How Express Scripts Plans to Disrupt the Emerging Cell and Gene Therapy Channel (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from October 2019. Commercial strategies for the new cell and gene therapies will be a hot topic in the coming years. Revisit this article for a look at how one major insurer / PBM / specialty pharmacy is attempting to pre-disrupt the channel.

Express Scripts is on a roll. ICYMI, it will be taking over Prime Therapeutics' formulary contracting and pharmacy network management. Manufacturer rebates will grow, pharmacy margins will be under more pressure, and the gross-to-net bubble will inflate. 

Get ready for more volatility with the DRUG CHANNELS OUTLOOK: WHAT YOU NEED TO WATCH IN 2020. During last week's event, I even discussed PBM consolidation scenarios for sub-scale players like Prime. Click here to hear what you missed and download the slides.

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Cell and gene therapies are poised to transform the treatment of many serious and previously untreatable conditions.

As this new market develops, payers and PBMs are laying the groundwork for disruptive channel models. Below, I examine how Cigna’s Express Scripts business has begun to shape this channel’s development. Its new models show the promise of private market innovation for the financing and commercialization of novel therapies.

These approaches will also shake up existing channels. If payers rub this magic lamp, these innovative channel models would: 1) enhance the role of the vertically-integrated insurer/PBM/pharmacy companies, 2) reduce or eliminate buy-and-bill by providers, and 3) minimize the role of the largest wholesalers. Consider the examples below to be early warnings of change.

FYI: Today’s post is an excerpt from Chapter 6 of our new 2019–20 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

THE GENE GENIE

Human gene therapy seeks to modify or manipulate the expression of a gene or to alter the biological properties of living cells for therapeutic use. Cellular therapy products include cellular immunotherapies, cancer vaccines, and other types of both autologous and allogeneic cells for certain therapeutic indications, including hematopoetic stem cells and adult and embryonic stem cells. The FDA’s Center for Biologics Evaluation and Research (CBER) regulates these products. Check out the FDA’s page: Cellular & Gene Therapy Products.

There are hundreds of cell and gene therapies at various stages of clinical development. By 2030, there could be 60 marketed cell and gene therapies treating about 50,000 patients per year. See the chart below, which comes from Estimating the Clinical Pipeline of Cell and Gene Therapies and Their Potential Economic Impact on the US Healthcare System.

[Click to Enlarge]

These products are typically administered by providers and are extraordinarily expensive compared with other specialty and traditional drugs. Some products are curative therapies that require a single treatment—true strokes of genie-us.

WISHING FOR SUCCESS

There are many complex activities required to bring these products to patients. For instance, chimeric antigen receptor (CAR) T-cell therapy involves a process in which the patient is part of the supply chain. For a CAR T-cell therapy, the patient’s own T-cells are collected at a hospital or clinic, transported to the manufacturing facility in a cryogenic chamber, re-engineered in the lab so they can attack cancerous cells, transported back to the hospital/clinic in a cryogenic chamber, and then re-infused into the patient after the cells thaw. (This description comes from The Key to Commercializing Revolutionary Gene Therapies and Other Orphan Drugs, a McKesson white paper.)

Wholesalers will likely play a crucial role in the many complex activities required to bring these products to patients. They have already begun developing and marketing end-to-end solutions that address the logistical challenges associated with cell and gene therapies.

For instance, McKesson Life Sciences launched in 2018 to unite different manufacturer and provider services offered by McKesson and its specialty businesses. These services include distribution, third-party logistics, specialty pharmacy, financial and reimbursement assistance, outcomes data gathering, adverse event monitoring, and more. See Commercializing Cell and Gene Therapies with High-Touch Services.

RUBBING THE MAGIC STRATEGY LAMP

Standard buy-and-bill reimbursement models were not designed for curative, high-cost therapies, so they pose significant challenges for conventional distribution and reimbursement models. For example, typical provider reimbursement approaches imply unreasonable markups over a therapy’s cost.

Early evidence suggests that payers are actively evaluating alternative distribution channel arrangements. To date, the new channel models reduce or eliminate buy-and-bill by providers and enhance the role of the vertically integrated insurer/PBM/pharmacy companies that I describe in CVS, Express Scripts, and the Evolution of the PBM Business Model.

Consider Zolgensma, a curative therapy for spinal muscular atrophy. It has a list price of $2.1 million per person. The eligible U.S. patient population for Zolgensma is estimated to be fewer than 1,000 people. AveXis, the drug;s manufacturer and part of Novartis, offers a novel pay-over-time option in partnership with the Accredo specialty pharmacy owned by Cigna’s Express Scripts PBM business:

• Accredo pays the manufacturer upfront for the full cost of the drug.

• After the health plan approves Zolgensma’s use for a beneficiary, Accredo ships the patient’s therapy directly to the provider.

• The health plan then pays Accredo over time, with both the rate and time period subject to negotiation.

• The manufacturer and health plan can separately establish a value-based arrangement, under which the manufacturer could agree to certain rebates and discounts that do not flow through the dispensing channel.

As with a white bagging arrangement, the provider neither purchases the gene therapy nor seeks reimbursement from a third-party payer. Instead, Accredo, the specialty pharmacy, adjudicates the claim, collects any copayment or coinsurance from the patient before treatment, and receives the reimbursement for the gene therapy sent to the provider. The provider is still paid for professional services associated with the gene therapy’s administration. In this situation, Accredo also acts as a financial intermediary, because it is paying for the gene therapy upfront but being reimbursed over time.

An analogous channel structure exists for Luxturna, a one-time gene therapy that treats a form of vision loss and has a list price of $850,000. The eligible U.S. patient population for Luxturna is estimated to be about 1,500 people. For this product:

• Either Accredo or CuraScript SD, the specialty distributor owned by Cigna’s Express Scripts PBM business, delivers a patient-specific dose to a healthcare provider.

• As with Zolgensma, the health plan pays the provider for medical services. The plan either reimburses the provider under a buy-and-bill agreement, or directly reimburses CuraScript SD or Accredo.

• Unlike Zolgensma, there is no pay-over-time aspect, so the pharmacy or distributor faces a more conventional cash conversion cycle.

In 2019, Cigna launched Embarc Benefit Protection. Under this program, third-party payers—employers, insurers, HMOs, and health plans—pay a fixed per-member, per-month amount to Cigna’s eviCore business. After a patient is approved for a gene therapy treatment, eviCore acts as the exclusive, in-network provider for the gene therapy drugs. Payers and patients incur no additional costs for the gene therapy, though there could be costs for medical care associated with treatment. eviCore arranges for the provision of the drugs to patients through a network of specialty pharmacies and specialty distributors. To date, the eviCore network includes only Accredo and CuraScript SD.

One final thought: Wholesalers will need more than three wishes to avoid disruption from these novel channel and payment arrangements.