, Magellan has signed three states for this program and expects a fourth to come on board by the end of the year. Magellan, however, wouldn’t disclose which states have signed up already.

“We support 26 states in the District of Columbia with preferred drug list management services,” Billy Thomas, senior vice president, plan president, Medi-Cal Rx at Magellan Health, said in an interview. “We see this Value Plus solution as an adjunct to that, and a new innovation that we’re bringing to market given the confluence of the new cell and gene therapies that are coming to market the overburdening that Medicaid will have in terms of a percentage of paying for these types of therapies.”

Critical to providing value-based contract is a technology solution to manage and meet the needs of each state. Magellan Rx Management in August 2022 teamed up with Coeus HealthCare to help administer the value-based contracts through the Coebra Platform. Coebra is a SaaS solution that interprets large, disparate, real-world data sets and summarizes results.

The states are trying to build a construct around gene and cell therapies to understand their clinical value and the pathway for access, Thomas said. “We’re definitely seeing a need emerging very rapidly in the larger states that have a large population that they’re supporting.”

Additionally, Thomas said Magellan is looking to develop a collective of states to negotiate the best deal available so smaller states with few patients can participate in the value-based contracts.

Sidebar:

Medicaid Facts

Medicaid is a health insurance program for lower-income Americans. In 2021, In 2021, the federal government covered 70% of the program’s cost. Medicaid is administered by the states but is subject to federal oversight. The Affordable Care Act (ACA) expanded the Medicaid program to include people with incomes up to 133% of the federal poverty level. More than one-third of U.S. children are covered by Medicaid, and 54% of Medicaid's funds were spent on the elderly and people with disabilities.

In 2021, Medicaid:

• Provided health insurance for about 76 million Americans, or about 23% of the U.S. population.
• Cost the federal government $513 billion.
• Represented 18% of all health spending in the United States.
• Was the largest single payer of long-term services;

Source: Peter G. Peterson Foundation, https://www.pgpf.org/budget-basics/budget-explainer-medicaid

This story originally appeared on Formulary Watch.