An updated analysis from Avalere (to be released today) highlights 200+ products in development that could challenge payment models across care settings and payers.
Transformative therapies:
- Meet unmet clinical need.
- Have a unique mechanism of action.
- May not fit neatly into current payment systems.
- May require transplantation in the body or other intensive patient treatment.
- Are durable, such that one or a few treatments last for years—or a lifetime.
By the numbers: 214 product/indication combinations in development fit the “transformative therapy” criteria; one-third treat cancer, while therapies treating neurologic, metabolic, ophthalmologic, and autoimmune conditions each account for an additional 10% or more.
89% are expected to be administered in a hospital setting—with more than one-third in outpatient settings, 36% in inpatient or outpatient settings depending on safety outcomes, and 28% in inpatient settings.
Who pays? Avalere estimates government sponsored insurance will cover two-thirds of the transformative therapies, while Medicaid/CHIP will be the primary payer for 35%. Compare this to insurance coverage of all services in the U.S. population, with more than 50% covered by commercial insurance and 20% covered by Medicare/Medicaid.
Why it matters: While Centers for Medicare and Medicaid Services (CMS) has continued to refine inpatient payment approaches, reimbursement may be insufficient to cover all provider costs. And while innovative payment arrangements (outcomes-based contracts, value-based arrangements, employer benefit protection programs) have been explored by payers, including state Medicaid programs and commercial payers, uptake has been relatively limited for on-market transformative therapies.
BIO’s bottom line: While innovation keeps occurring in the lab, we may also need innovation in payment mechanisms to bring the growing set of transformative therapies to the patients who need them.
