The NCSL Blog


By Kelsie George

Some gene therapies “are approaching several million dollars and those costs are felt across the health care system, particularly for Medicaid and state employee plans,” said Colleen Becker, a senior policy specialist in NCSL's Health Program, during a recent installment of NCSL’s “Our American States” podcast.

Docs looking at x-rayBecker discussed the fiscal considerations of high-cost gene therapies used to treat rare and novel diseases with Health Management Associates strategist Anne Winter and host Ed Smith.

Gene and cell therapies are innovative treatments that either add, delete or correct a gene that causes a particular condition. One example, spinal muscular atrophy or SMA, has a new, one-time treatment for children younger than 2 that stops the disease’s progression. At least five treatments have been approved by the Food and Drug Administration (FDA), with several hundred more in the pipeline.

While gene therapies offer life-altering treatments to people with some forms of cancer and other rare diseases, they may cost millions.

The Medicaid Drug Rebate Program (MDRP) requires drug manufacturers to sell medicines to state Medicaid programs at the best price, or the lowest price they give to any other purchaser, such as commercial payers. In return, Medicaid must cover all FDA approved drugs made by the participating manufacturer. This rule may create unique affordability challenges for Medicaid programs by limiting access.

Winter, a Medicaid policy expert, discussed her research published by the Kaiser Family Foundation (KFF) on innovative approaches state Medicaid programs are taking to manage prescription drug costs. KFF’s Survey of State Medicaid Pharmacies found state agencies struggling to forecast the use of gene therapy medications, how many people will use them and what state expenditures will be.

Winter laid out three key strategies that states are using to manage the costs of innovative therapies: value-based or outcomes-based arrangements (OBA’s), managed care organizations, reinsurance programs and high-cost drug review processes.

Value-based arrangements allow state Medicaid programs to negotiate the cost of prescriptions with drug manufacturers based on patient clinical outcomes or other financial incentives (risk-sharing). Nine state have submitted and received approval for a state plan amendment to enter these types of contracts.

State risk-based contracts with managed care organizations allow state Medicaid programs to carve in (include) or carve out (exclude) pharmacy benefits from contracts, leaving managed care organizations accountable for drug costs. Forty states and the District of Columbia have some form of managed care as a method for delivering services to their Medicaid populations.

Reinsurance programs mitigate the cost of covering very high-priced treatments by pooling the risk across multiple payers. Managed care drug review processes require certain treatments receive prior approval before being administered to a specific patient. Sixteen states have approved reinsurance programs.

Value-based arrangements encompass more than just OBA’s. For example, Louisiana implemented a “Netflix” model for hepatitis C treatment for Medicaid, state employee and prison health plans, providing capped costs or flat-rate subscriptions offering lower costs than traditional pricing methods and certainty on state expenditures to treat hepatitis C each year. If left untreated, hepatitis C infections lead to cirrhosis, liver failure and liver cancer, making it the leading cause of liver transplantation and death from liver disease.

The long-term costs of untreated hepatitis C can be significantly more than the cost of a regenerative therapy, as is the case with many rare conditions and cancers targeted by gene therapy manufacturers.

Moving forward, Winter anticipates the largest challenges for states will continue to be “understanding how to reimburse and cover… high-cost drugs” and establishing cost-effective and efficient data collection processes to follow an individual’s outcomes from gene therapy treatment. These strategies, however, may depend on the scale of the program, ranging from a state like California with 12 million enrollees to Montana with 99,000 enrollees.

As gene therapies come to market, states may continue to develop innovative models and practices to manage the costs and facilitate access to these life-altering treatments. To find out more on policies states legislatures are considering and enacting, visit NCSL’s, Prescription Drug Policy Resource Center and the Campaign for Transformative Therapies.

Kelsie George is an intern with NCSL’s Health Program.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.