Episode 46 – Cell and Gene Therapy

Released December 17, 2024 

Mike Stull (0:08-1:34) 

Hi, everyone, and welcome to HR Benecast, your source for expert commentary and insights on current health benefits-related news and strategies. This is your host, Mike Stull. Here at Employers Health, we always strive to provide useful content and resources you and your colleagues can use to stay informed on the latest in employee and pharmacy benefits.

This past year, we hosted over 25 webinars discussing industry hot topics, all of which are available on demand at employershealthco.com forward slash events. I encourage you to watch any of them that you may have missed and share with your team. With that, let’s get started.

Today’s guest is Drew Wilkins, managing director at Deloitte Consulting. Drew has more than 20 years of consulting experience, particularly in the biopharmaceutical and medtech industries. Drew also leads Deloitte’s efforts related to innovative financing models for advanced and emerging therapies, including cell and gene therapies, which will be the topic of our discussion today. I hope you enjoy it.

All right, welcome, Drew. Can you get us started by telling the audience a little bit about yourself?

Drew Wilkins (1:34-2:11)

Sure thing, and thank you so much, Mike, for having me. My name is Drew Wilkins. I’m a managing director with Deloitte Consulting.

I focus on commercial strategy for life sciences companies, and I’ve spent the last three years or so really thinking about cell and gene therapies, or CGTs, and how they’re emerging in our industry and the implications they’re going to have for employers, for benefit plans, for coverage, and of course for patients. A lot of the work that I’ve done has focused on innovative financing models for those high-cost therapies, and we can talk a little bit more about what some of those financing models are.

Mike Stull (2:13-2:38)

Excellent. We’re going to use the term CGT a lot. You’ve defined it as cell and gene therapies.

Maybe talk a little bit more about what CGT is or what CGTs are and why employers should be interested in what’s happening in this part of the healthcare sector.

Drew Wilkins (2:39-5:25)

So, cell and gene therapies mean a few things, but most importantly, they’re really a triumph of innovation. There’s something we’ve been talking about in the industry for many, many years now. How many of us have thought about what a cure for cancer might look like, for example?

And in some ways, CGTs do that. They are these amazing innovations that allow patients to change the trajectory of their disease. A cell therapy, to get a little technical here, is an injection or a transfusion of cellular material into a patient’s body, and what it does is essentially repairs or replaces damaged cells or diseased cells.

Gene therapy is slightly different, and in gene therapy, we transfer genetic material into the body, and what that does is it changes the composition of those cells to stop a disease or to prevent a disease. The takeaway here, though, is that they’re unique. They’re not these traditional therapies that get administered on a daily, weekly, annual basis.

These tend to be one-time or sort of one-time treatments that address the underlying need or underlying cause of the disease. Now, the downside of that is they tend to be pretty expensive. They tend to cost somewhere between a quarter of a million to three, sometimes even four million dollars per patient, and that’s a lot, and that’s particularly hard for many self-insured employers, especially smaller and mid-sized self-insured employers who are trying to think about how to manage budgets over the course of a year.

What’s also complicated for employers is that these tend to be kind of lightning strikes. You don’t know they’re coming. They tend to be pretty rare.

The diseases that we are treating today tend to be more rare diseases, and so for an employer, it can be hard to plan for and to budget, but what we’ve seen is that they’re growing. The number of these therapies that are on market is increasing. They’re about, you know, 25, 30 of these on the market today, and we see many or most pharmaceutical manufacturers having them in their pipelines, so what we think that means is by 2030, we’re going to have about 100,000 patients in the U.S. being treated by cell and gene therapies. That means, depending on your plan size, you’ve got between a 25 and a 50 or maybe even 60% chance of having one of these claims come up in your member basis.

Mike Stull (5:29-6:10)

Well, great. I love the term, I think you said, a triumph for innovation. Is that correct?

Is that what you said? I think that that is a wonderful way to describe it, and I know that a lot of times, employers today, when they hear cell and gene therapy, it’s right away like, oh no, because of the price tag, but I know it truly, you know, is one of the areas of medicine where we’re starting to represent cures, not just ways to treat the symptoms, but actual cures for diseases, so I love that phrasing of it.

Drew Wilkins (6:11-8:29)

Yeah, Mike, I think that’s right. I think from a scientific standpoint, definitely a triumph of innovation, and from a patient standpoint, definitely a triumph of innovation, and frankly, a beacon of hope even for many of these patients who are out there who don’t have other options, and so it’s really brought a lot of hope to them. There’s a story out there, I think it’s publicly available, about a family who had three children with spinal muscular atrophy, which is a genetic disease, rare genetic disease, but it’s one that we can now treat using gene therapies, and the first child was born and didn’t have access to one of these therapies.

By the time it was on the market, he was too old to receive it, and the disease had progressed far enough along, and so while he’s still alive, he needs a lot of help. He’s in a wheelchair, he’s incapacitated, he needs help breathing sometimes, and it’s a very sad story. Now, their middle child got it after the disease had started, but they caught it, and so he certainly has some side effects from the disease, but he’s doing well, and their third child received it immediately after being born because they knew she had the disease as well, and she looks like a normal five, six, seven-year-old.

It’s amazing that we’ve been able to make that type of innovation so quickly, and that it’s having that direct impact on patients’ lives. Now, as we think more broadly beyond spinal muscular atrophy, we think about patients in other disease areas, and so what do these cell and gene therapies mean for them? Well, for many of them, it’s similar to the story I just told, but it also can mean fewer hospital visits, fewer side effects, lower cost to treat on an ongoing basis, and so while there is an upfront cost of these high-cost therapies, there’s a story to be told about the value over time that they provide to the payer and to allow for reduced chronic care in many cases because they are largely cured or we’ve meaningfully stopped the progression of the disease.

Mike Stull (8:30-9:09)

Yeah, very, very neat stuff, and I love the word hope as well. So, we talked about a quarter, you mentioned a quarter of a million to three million dollars each. We said there’s about 25 to 30 of them on the market today.

We think 100,000 patients by 2030. In terms of that high cost of these therapies, I mean, that’s really what has employers, you know, worried, and so maybe talk a little bit about what’s driving that high cost for these therapies.

Drew Wilkins (9:10-11:15)

Yeah, the high cost is really driven by the personalized nature of cell and gene therapies. They’re hard to study, they’re hard to make, and they are made bespoke to each individual patient for most of these, which means they take the cellular material out of your body, in the case of a CAR T, they manufacture, and then they put it back into your body, and so it’s a highly personalized treatment that, of course, has high costs associated with it because of the complexity of the manufacturing, because of the procedures that go along with it to extract that material, to follow it through the manufacturing process, and to make sure that it is safe and ready to be put back into the body. It relies on a chain of custody as it goes from the hospital, from the patient itself, through the transportation to the manufacturing site.

It gets manufactured and then the chain of custody back, and so we need to be very careful about that. It’s appropriate that we have these safeguards in place to make sure that it is safe. It is your material.

We’ve managed the temperature, for example, correctly across that chain of custody to make sure that that product is effective and safe. You know, you can imagine in these small disease areas that recruiting patients for these clinical trials is very complicated too. In some cases, we’re talking about children.

In other cases, we’re talking about extremely small populations that are hard to find and hard to recruit into these trials, and so there’s a lot of cost that’s baked into it. The nature of these products, though, is very much focused on this mindset of a cure or a fundamental change in the course of the disease. So going back to some of my previous comments, this means fewer long-term costs, fewer hospitalizations, fewer tests, all of those things that drive costs to employers along the line.

The goal of cell and gene therapy is to get ahead of that and to be able to prevent those costs downstream. 

Mike Stull (11:16-11:31)

And obviously, besides the price tag, are there other obstacles that you’re hearing about or seeing from employers in terms of paying for these therapies?

Drew Wilkins (11:33-13:31)

Yeah, I mentioned some of these a few minutes ago. Certainly, the magnitude of costs that you call out, Mike. The second is the timing of those costs and the fact that you don’t know that you’re going to have one of these claims.

It is actuarially very difficult to predict that one organization will have this claim this year versus the next because they are in such rare populations. Now, as we think about where the world is going, where we see clinical trials happening, it’s very possible that we will be in broader diseases, and so these costs may get smoothed out over time. But for right now, this lightning-strike nature of these costs makes it very, very difficult.

So, we’re seeing employers struggle with that. They’re struggling with the budgeting, they’re struggling with the magnitude of these, and they’re struggling with the options. You know, I fundamentally believe that employers want to do the right thing for their employees.

They want to provide the right health care, and that most employers know that a good, supported, healthy workforce is a good, productive, and loyal workforce. And so, providing benefits for these kind of diseases when they pop up is critically important. I did a webinar a couple weeks ago, and we had somebody from an employer group talking, and he shared a story of they hadn’t covered these cell and gene therapies previously, and almost on a whim, they added a rider to one of their policies, and not two months later, they had a claim.

And had they not had that rider, they would have been, you know, on the hook for the cost here, or they would have had to tell the patient that they weren’t covered for this severe disease that they needed to treat. And so, we’re seeing more and more of those stories pop up, and I think it’s critically important that we work together to figure out how we start to find financing models that work for employers of all sizes to make sure that we can get these types of treatments covered.

Mike Stull (13:32-14:05)

Yeah, so you mentioned the rider that this company put into place, and you also mentioned employers of all different sizes, so I know there are really large clients of ours that could absolutely absorb, you know, one or two of these. I think the long-term concern is, what happens when I get more than that? But maybe talk to us a little bit about, you know, what are the options that companies are employing to cover CGT?

Drew Wilkins (14:06-16:24)

Yeah, as you mentioned, larger companies are putting aside funds. In many cases, they’re budgeting. They’re saying, look, we can cover one or two of these.

We don’t expect to have 10 in a year. That would be extremely rare. And so, they’re able to support these therapies.

It’s the small and medium employers that are having a harder time, and they’re the ones that are really looking for other ways of doing this. And so, we’re seeing stop-loss insurance as a major way that companies are trying to cover cell and gene therapies. Of course, there are challenges with stop-loss insurance.

The cost of stop-loss insurance is rising. We’re seeing stop-loss insurers really struggle with how to cover these as well. And so, some stop-loss policies have carved off cell and gene therapy and said that it’s excluded from stop-loss policies, or we’ve seen others that have said you need additional coverage to cover cell and gene therapies, or we’ve just seen the cost increase.

And so, it’s one of these questions of how do we think about stop-loss insurance? We’re seeing some large payers provide a couple of different options. One option they’re providing is a limited network of providers.

So, if you sign on, you get this limited network of providers. If a patient, a member needs one of these cell and gene therapies, then they’re able to go to this limited network. And by doing so, the company sees some savings in that.

It’s cheaper to go through this network. Other payers are looking at risk pools. And so, what they’re doing is to say for a relatively low per member per month, you can buy into this risk and then you get coverage for the gene therapy if and when you need it.

So those are, I think, are effective models. I think the questions come in related to those models around, are the savings meaningful enough for small and mid-sized employers? And then secondly, do the options, like the risk pool option that I mentioned, do they provide enough coverage of these various products that are coming to market?

And how does that price point meet the budget needs of small and mid-sized employers? Are the per member per month’s costs that they’re charging, are those feasible in terms of the budget these small and mid-sized companies have?

Mike Stull (16:25-16:46)

Are there, you know, you talked about some of the stop loss policies having, you know, eliminating coverage for these. We talked about some employers that don’t cover them. Are there other gaps that employers should be aware of and what’s being done about it?

Drew Wilkins (16:47-20:02)

Well, maybe the major gap, in addition to the ones I just mentioned, is if you’re not part of the network that those health providers offer, those programs aren’t available to you. And so, if your insurance company doesn’t offer that limited network, you can’t get it. If your insurance company doesn’t offer that per member per month risk pool, you can’t get it.

And so, what are you supposed to do? Are you going to change your provider, your payer network to be able to access those? Probably not.

But we need to think about some alternatives. And so, we’ve been spending a lot of time, as I mentioned in my introduction, thinking about what some alternative models might look like. Thinking about how those models might meet the needs of certainly the self-insured employers, but also patients themselves.

Because patients experience a financial burden here too. They have to pay out of pocket for the co-pays, obviously. But they may also be on the hook for things like travel, or time away from work, or childcare when they have to be away from their families, or have other children who maybe aren’t undergoing the therapy.

And so how do you think about helping patients be able to feel supported and to get the financial support they need as well? So maybe, Mike, let’s talk a little bit about some of the models we’ve imagined, if that works for you. I mentioned a risk pool.

One of the limitations, I think, of a risk pool that’s tied in with a payer is that it’s a for-profit entity. And so, this is a service they’re providing. And they likely experience a margin on top of whatever the cost to serve is.

And so, we re-imagined how we might be able to do that using a non-profit entity or a public benefit company. And would we be able to drive to a lower price by getting much closer to the fees, the actual cost of services themselves? And so, we’ve imagined working with a public benefit company to be able to provide this risk pool.

The idea would be that self-insured employers would pay into that risk pool. We think we can get the per member per month cost down below the cost of stop-loss insurance, the increases in stop-loss insurance that we’re seeing associated with cell and gene therapy coverage and make this a nationally available risk pool that would cover all gene therapies. Not only would it cover the product cost, but it would also cover the administration cost.

So from when the patient checks in to when they receive the product back, and then, of course, some tie-in as well to any types of complications that would exist as well. So this would entirely remove any risk related to the cell and gene therapy from the self-insured employer. And all of the benefit associated with patients having fewer hospitalizations, fewer diagnostic tests down the line, fewer chronic treatments, all of those benefits would accrue to the payer itself.

So that’s a solution that we’re trying to get into the marketplace, would be open to any and all, and we think would really benefit self-insured employers and sponsors.

Mike Stull (20:03-20:12)

As you’re thinking about that type of risk pool, how big does the risk pool need to get to make it affordable?

Drew Wilkins (20:13-20:45)

You know, the more the merrier, right? And the more we can spread these costs out, the better. But it’s not 100 million people.

You know, if we can get to, I don’t know, let’s call it 10 million people, I think we can get to a really attractive price point. Now, we’re still working through what that price point is, what the exact number that we got to get to is, but it’s something that I think is very reachable with a couple of, you know, a couple of small plans joining, a couple of self-insured employers joining. I think we can get there pretty easily.

Mike Stull (20:45-21:27)

Yep. And we’ve certainly seen it. We have a number of clients that belong to public risk pools.

And so, you know, taking this on a more macro level, looking at overall healthcare expenses, same concept, right? How do you spread the risk over a pool of employees? So, it’s just a matter of, you know, can you get it to the size where it makes sense?

And certainly, I think a concept that we’ve tried to convey to the market and to our employers is, you know, most of them are very much aware of this, but, you know, anytime you want another entity to take on risk, it’s going to cost you a premium. So…

Drew Wilkins (21:27-21:34)

We’re trying to keep that premium as low as possible because we think that this benefits all of us by being able to get a service like this in the marketplace.

Mike Stull (21:34 – 21:35)

Absolutely.

Drew Wilkins (21:36 – 22:36)

I do think there are other insurance products that could be attractive here, Mike. And I think particularly as we think about the patient requirements, products that are essentially supplemental insurance policies could be very helpful. As I mentioned, patients experience a lot of costs.

Some of those costs are supported by various insurance products and other coverage that they have, but not all. And so, we want patients to feel entirely comfortable being able to go get these products, be able to focus on their care, their recovery, and make sure they’re making the most of the opportunity. So, how do we find opportunities to support them?

Supplemental insurance is a great proxy for us to look at to be able to do that. We could also think about accelerated benefits associated with things like life insurance. So, are there opportunities to tie in those to self-insured employers’ policies to make sure patients can use those benefits when they need them?

Because this is a major life event for them.

Mike Stull (22:37 – 22:54)

Have you given any thought or have you seen any models out there, whether we call it a value-based type design or a warranty type of program? But I know a question that a lot of employers have is, I pay for this, what happens if it doesn’t work?

Drew Wilkins (22:56 – 23:46)

First of all, let me start by saying the data out there on the efficacy of these products is incredible. That is not a guarantee, of course, but the efficacy is incredible from both a safety standpoint, as well as does the product actually work? So, I feel very confident in saying that I think these products stand for themselves.

That said, we are seeing warranty models emerge across biopharma. We’re seeing companies offer them to payers to make sure that payers feel comfortable. I can imagine a world where many or most cell and gene therapies have a warranty associated with them.

I think they are the exception right now, but certainly there is a trend towards moving towards those that I think would make a lot of employers feel much more comfortable about it.

Mike Stull (23:47 – 23:53)

Excellent. Well, I know we’ve covered a lot of ground here today. Anything that we missed?

Drew Wilkins (23:55 – 25:52)

I would just say there are a few things that self-insured employers could and should do now. The first is you should review your benefits package and understand if you are covering cell and gene therapies. There have been several companies that I’ve talked to who were surprised to learn that they don’t cover them or that they do cover them.

It just hasn’t been top of mind for people, given that they’re very focused on rare disease. So, assess your benefits plan, and I would hope that it does include cell and gene therapies, but then start to develop what your strategy would be to manage the financial impact of these therapies. The second would be to review your policies.

I mentioned the company who kind of randomly signed a rider to add coverage for these things. You should understand what’s in your stop-loss policy, confirm it does cover cell and gene therapy, and if it doesn’t, figure out how to update it so that you can make sure that you have the right coverage and that you’re not surprised by any of these costs. I do think it’s worth exploring some of the other insurance models that are out there, the models that I mentioned around risk pool, around limited coverage networks, to see if you or the insurance companies you partner with, to see if they offer those types of programs and if that would be a good fit for your member base.

And then finally, talk to your benefits consultants. Talk to your brokers about some of these models that are emerging. We’re certainly working on a few of them, and I’ve had conversations with other entities that are also working.

I think we’re going to see a lot of these models come out in the next 12 to 18 months, hopefully. I think the market is hungry for different options, but understanding what those models are, understanding how to educate yourselves on how they fit with your business, and then making sure that you’re making the smart decision around if and when and how to cover cellular gene therapies to really benefit your member base and take advantage of the triumphs and the innovations that are in the marketplace.

Mike Stull (25:53 – 26:16)

Excellent. That is a great wrap-up and great takeaways for employers. This is such a fascinating area and, to be frank, a scary area, as we’ve said, for a lot of employers.

But I really appreciate your insights and expertise, Drew, and appreciate you coming on and talking with us.

Drew Wilkins (26:17 – 26:19)

Thanks so much, Mike. Really appreciate the opportunity.

Mike Stull (26:20 – 27:52)

Thanks again to Drew. It was certainly great to hear his perspective on this, as I said, fascinating realm of the healthcare industry. Before we go, I want to thank our sponsors for helping to not only make this podcast possible, but for supporting us in providing great employee benefits-related content.

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