Gene Therapy: The Unexpected Twist That Could Unlock Massive Medicare Payment Bumps

In their FY 2025 Inpatient Prospective Payment System proposed rule, CMS proposes a policy that would increase Medicare payment for gene therapy targeting sickle cell disease. CMS asserts that these additional New Technology Add-on Payments would increase access to these expensive, but life changing therapies.

Background on the New Technology Add-on Payments (NTAP) Policy:

The NTAP program was designed to identify new technologies and to ensure that payment under the IPPS would be adequate so that early adopters of  new technologies would not be financially disadvantaged. Under the traditional NTAP pathway, a technology must be considered “new”,  the charges of cases involving the technology must be more than 75 percent of the unadjusted rate for the MS-DRG to which the technology is assigned, and the technology must represent a substantial clinical improvement over existing technologies.

Key Details of the Increase in Medicare Payment for Gene Therapies Targeting Sickle Cell Disease:

Sickle cell disease (SCD) is the most common inherited blood disorder. According to the Centers for Disease Control, nearly 100,000 Americans are affected by SCD, and while mortality has dropped it still disproportionately affects persons of color. According to the Department of Health and Human Services the cost of treatments for and related to SCD approach $3 Billion each year. The high cost of gene therapies, particularly for SCD, has given CMS pause and has raised concerns that some hospitals may be unable to afford to provide gene therapy to their patients with SCD.

CMS notes its hesitancy to increase the NTAP add on percentage, emphasizing its long held belief that the current 65 percent add-on is sufficient to incentivize hospitals to adopt new technology while still allowing CMS to maintain its responsibility of protecting the financial well-being of the Medicare and Medicaid programs.

To increase access to gene therapies targeting SCD, CMS proposes to increase NTAP payments for gene therapies granted NTAP payment from 65% of the costs of the technologies to either (1) 75% of the costs of the new medical service or technology; or (2) 75% of the amount by which the costs of the case exceed the standard DRG payment. If finalized, the first of these increased payments would begin October 1, 2024 and continue for the 2- or 3- year period of newness (as determined via the NTAP review process).

There are two gene therapies that have submitted applications for NTAP that are addressed in this year’s proposed IPPS rule: 1) Casgevy (Vertex Pharma) and 2) Lyfgenia (Bluebird Bio).

CMS is requesting public comments on their proposal to increase the NTAP add-on percentage and on whether these two therapies would satisfy the NTAP criteria. Comments will be due on June 10th. 

What are the Implications of the Additional Gene Therapy Payments on Developers of Future Therapies?

CMS is limiting this policy only to gene therapies for SCD that have been granted NTAP approval. However, the proposal provides a signal that the agency may be willing to provide higher reimbursement for some transformative cell therapies, but will expect substantial evidence of clinical benefit and economic value.

While CMS is likely to strongly disagree when faced with an argument that this proposal sets precent for similar increases for other high-cost cell therapies in the future, it would be in the best interests of developers of future cell therapies to closely monitor CMS policies and be prepared to make the case for higher reimbursement rates if their therapies address significant unmet needs.

At the same time robust clinical data and economic models to justify higher add-on payments from CMS, beyond just demonstrating safety and efficacy. Furthermore, the opportunity to engage in innovative pricing and contracting models that tie reimbursement to real-world patient outcomes, in order to qualify for enhanced add-on payments may be a lever that developers could use to encourage additional payments in the future.

Future cell therapy developers should proactively plan for these types of payment and pricing requirements to optimize access for Medicare beneficiaries.