Eakinomics: Access versus Program Cost; The CAR-T Test

Eakinomics: Access versus Program Cost; The CAR-T Test Over the past year, a lot of the debate over drug pricing reform can be boiled down to concerns that arbitrary reductions in price (e.g., tying Medicare reimbursements to an average of international prices) would lead to diminished access as existing drugs were withdrawn from markets and new drug development was inhibited. A difficulty about the debate is that much of it relies on unseen, future developments. In contrast, the administration faces a very concrete decision that highlights the issue perfectly. CAR-T therapy – short for Chimeric Antigen Receptor T-cell therapy – uses the patient’s own immune system to attack cancer. By modifying the patient’s T-cells with an engineered, synthetic receptor specific to their cancer, the patient’s body becomes capable of recognizing and attacking the tumor while leaving normal cells alone. It is miraculous. And expensive. Currently, Medicare does not fully cover the cost of CAR-T and it is about to get worse. If the administration does not pursue routes to full reimbursement of costs, there will be no widespread access to CAR-T therapy. To understand the mechanics of the decision requires surviving a welter of acronyms and learning a bit about Medicare reimbursement. Fortunately, AAF’s Andrew Strohman has written two outstanding papers on the topic: one on the CAR-T issue in particular and another on the basics of inpatient reimbursements for drugs in Medicare. Take a sip of coffee, here we go. Under fee-for-service Medicare, the more services providers utilized, the more money they would make. To counter this incentive, Medicare created the Inpatient Prospective Payment System (IPPS). The idea was to assign patients on the basis of their diagnosis and severity (Medical-Severity Diagnosis-Related Group or MS-DRG) and then make a single, lump-sum payment to cover the expected cost of care for that diagnosis. Hospitals would then have no incentive to overutilize procedures. (This is the really simple version. See Strohman for more detail.) For CAR-T, it is even more complicated because there is a patchwork of additional reimbursements. Because it is an expensive therapy, it gets a so-called “outlier payment.” And, in addition, because it is a new technology it receives a new technology add-on payment (NTAP). Unfortunately, as the table below (stolen from the Strohman CAR-T paper), this jerry-rigged system of payments comes up about $50,000 short of the cost of the CAR-T therapy. The pressing issue is that that NTAP will expire in September. A quick look at the table shows that the basic problem is that the current DRG payment is unrealistically low because CAR-T was assigned to a pre-existing DRG for bone marrow transplants. The solution is to create a new DRG for cancer diagnosis susceptible to CAR-T therapy. That’s the mechanics. The economics are simply to pay enough to ensure broad availability of the therapies.