5.2 Subscription-Based Payment Models

NC Medicaid should explore innovative payment models, including Subscription-Based Payment Models (SBPMs), to increase utilization of new therapeutics and improve SCD health outcomes.

Implementation: • NC Medicaid should apply for a Medicaid State Plan Amendment (SPA) that will allow NC DHHS to leverage SBPMs as expensive SCD therapeutics come to market that improve SCD outcomes.

Background

By 2030, an estimated 40 to 50 gene therapies will provide novel curative options for a variety of conditions.302 Gene therapies for treatment of SCD that aid in the production of normal red blood cells (RBCs) are currently in the drug pipeline and appear promising. In an ongoing phase 1/2 clinical trial, lentiviral-based therapy demonstrated efficacy, suggesting that it may improve the lives of patients with SCD.303 In the European Medicines Agency (EMA), a gene therapy using the lentiviral vector received conditional approval in 2019, which indicates that this gene therapy may soon be entering U.S. markets.304 The cost of this therapy in Europe was set at 1.58 million euros ($1.78 million) over five years. The pharmaceutical company, bluebird bio, Inc., expects that pricing will be similar in the United States.305 This therapy is anticipated to be a one-time, potentially curative therapy. Subscription-Based Payment Models (SBPMs) are a novel approach to paying for drugs that allows state Medicaid programs to contract exclusively with a single manufacturer to supply treatments at a reduced price while improving budget predictability. States pay a reduced price per prescription or treatment up to a set threshold. Once that threshold is met, the cost of additional prescriptions is nearly zero.306 SBPMs achieve goals for both the Medicaid program and the pharmaceutical company: SBPMs cap payments and increase access to expensive, life-saving treatments that would otherwise be inaccessible to Medicaid enrollees, while ensuring pharmaceutical manufacturers receive guaranteed, negotiated revenue.307 Typically, Medicaid programs have to cover all drugs of participating manufacturers that have been approved by the Food and Drug Administration (FDA), but subscription models approved by CMS allow Medicaid programs to contract with only one manufacturer for one treatment.308 Thus, the manufacturer with which the state contracts gains the state’s entire market share of patients that need the treatment—an appealing proposition when there are other competing treatments in the pipeline (Table 1).

North Carolina Context

Currently, NC Medicaid covers all medications and treatments for SCD, without requiring prior authorization. As the majority of SCD patients nationally—an estimated 70 percent of children and 50 percent of adults—are covered under Medicaid or Medicaid administered programs, it is extremely important that innovative treatments continue to remain covered under Medicaid.309 And with five percent of Medicaid and CHIP enrollees in NC having SCD, it is crucial for the state to employ innovative methods to keep expenses down while providing access to these treatments.

Evidence

Gene therapies have the potential to be costeffective in the long run. As of 2020, lifetime SCD-related health care expenditures exceed approximately $550,000 per person.310 One study estimated that a hypothetical treatment for SCD provided at birth would provide a costeffectiveness of $150,000 per quality-adjusted life year (QALY).311

Table 1. Gene Therapies in the U.S. Drug Pipeline through US Clinical Trials

Intervention Clinicaltrials. gov Brief Study Title Trial Phase Age Eligibility Estimated Primary Completion Date Pharmaceutical Company Sponsor

Genetic: bb1111 A Study Evaluating the Safety and Efficacy of bb1111 in Severe Sickle Cell Disease Genetic: bb1111 A Study Evaluating Gene Therapy With BB305 Lentiviral Vector in Sickle Cell Disease

Genetic: GPH101 Drug Product

Gene Correction in Autologous CD34+ Hematopoietic Stem Cells (HbS to HbA) to Treat Severe Sickle Cell Disease Genetic: EDIT-301 EDIT-301 for Autologous HSCT in Subjects With Severe Sickle Cell Disease

Gene transfer. Biological: single infusion of autologous bone marrow derived CD34+ HSC cells transduced with the lentiviral vector containing a short-hairpin RNA targeting BCL11a Gene Transfer for Sickle Cell Disease Phase 1 Phase 2 12 to 50 years old

Phase 3 2 to 50 years old

Phase 1 Phase 2 12 to 40 years old

Phase 1 Phase 2 18 to 50 years old

Phase 1 3 to 40 years old June 2022 *Trial is funded by National Institutes of Health (NIH)

May 2023 bluebird bio, Inc.

July 2024 bluebird bio, Inc.

May 2026 Graphite Bio, Inc.

August 2025 Editas Medicine, Inc.

Source: Clinicaltrials.gov

However, balancing the budget may be difficult in the short-term if and when gene therapies enter the U.S. market. SBPMs offer an alternative payment model that, if implemented, will allow NC DHHS to ensure their SCD patients receive these essential therapies at a reduced-price level. SBPMs remove the incentive to ration access due to no additional cost occurring after a certain threshold.

Additional Considerations

To date, NC Medicaid covers all treatments for SCD. This pattern of coverage should continue. A typical, pure subscription model requires waiver approval from CMS. To avoid this requirement, Louisiana and Washington had pharmaceutical companies bid on a price and used specific language in their agreement.312 This supplemental rebate agreement using a SBPM allowed the two states to avoid the waiver approval process. CMS approved both Louisiana’s and Washington’s programs through Medicaid SPAs.313

SBPMs allow NC Medicaid to anticipate highcost interventions and treatments as therapeutics are developed for SCD, particularly within the domain of gene therapy. Another benefit of SBPM is that states experience fixed, upfront costs regardless of the number of people treated. This allows states to avoid the risk of spending overbudget and facilitates state budget planning and predictability. Finally, SBPMs encourage the treatment of as many individuals who would benefit from the drug as possible. Medicaid programs in Louisiana and Washington have implemented SBPMs for hepatitis C drugs. Hepatitis C, which typically impacts low-income and disproportionately marginalized communities, has seen a recent surge in available and effective treatments. While these treatments are essentially curative, they remain costly at a list price between $25,000 to $95,000 per prescription.314 The expensive price-tags were leading Medicaid programs to impose strict eligibility requirements. In an effort to increase access to and utilization of these treatments and to improve budget predictability, Louisiana and Washington implemented SBPMs with pharmaceutical companies. A recent cross-sectional study of Louisiana and Washington evaluated trends in prescription fills before and after the changes in SBPM Medicaid-covered prescriptions. Louisiana saw a sharp increase of 534 percent in prescriptions filled (from 43.1 to 206.0 average rate of prescription fills per 100,000 Medicaid enrollees).315 Washington did not see a significant change in prescription fills. Possibilities for these differences in outcomes may include state-level differences in implementations, historical restrictions on access to the medications, and responses to the COVID-19 pandemic, as the study included data from January 1, 2017 to June 30, 2020.316