CAR T Cells: Exciting, but Who Is Going to Cover Costs?

Roxanne Nelson, RN, BSN

December 27, 2017

ATLANTA ― The prices of the new cancer drugs rolling through the pipeline have been an increasing cause of concern. Even as prices continue to escalate, the novel approach based on chimeric antigen receptor (CAR) T-cell therapies has redefined the meaning of expensive.

CAR T-cell therapies have generated tremendous excitement in the oncologic community, as they have elicited responses and complete remissions in patients who have come to the end of approved treatment options.

"The excitement is palpable.... This is all we are talking about," commented Samuel Silver, MD, PhD, MACP, professor of internal medicine and assistant dean for research at the University of Michigan Medical School, Ann Arbor.

But who is going to cover the huge costs of these novel therapies, he wondered aloud at a special session that focused on reimbursement issues for these new therapies during the recent American Society of Hematology (ASH) 2017 Annual Meeting.

Dr Silver is chair of the ASH subcommittee on reimbursement, a position he has held for years, but he has never received as many telephone calls as in the past few months, since CAR T cells were approved.

The first drug in this class to hit the market was tisagenlecleucel (Kymriah, Novartis) which was approved by the US Food and Drug Administration (FDA) in August 2017 for the treatment of pediatric and young adult patients with acute lymphoblastic leukemia (ALL). The manufacturer has priced the treatment at $475,000.

It was followed soon after by axicabtagene ciloleucel (Yescarta, Kite/Gliead), the second CAR T-cell therapy to receive FDA approval and the first for adult patients with relapsed/refractory aggressive B-cell non-Hodgkin lymphoma who are ineligible for autologous stem cell transplant. Gilead Sciences recently acquired Kite Pharma, the company that developed axicabtagene ciloleucel, for $11.9 billion. The therapy was launched in October with a price tag of $373,000

Cost Only Part of the Problem

But the price tag is only part of the problem, noted Dr Silver. "We need appropriate reimbursement for providers and facilities," he said, but at the moment, this a daunting challenge.

CAR T-cell therapies are basically unchartered territory when it comes to reimbursement from payers. These are not typical therapies with respect to cost structure, he pointed out.

"We need to accurately capture charges to agencies like CMS [Centers for Medicare & Medicaid Services] and private carriers using a uniform coding system," said Dr Silver. "There is a risk of inaccurate cost assignment from payers, and we've seen this with transplantation with CMS."

Dealing with CMS can be particularly challenging, owing to the complexities of its reimbursement system. For now, hospitals should brace themselves and be prepared to be operating at a loss.

Dr Silver pointed out that for axicabtagene ciloleucel, which has been approved for the treatment of adult lymphoma, about half of the patients will be Medicare beneficiaries. The only way that hospitals can come close to being reimbursed for invoice cost for the product ― not taking into account the cost of the inpatient stay itself ― is to mark up the product by 400%. Even then, hospitals would be facing a loss of revenue.

Complexities of CMS Payment

Dr Silver explained that for this fiscal year, the only augmentation of payment from Medicare is the outlier calculation.

Short-term acute-care hospitals are reimbursed under the inpatient prospective payment system (IPPS) within the Medicare program. This payment may include charges for excessively costly cases (outliers), indirect medical education costs, disproportionate-share hospital costs associated with services provided to low-income patients, and new technology costs.

To qualify for outlier payments, a case must have costs higher than a fixed-loss cost threshold. Outlier payments are not available in IPPS-exempt hospitals.

"New technology add-ons are not available for fiscal 2018, due to the timing of FDA approvals and CMS decision cycles, and this is going to be an issue," said Dr Silver. "And outlier payments are not likely to mitigate losses."

Although it may stop "some of the financial bleeding," it is not a viable solution, because significant underpayment persists in both IPPS and non-IPPS hospitals.

Given the high number of patients who are covered by Medicare, Dr Silver used Medicare as an example to emphasize the complexities and difficulties of appropriate reimbursement.

To generate cost, the Medicare administrative contractor takes the hospital's total covered inpatient charges that are billed on the claim and multiplies these by the hospital's operating cost-to-charge ratio from the most recently filed cost report.

The calculated cost is then compared to the sum of the MS-DRG [Medicare severity-diagnosis related group] payment for the case and the outlier threshold. For fiscal year 2018, the IPPS fixed dollar outlier threshold is $26,713. The IPPS MS-DRG base payment for lymphoma is $16,736.

Further calculations are made, and if there is an excess cost, CMS will make an outlier payment. It is unclear at this time what role Medicare advantage/supplement payments will play, because payers are uncertain about the benchmarks they should be using for assigning payment.

Operating at a Loss

Dr Silver gave examples of what a hospital could expect in the way of Medicare reimbursement, using two scenarios.

In the first scenario, the markup was for 110% ― that is, the hospital marked up the cost of the CAR T-cell product by 110%. Because virtually all CAR T cells are currently infused in the inpatient setting, this calculation included basic hospital charges, such as room and board, pharmacy charges, and costs for laboratory work and miscellaneous supplies. The total came to $524,300.

He then compared that total to what Medicare would be expected to pay, using the inpatient outlier calculation. The total case payment (MS-DRG payment plus outlier) for the CAR T-cell product alone came to $86,836.80, which would mean a loss of $286,163.30 per patient, before other costs of care were factored in.

Dr Silver emphasized that these charges did not include treatment for possible toxicities, such as cytokine releasing syndrome, which can be severe and involve a stay in the intensive care unit.

In the second scenario, the marked-up cost of the CAR T-cell product was 400%. In this scenario, the total hospital charges for the patient were $1,606,000. The increased markup boosted the Medicare payment to $303,176.80, but this still left the hospital with a loss of $69,823.60 for the cost of the CAR T cells alone.

These payment models are just with regard to Medicare. There are potential problems with private payers and Medicaid, Dr Silver told Medscape Medical News. "Medicaid payments are very low to begin with, and there are a limited number of centers that are certified to administer CAR T cells," he said. "So imagine this scenario, of a child with leukemia on Medicaid who needs the therapy."

First, access can be a problem, because fewer than half of states currenlty have a CAR T-cell therapy provider for pediatric patients with ALL, he pointed out. "Second, authorization for out-of-state treatment can be very difficult. So if we have a child on Medicaid coming from out of state, who is going to pay for it? There are delays in payment, due to state budgets, and Medicaid payments are not going to get any better, so there are going to be issues with that."

New policies are needed from private payers, and such policies may be more restrictive. "It will require placement in NCCN [National Comprehensive Cancer Network] guidelines and in various pathway models ― and these are necessary for payment," he said.

Dr Silver also pointed out that to date, studies of CAR T-cell therapy have been small with limited follow-up. Follow-up typically extends from a few years; the maximum is 7 years, and that was for a few patients. "We don't know what proportion of patients may need transplantation afterwards," he added.

There are still many questions about these novel therapies. Among the biggest are those concerning cost and reimbursement ― what Dr Silver described as the "the financial realities."

American Society of Hematology (ASH) 2017 Annual Meeting. Presented December 11, 2017.

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