Why a Flat Pricing Model Won't Work for New Cell Therapies

Cell therapies have come a long way since the launch of first chimeric antigen receptor (CAR) T-cell therapies in 2017. A growing body of evidence–spanning clinical trials and real-world data–continues to demonstrate and reinforce their positive clinical benefit and potential curative value. Stakeholders are gaining ground in mitigating uncertainties and aligning cost with value through new approaches, such as innovative pricing and access models. These advancements have increased patient access and improved patient outcomes. Now, as the next generation of cell therapies moves through the pipeline, they bring new promises – and challenges.

Pipeline cell therapies not only target earlier lines of treatment for hematologic malignancies, but they also explore other therapeutic areas, including autoimmune diseases, neurological conditions, and many more. These developments offer significant benefits for patients while raising new challenges around how to better align value with cost without limiting access.

One option to address these complexities, is an indication-based pricing model as a solution for cell therapies with indications across multiple therapeutic areas in the Medicare Part B setting. This strategy offers a sustainable path for potential implementation and addresses the challenges in bringing the model to fruition.

The traditional pricing approach limits patient access

CAR-T therapies were initially introduced as a last-resort treatment for terminal acute lymphoblastic leukemia and diffuse large B-cell lymphoma, showing potential to extend lives and even "cure" certain cancers. These therapies harness a patient's own immune cells to combat various cancers and other severe diseases. Unlike traditional therapies, they are produced and shipped for a unique individual with a specific condition. While some value-based agreements have been implemented for cell therapies, the system continues to predominantly rely on the traditional flat pricing model.

As cell therapy manufacturers target multiple indications across diverse therapeutic areas, setting a single price for all indications presents significant challenges due to differences in unmet needs, standard of care costs, population sizes, and other factors unique to each therapeutic area. This leads to a mismatch between price and value, where a single price may not accurately reflect the varying value of therapies across diverse conditions. To address this, payers may look to impose access restrictions on certain indications due to a mismatch between price and value. Such an approach can ultimately hinder patient access to needed treatments and may discourage manufacturers from developing therapies for certain conditions due to the associated pricing risks.

Take CD19-targeted cell therapies, for example. They are being developed for a range of indications, including hematological malignancies like leukemia and lymphoma, as well as autoimmune diseases like rheumatoid arthritis and multiple sclerosis. While all these conditions require better therapies, their unmet needs, population sizes, standard of care protocols, and expected outcomes differ significantly. Should they all be valued and reimbursed the same way?

The traditional single price approach poses significant challenges to manufacturers and payers in aligning price with value and ensuring timely and broad patient access.

How indication-based pricing can work

Traditional medicines are produced, sold, and distributed before being prescribed for a specific patient or indication, with a single price set based on the first indication, which may evolve over time. In contrast, cell therapies are produced, sold, and distributed for a unique patient with a specific condition, meaning that the indication is known before production. This allows for easier implementation of indication-based pricing.

For example, Novartis set different wholesale acquisition cost prices for Kymriah, a CAR-T therapy, based on whether it was being used for pediatric acute lymphoblastic leukemia or for adult diffuse large B-cell lymphoma. However, the full potential of indication-based pricing was not realized in this case, as Kymriah was assigned only one Q-Code, meaning the average sales price (ASP) and outpatient reimbursement were the same across all indications. To resolve this, indication-based HCPCS codes (J or Q) are needed such that the ASP could be reported and reimbursement rate set based on the value of each indication.

There are two potential ways to establish end-to-end indication-based pricing:

1. Indication-based Biologics License Application (BLA): BLA is in line with the current Centers for Medicare & Medicaid Services (CMS) HCPCS Workgroup Rules, where a manufacturer would submit a separate BLA to the U.S. Food and Drug Administration for each indication. GSK pursued this strategy for Jemperli (dostarlimab-gxly), which has one BLA for treating mismatch repair deficient (dMMR) recurrent or advanced endometrial cancer, and another for treating solid tumors. Both BLAs share the same formulation and dosage but were submitted separately due to the different indications. Once approved, each indication was given its own J-code based on CMS’ definition of “significant therapeutic distinction.” This approach adds more upfront administrative burden to the manufacturer and the regulatory body, but it can solve the longer-term economic and access concerns.
   
   
2. New pathways and infrastructure: A strategy with no precedence would be for the manufacturer to work with the American Medical Association and CMS to secure a distinct J-code or modifier to identify different indications. In this case, the J-code or modifier would reflect the appropriate indication, which in turn would be used for billing and to calculate the ASP. This would enable providers to be differentially reimbursed in the outpatient setting for different indications of a single cell therapy.

A collaborative approach for a sustainable path forward

Exploring a new pathway for implementing an indication-based pricing model for cell therapies under Medicare Part B in the outpatient setting presents a sustainable path forward. However, this approach faces limitations, as cell therapies are also administered in inpatient settings, which may require the development of indication-based DRGs or alternative payment models to reduce financial friction between providers and payers.

Additionally, since not all countries can adopt indication-based pricing, manufacturers must develop strategies to mitigate risks from international price referencing. Despite these challenges, cell therapies remain the strongest candidate for indication-based pricing due to their tailored manufacturing for a specific patient and condition.

Collaboration across manufacturers, policymakers, payers, and providers will be key to shaping a pricing model that balances cost with value, expands patient access, and ultimately improves health outcomes.

This article was produced in partnership with Jie Zhang, PhD, strategic advisor at Guidehouse and former vice president - head of Cell & Gene Global Value & Access at Novartis.