New Payment Models Emerge for Costly Pharma Therapies

By Judy Packer-Tursman

As payers struggle to cover high-priced pharmaceutical therapies in a year in which the first drug costing more than $1 million is expected to launch in the U.S., new payment models are emerging — including a "Netflix"-like subscription model in Louisiana for hepatitis C virus treatment — that could offer ways for patients to be treated without bankrupting the health care system.

In December, the FDA accepted Novartis company AveXis' Biologics License Application for Zolgensma (AVXS-101), a gene therapy for spinal muscular atrophy (SMA) Type 1. Although AveXis has not set a price for Zolgensma, it has said a one-time price of $4 million to $5 million per patient would be cost effective.

With respect to costly SMA treatments, Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates, wonders whether Medicaid programs and commercial payers would need to cover Zolgensma if they already were covering Biogen's Spinraza. If they did, though, he says that "insurers offering fully insured health plan policies will typically purchase stop-loss (excess loss) reinsurance to protect themselves from catastrophic claims. At $2 million for a one-time treatment, the Novartis drug would likely qualify, limiting the insurance company’s exposure."

"The question, both for Medicaid and commercial plans: Is it more affordable to pay $2 million one time for a cure, or to pay far less, but pay it on an annual basis for a drug that must be administered chronically?" says Rubinstein. "Can these payers take the long view on value, if their funding is on an annual basis and beneficiaries move in and out of eligibility?"

Then there are the highly curative but expensive hepatitis C virus (HCV) treatments that have proliferated in the U.S. market since the introduction of Sovaldi (sofosbuvir) in September 2014 — at a cost of about $84,000 for the full 12-week course of treatment.

Louisiana recently proposed a new approach to Medicaid patients with hepatitis C: a "Netflix"-like subscription service. It aims to identify a pharmaceutical partner to negotiate unrestricted access to hepatitis C treatment for Medicaid and incarcerated individuals in the state over a five-year contract term.

"This subscription model effectively caps the State's spending on expensive hepatitis C drugs and creates an incentive to treat as many infected people as possible," Gov. John Bel Edwards (D) said in a statement.

From Health Plan Weekly