From The Editor | August 1, 2019

What Can Cell & Gene Efforts Teach Biosimilar Makers?

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By Anna Rose Welch, Editor, Biosimilar Development

Biosimilar industry

It’s rare that I venture too far outside of the biosimilar space; heaven knows there’s no shortage of happenings to think and write about where biosimilars are concerned. However, I had the opportunity to serve as the moderator for an event in Pittsburgh a few weeks ago put on by the Pittsburgh Business Group on Health (PBGHPA). This gathering not only furthered employers’ discussions on biosimilar medicines, but it also introduced me to their early-stage considerations about emerging cell and gene therapies.

The goal of this event was to educate employers on these therapies and hear their thoughts, questions, and concerns about implementing these therapies into their populations. As can be expected, the costs of specialty medicines remain a central talking point for employers who fear the long-term impact these expenses could have on their organization.

On the biosimilar side of things, I walked away from the event with a better sense of where these critical stakeholders currently stand in terms of implementation and education. (There’s much work to be done, as I shared in this article.) However, the cell and gene therapy portion of the event — in particular, the discussion surrounding the contracting of Spark’s LUXTURNA via the SPARK Pioneering Access to Treatment in Healthcare (PATH) — got my gears turning about how we can better progress on the hospital outpatient site of service (medical benefit) with the majority of biosimilars on the market today.

Obviously, site of care is an adjustable variable for current biosimilars (or the brands facing biosimilar competition), which is not the case for LUXTURNA. As such, the strategy I discuss here may not necessarily be feasible for biosimilars (at least not today). However, I still wanted to share the important parts of this discussion. Not only are the issues impacting cell and gene therapies relatable on the biosimilar side, I’m hoping this particular strategy can inspire creative thinking as scrutiny into the buy-and-bill landscape continues to intensify.

Buy & Bill Frustrations Abound

When I first started writing about biosimilars almost five years ago (what?!), I heard little about the buy-and-bill system. It came up in discussions occasionally given that a majority of these first-wave biosimilars are reimbursed in such a fashion. (Buy-and-bill is a payment practice for biologics administered in a hospital outpatient or physicians’ office setting. The hospital or physician buys the drug, administers it to the patient, and then submits a claim to the insurer to have that treatment and any additional services reimbursed.)

Fast forward to this year and buy-and-bill has been taking heat as the federal administration releases proposal after proposal for reining in drug costs. As I wrote in an article earlier this year, the Medicare International Pricing Index (IPI) and the introduction of step therapy into Medicare Advantage plans are just a few of the ways that could impact how (albeit a smaller portion of) drugs are bought and paid for in the biologics outpatient setting. We’ve even begun to hear striking proposals to eliminate buy-and-bill practices altogether. These arguments are based on the notion that providers mark up the payer’s cost of the therapy and receive reimbursement which is typically much higher than the provider’s acquisition cost. This payment methodology could encourage the providers to choose the more costly option, several Kaiser physicians argued in this Health Affairs column. In addition, it inflates the actual cost paid far above the manufacturer’s original prices. Obviously, if this is the case, this is bad news for biosimilars which aim to provide a lower price tag and decrease overall costs — though one study so far has argued price does not drive physician treatment choices. (Eliminating buy-and-bill altogether certainly wouldn’t be the easiest option to employ, as it will involve a change in statute — but it’s one I occasionally hear proposed.)

The challenges of the buy-and-bill system were a large part of the discussion surrounding the introduction of Spark Therapeutics’ LUXTURNA, the first gene therapy for any genetic disease approved in the U.S. and the first medicinal therapy of any kind for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy. As this treatment can only be administered in a hospital outpatient setting — specifically, in a hospital surgical setting — it would be reimbursed via a buy-and-bill payment process. However, given the high cost of gene therapies, when Spark set out to explore the contracting process, experts, including this event’s speaker Jay Newman, Spark’s head of U.S. marketing and patient access, discovered a few critical things that informed the company’s strategy.

For one, in the buy-and-bill setting, there is little transparency into the claims submitted to the insurer and employer following treatment. Newman cited literature — in particular, this analysis from The Moran Company — and anecdotes in which hospital drug claims can be anywhere from two- to eight-times higher than what the hospital actually paid to acquire the drug in the first place.

For example, say the hospital acquired a drug for $100. Following administration of the drug, the hospital would file a drug claim, or billable charge, to the insurer which could be marked up two to eight-times higher. In this case, a $100 drug could be billed for as high as $800. The payer reimburses the typical commercial outpatient drug at 60 to 80 percent of the billable charge. So, in this example, the payer would reimburse the hospital around $640 for a drug that the manufacturer priced at $100. (I have heard anecdotally that billable charges such as this can be a concern in the biosimilar space as well.)

Now, imagine that scenario in the gene therapy setting in which a treatment already has a bigger price tag — for instance, LUXTURNA, which costs $850,000 (for treating both eyes). Rather than charging the $850,000 it paid to acquire the drug, the hospital could send a marked-up bill to the payer for anywhere between two to four million dollars, of which the payer would reimburse 60 to 80 percent.

Given the high price for cell and gene therapies, however, it perhaps shouldn’t be surprising that several treatment centers were concerned at the prospect of buy-and-bill. The fear here would be that the payer, upon receiving a claim, would not reimburse it, leaving the hospital holding the bill. When building its network of eligible hospitals at which to administer LUXTURNA, Newman said centers were split 50/50, in terms of whether they wanted to buy-and-bill for the gene therapy. 

The SPARK PATH: Balancing The Needs Of All Stakeholders

The biosimilar industry has talked for years about the value of multi-stakeholder approach, so I was happy to learn that Spark’s approach is rooted in balancing all stakeholders’ needs. Rather than contract directly with treatment centers, the company chose to go directly to the health plans. Today, LUXTURNA is covered by all of the large health plans in the country, however it is only administered at a select few treatment centers around the country — 10 to be specific. This is a niche treatment, after all; of the 6,000 potential patients globally with the RPE65 gene mutation, roughly1,000-2,000 are in the U.S., and only a much smaller portion of people will be eligible for this treatment, which currently has a 93 percent success rate in Phase 3 trials. In order to qualify for surgery, the diagnosed patient must test positive for the RPE65 biallelic gene mutation and have a retina viable enough to accommodate the gene therapy. The surgery involves two retina vitreal surgeons conducting a vitrectomy and sub-retinal injection of LUXTURNA. The second eye procedure will be conducted no less than six days after the first eye. 

The SPARK PATH is as follows: Spark contracts with the payer to provide LUXTURNA at the wholesale acquisition cost (WAC). The therapy is then shipped via a specialty pharmacy (Accredo) to the treatment center for administration to the patient. The treatment center submits a claim to the payer for the procedure and services, while Accredo files a drug claim to the payer for the WAC price of the drug. This is a different strategy from what we’ve seen thus far with other cell and gene players on the market. These other players have contracted directly with the treatment centers, many of which continue to rely on the buy and bill model.

In Spark’s arrangement, there are a few expectations the payer must meet to enter into this agreement. First, the payer must abide by LUXTURNA’s label and ensure reasonable coverage for the patient. Secondly, the payer must also have an agreement in place with Accredo certifying it will pay the claim for the drug. Third, the payer must have agreements in place with the treatment centers to administer LUXTURNA. Ensuring that treatment centers are treated fairly by the payers is a critical piece of this arrangement, Newman pointed out.

What Does This Reinforce About The Biosimilar Market?

Though I am not a cell and gene therapy guru (not even close), there have been a number of articles written on Biosimilar Development’s sister-site Cell & Gene about the unique challenges these innovations pose on our current reimbursement system. Throughout his discussion, Newman reiterated that this path was one of the first steps in moving away from quantity-based to quality-based reimbursement. He emphasized the scalability of this pathway for other cell and gene therapies and biologics that can only be given out in the hospital outpatient setting (as opposed to an infusion center or doctor’s office).

As I mentioned previously, the biosimilars on the market today are not limited to the hospital outpatient setting; they can also be administered in infusion centers, doctors’ offices, and even in patients’ homes. Naturally, I found Spark’s strategy just plain interesting; but it also reiterated to me how important the site of care is in the ongoing biosimilar discussions.

When I stood up before the employers in the room at the PBGHPA event, I emphasized just how much power they have within our healthcare system today — and one of the ways this power can be wielded is through paying close attention to site-of care. Managing site of care for certain high-impact drugs in an employers’ population can be a solid way to avoid the billable charge mark-ups that can happen in the hospital landscape — which are at risk of growing more widespread as hospitals continue to acquire clinics and doctors’ practices. (For a great read-up on one coalition’s efforts to manage high biologics spend in RA, check out this article.)

Similarly, as I’ve discussed before in an article outlining the different sites of care, payers and health systems are becoming savvier in specifying how and where treatments can be administered. Simply reviewing a few insurers’ qualifications for administering Neulasta, for example, you’ll see they specify treatment at a physician’s office, an independent clinic, or the patient’s home over treatment in the hospital outpatient setting. Certain plans also permit the use of white-bagging, enabling Neulasta to be given out at the pharmacy.

For employer coalitions and, to some extent their manufacturing partners, I would continue to emphasize the importance of education, not only on the science and regulatory pathway for biosimilars, but also best business practices in terms of benefits management (including site of care discussions).   

As the healthcare system continues to explore value-based treatments and reimbursement strategies, I’m also intrigued about how these types of frameworks can be implemented in the biosimilar sphere. For instance, I recently came across a new initiative announced by the Articularis Rheumatology Network (ARN). This organization worked with a payer to implement a value-based RA treatment pathway that bolstered the use of infliximab biosimilars despite current formulary woes (future article forthcoming!).

Overall, contracting strategies like the one Spark has implemented never cease to leave me curious about their long-term implications in the biologics and biosimilars space. After all, there is a whole world of orphan drugs and new innovations coming to market that could, fingers crossed, be taken on by some dedicated biosimilar makers in the future. As you all know, it’s never too early to begin brainstorming strategies to ensure current and future biologics and biosimilars make it affordably into physicians’ and patients’ hands.

As always, I’m  open to hearing your thoughts, impressions, unmentioned caveats or concerns about topics discussed here. Feel free to email me at anna.welch@jamesonpublishing.com (off-the-record).