Cell and Gene Therapy in Medicaid

Authors: Patti Boozang & Tracy Massel

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tl;dr:

An explosion of cell and gene therapies (CGT) coming to market offers life changing, lifesaving treatments, but state Medicaid programs face unique coverage, reimbursement, and administrative hurdles that limit access to these therapies for their enrollees. Stakeholders across the health care system – including the federal and state government partners, life sciences manufacturers, insurers, academic medicine and others – must work together to find solutions to these hurdles or risk perpetuating decades of structural racism and access inequity in our health care system. It’s going to take real compromise on all fronts. As everyman philosopher Larry David says:

The Tip of the Iceberg

We are living at the leading edge of cell and gene therapies (CGT) rapidly proliferating in the health care system including some one-time, durable treatments for rare and severe genetic conditions like cancers and sickle cell disease (SCD). The advances in science that make these therapies work are incredible and the therapies themselves are transforming medicine and lives, in some cases curing pernicious and terminal illnesses. The pace of FDA approval of CGT is rapidly increasing, and the clinical pipeline is robust:

• 21 gene therapies have been approved in the US (including genetically modified cell therapies) since 2015.

• 2/3 of those were approved between 2022 – 2024.

• Over 4,000 CGTs are in clinical development; oncology is the most targeted therapeutic area.

In December 2023, the U.S. Food and Drug Administration approved two new gene therapies to treat SCD: Lyfgenia^TM (lovotibeglogene autotemcel) and Casgevy^TM (exagamglogene autotemcel), landing Medicaid squarely in the thick of the CGT coverage and access challenges. SCD is a debilitating and costly genetic disorder that predominantly impacts Black and African American people. Half of the roughly 100,000 patients with SCD in the United States are enrolled in Medicaid, and many observers note that SCD CGTs are “the tip of the iceberg” for Medicaid as CGTs proliferate. Kate McEvoy, the Executive Director of the National Association of Medicaid Directors said in her recent blog on CGT, “We have to embrace the now of the sickle cell CGT as well as the approximately 100 other CGT treatments that are currently in the pipeline with the FDA. And we have to help states cover the costs.”

There is ample excitement about these new, curative SCD therapies among Medicaid policymakers as well as legal obligations for Medicaid to cover them. Federal law requires state Medicaid programs to cover nearly every FDA approved drug, including CGTs, and generally requires that all indications on the FDA label are covered. States have to cover drugs where the manufacturer has a rebate agreement with the federal government (and the state participates in the MDRP, which all states and the District of Columbia do.) Despite the excitement and legal and moral imperatives, access to SCD CGT remains limited.

There are several hurdles to ensuring access to SCD CGT in Medicaid, but the major ones are:

Coverage and Payment. Medicaid is the critical payer for treatment and services for people with SCD. And while these new SCD therapies dramatically reduce the lifetime medical spend for patients (and extend lives in terms of longevity and quality), they come with high upfront costs ($2 million to $3 million before negotiated discounts) incurred over a short period of time. That price tag risks overwhelming states, which typically must balance their budgets annually and in lean times, look to reduce Medicaid costs as one of the two top areas of state spending in addition to education. Then, there is what Medicaid experts refer to as a “wrong pocket” problem – where the long-term financial “return” or benefit of the upfront investment for the treatment doesn’t benefit the “payer” for the treatment (i.e., the state Medicaid program.) Further exacerbating the issue, 74% of Medicaid enrollees are enrolled in state-contracted Medicaid managed care plans that assume financial risk for delivering care to enrollees, and have their own coverage and reimbursement policies. Managed care plans have even less incentive to manage long-term risk and outcomes as patients often shift between plans.  To state the obvious, this problem is a disincentive for payers to cover SCD CGT. Finally, SCD patients are not uniformly distributed nationally, leaving some state Medicaid programs – primarily those scattered throughout the Southeastern United States – with an outsized financial responsibility.

Total Number of Medicaid and CHIP Beneficiaries with SCD, 2017

^{Source: Medicaid and CHIP Sickle Cell Disease Report, T-MSIS Analytic Files, 2017 (medicaid.gov).
Notes: *Maryland excluded for data quality issues. ^Gene therapy treatment center in-state.}

Coverage “Churn”: Medicaid enrollees have fluctuations in coverage, including temporary loss of Medicaid coverage or “churn.” Short-term changes in income or circumstances may make some enrollees temporarily ineligible. More commonly, people who remain eligible lose coverage for administrative reasons during renewal processes and periodic eligibility checks. A study of Medicaid enrollment of children born with SCD in five states between 2015 and 2017 determined that 30% of these children had interruptions or loss of coverage in the first three years of their life. This poses a particular health risk for enrollees with SCD, including those receiving gene therapies, and financial risks for the programs/plans paying for CGT treatments, which on average take a year to deliver from the initial patient assessment until post-treatment monitoring.

Fertility Support Services Coverage: Prior to receiving CGT for SCD, patients must undergo chemotherapy, which can impair or eliminate fertility. This leaves people with a difficult decision between the opportunity to naturally conceive and freedom from a painful disease. Access to support for fertility services is very limited in Medicaid—just two states provide significant fertility coverage for Medicaid enrollees (New York and Illinois) and manufacturers are not allowed to financially support patient utilization of fertility services pursuant to two recent U.S. Department of Health & Human Services Office of Inspector General (OIG) opinions indicating that the provision of fertility support services on behalf of eligible patients enrolled in federal health care programs (e.g., Medicaid) could violate the Anti-Kickback statute. This potentially further limits access to SCD CGT. 

There are nascent attempts by some states and the Center for Medicare & Medicaid Services (CMS) to mitigate these complexities and challenges:

• Medicaid-run Value-Based-Contracting (VBC): A few states are independently creating arrangements to share the financial risk for health outcomes with SCD CGT manufacturers and providers. But most state Medicaid programs are ill-equipped to negotiate and administer these arrangements and the state by state fragmentated approach is difficult for providers and manufacturers to manage.

• Separate Payments: To date, SCD CGTs are administered in inpatient settings and reimbursed through bundled payment rates (i.e., APR-DRGs) that do not adequately cover hospital costs, making it financially nonviable for hospitals to administer. Some states have adopted separate payment methodologies, allowing the state to separate the reimbursement for the therapy from the bundled payment for the clinical services used to administer the treatment.

• State-led managed care risk mitigation: To reduce the disincentives for managed care plans to manage long term risk, many states have used a variety of solutions, such as reinsurance, risk corridors, and kick payments that help MCOs bear the risk distribution and financial impact of SCD CGTs. These solutions vary state by state and are often tied to a specific treatment – requiring review for each CGT independently, and still leaving the state to manage the high cost of CGTs.

• Federal CMMI VBC Solution: In 2023, CMS announced the CGT Access Model, slated to launch in 2025, focused on increasing access to CGT for Medicaid enrollees suffering from SCD by supporting outcomes-based agreements between states and manufacturers including lower prices for states and payments tied to outcomes. The Model includes policies designed to solve some of the hurdles to access and reduce variation between states, like improving cross-state credentialing, reimbursement rates, and access to fertility support. It’s a promising model, with concerning gaps – (1) it ends in ten years, potentially reopening coverage gaps for patients, (2) it relies on states opting to participate, and (3) it does not solve for patient churn in Medicaid programs.

Getting back to our tip of the iceberg point, availability of new CGTs is going to outpace these early-stage payment and access solutions. We need to do more, now.

It will take creativity and compromise to expand access to CGT for SCD patients, and beyond, in Medicaid.

Access to SCD CGTs, like many challenges in Medicaid, requires nuanced solutions in which multiple stakeholders contribute, including federal government, state Medicaid programs, academic medical centers, life sciences manufacturers, insurers, and patients/patient advocates. As noted earlier – the best type of solution for this situation is a compromise that likely leaves every stakeholder a little dissatisfied. To ensure that SCD patients have access to the therapies they need there are several potential steps that state and federal partners should evaluate:

• Providing multi-year continuous eligibility for enrollees with SCD States and CMS could leverage 1115 demonstration flexibility to test multi-year continuous eligibility for enrollees with SCD to provide stable coverage for the duration of enrollee SCD treatment and beyond.

• Creating SCD Medicaid Special Needs Plans (SNPs) for Medicaid enrollees with SCD that would make it easier for states to designate a single health plan or other risk bearing entity (for example an ACO anchored at an academic medical center providing the treatment) to serve this population, either statewide or within regions. The SNP could cover a specialized set of services that includes fertility support. Working with CMS, states would need to consider the appropriate Medicaid waivers and waiver authorities necessary to procure a single plan or provider-entity to serve as the SCD SNP. These could include various 1915(b) waivers and/or 1115 demonstration waivers or expenditure authorities. CMS could also explore the boundaries of its authority to allow interested states to create regional SNPs that enroll patients across several Medicaid programs, allowing states to pool risk across a broader population of enrollees and share administrative expenses. A state-based or regional SNP could also facilitate value-based care and payment arrangements.

• Waiving Medicaid managed care enrollee plan choice As a complement to the SNP plan or even if a state uses its existing contracted managed care plans to cover and pay for SCD CGT, CMS could permit states to use 1115 authority to waive plan choice for enrollees with SCD, giving states flexibility to require permanent, stable enrollment (with appropriate enrollee protections) in a SNP or another health plan for the duration of their Medicaid coverage.

• Expanding payment strategies that mitigate managed care plan risk and incentives for plans to limit CGT treatment. Risk corridors are a common and flexible risk mitigation tool in Medicaid managed care that allow states and health plans to share risk if spending falls above or below specific thresholds for certain high-cost services or health events. They can be used in concert with other strategies like reinsurance and stop-loss. States can implement these payment strategies through their managed care plan contracts and must ensure that the risk-mitigation arrangements are actuarially sound and approved by CMS.

• Leveraging insurer taxes to fund the state share of SCD treatment in Medicaid through the creation of a permissible health care-related or “provider” tax (as authorized by and compliant with Section 1903(w)(3)(A) of the Social Security), the revenue of which could be used to support expanded coverage and access to SCD CGT treatment. Roughly 20 states leverage MCO provider taxes to support various uses that promote the objectives of the Medicaid program, including expanding benefits for targeted populations. Dedication of these tax revenues to improve the health, well-being and outcomes for and reduce the long-term medical costs of Medicaid enrollees with SCD has broad financial and economic benefits to Medicaid and to society at large by returning people to health and the workforce.

• Reducing cross-border credentialing burden for out-of-state providers already enrolled in Medicare or their home state Medicaid program. States could exercise flexibility under existing law to streamline enrollment, offering expedited screening and enrollment processes, specifically for out-of-state providers offering gene therapies. Alternatively, similar to the Accelerating Kids’ Access to Care Act, Congress could develop a bill to streamline out-of-state provider enrollment processes for adult patients.

Federal partners can play a continued leadership role to support states and pursue unique coverage and access innovations:

• Changing federal Medicaid law to increase federal Medicaid match funding for SCD CGTs. CGT is changing the face of SCD treatment. States are bound by federal law to cover and pay for the therapies, but most lack the budget capacity and in many cases the negotiating leverage to do so. Congress could act to amend Medicaid statute to increase federal Medicaid funding for SCD CGT so that the federal government is bearing more of the cost.  

• Creating a new Medicare coverage pathway for Americans with SCD, including those otherwise eligible for Medicaid. This could be accomplished by mirroring Medicare eligibility for people with end state renal disease (which would require Congressional action) or by expediting access to social security disability benefits through the SSA Compassionate Allowance Program through which the Social Security Administration allows patients with certain diagnoses, such as ALS, to enroll in Medicare faster than the typical 24-month waiting period. Like a state or regional SNP model, a Medicare coverage vehicle for SCD would enable more efficient implementation of value-based care models. Medicare also has a more uniform funding structure and regulatory framework, and limited patient churn, which further simplifies the administration of benefits for high needs populations.

• Increasing antikickback flexibility SCD CGT manufacturers are currently limited in their ability to pay for travel and lodging for patients (outside of the CMMI model) due to OIG advisory opinions. Congress could create a regulatory or statutory safe harbor to the anti-kickback statute to permit manufacturers to subsidize travel supports for Medicaid enrolled and other patients receiving SCD CGT so that it is codified and reduces the situation dependent risk.

As state and federal Medicaid partners act to expand coverage and access, CGT manufacturers will be asked to come to the table to compromise on:

• Reducing the cost of each unit of drug. Manufacturers can accelerate negotiations with state Medicaid programs individually or collectively with regional state coalitions, exchanging volume purchase commitments for reduced per unit prices for SCD CGT. As SCD CGT access continues to expand, long term planning and commitments should help mitigate the high cost of each unit for states and ensure a sustained revenue stream for manufacturers.

• Aligning payment with outcomes and spreading cost over time. Payments for SCD CGTs could be made contingent on patient outcomes over time. The value of SCD CGTs is their ability to cure diseases which are debilitating and life threatening. Payments should be made over time as they are able to demonstrate improved health for patients, based on an agreed upon set of metrics, so that manufacturers share the financial risk with states for the quality of the therapy. In addition, by spreading payments over time, SCD CGT manufacturers can help alleviate the high upfront cost that threatens to overwhelm state and federal budgets.

• Supporting ancillary expenses. As regulatorily permitted, SCD CGT manufacturers should financially support ancillary expenses, such as travel and fertility needs, that will reduce barriers and support uptake of CGTs by SCD patients.

SCD CGTs demonstrate the ingenuity of medical research promised from their conception. But comprise is key to ensure that all Americans have access to these life-changing therapies. A combination of the stakeholders must work in tandem to deliver solutions. This calls to mind another Larry David quote, “I don't like to be out of my comfort zone, which is about a half an inch wide.” To deliver this essential care in an equitable way, we all must step out of our comfort zones, find areas of comprise and propose bold and equitable solutions to consistently provide the cutting-edge care that the 80 million deserve.