Floating the Possibility of National Insurance for Gene Therapies

Travelers Insurance Co. has used an image of a red umbrella in its logo since 1870. It’s brilliant imagery — both insurance and umbrellas offer protection against a rainy day. Here’s a little history about that logo: It became property of Citicorp (later Citigroup) when Citicorp acquired Travelers in 1998. Citigroup sold Travelers to MetLife in 2003 but kept the red umbrella logo. In 2007, Travelers repurchased the rights to the logo from Citigroup, but Citi’s logo still has a red arc — a design clearly derived from the red umbrella.

Gene therapies are emerging and many more are forming on the horizon (as the saying goes, when it rains it pours). The impending monsoon of gene therapies brings a rising chorus of concern about their costs. A lot of smart people are thinking and talking about ways to pay for gene therapies, whose prices and one-time curative potential are not a fit with our current system of financing less-expensive drugs and chronic therapies. To date, however, one idea — a national insurance program for gene therapies — has not been a meaningful part of that discussion.

Options to finance cures

A?team?at the University of Washington conducted a search of the peer-reviewed and grey literature to identify articles describing?policy options for addressing affordability?in high-priced medications with curative potential. The team identified 21 policy options published between 2000 and 2016, yet not one mentioned a national insurance program to finance cures.

Some?consultants?imagine financing cures?a number of ways: reinsured by private sources; backstopped either directly by existing government health care programs or indirectly through government-led credit vehicles; new accounting rules allowing payers to amortize costs over a longer time period.

Other?analysts?envision financing?models for innovative specialty drugs that are voluntary, do not require the creation of new entities, and do not require acts of Congress: amortize the costs over time through high-cost drug mortgages; pool reinsurance for multiple payers; and reduced copayments over time in exchange for patient adherence to therapy. The last suggestion, of course, is not applicable to potential one-time treatments.

A national insurance program for gene therapies could help to spread the risk across a larger population and, most importantly, help to spread the costs over time.?Churn gets in the way?of insurers and self-insured employers making up-front, one-time payments for gene therapy. A national program could make gene therapies more affordable and accessible to patients, and potentially benefit payers and manufacturers as well.

Forecasting the passage of a national insurance program

Weather forecasting commonly considers?atmospheric factors including barometric pressure, temperature, wind speed, microclimates, and humidity. Despite today’s sophisticated models, rainfall can be difficult to predict. While the likelihood of a national insurance program for curative gene therapies is difficult to predict, we can consider several factors.

A national insurance program for gene therapies could easily be confused with much-maligned proposals for comprehensive health coverage. While comprehensive changes, such as a shift to a single-payer system or the Clinton health care plan in 1993, have met with resistance, a series of incremental changes (e.g., Medicare and Medicaid, CHIP, Medicare Part D, the ACA) have occurred over the years. In contrast to these programs, which target specific groups for comprehensive coverage, a national insurance program for curative gene therapies may be less threatening because it could benefit all participants and be limited to a very specific benefit. An important benefit for all but the uninsured could garner sufficient support from both sides of the aisle. That said, it could be challenging to define the gene therapies and any ancillary services that might be covered.

Let’s think big and assume that government programs, including Medicare, Medicaid, and VA/DoD would be required to participate and that private insurers and self-insured employers could voluntarily participate. This would spread the risk over many lives, lowering the premium for insurers and self-insured employers and making their costs to cover such therapies more predictable. If, as imagined, the program were voluntary for private insurers and self-insured employers, then there would be less resistance. However, if there were less commercial participation, potential cost savings would erode.

Depending on the program’s approach to pricing and reimbursement, gene-therapy manufacturers may or may not be supportive. If the federal program simply expanded access to gene therapies, then manufacturers should have a sunny disposition. To maximize savings, however, a national insurance program would need the ability to negotiate prices with manufacturers — authority that would cloud manufacturers’ receptiveness toward such a program.

Conservatives advocating for smaller government are philosophically opposed to expanding the role of government, while liberals more readily embrace government interventions that create social safety nets. Conservatives and liberals might coalesce if a federal insurance program for gene therapies was framed as benefiting citizens, employers, gene-therapy manufacturers, and insurers alike. Even how the program is named would likely impact its success.

Democrats and Republicans are concerned about the cost of specialty drugs, and a desire to rein in drug pricing has mass appeal. As more and more ultra-expensive gene therapies approach the market, storm warnings will increase. As approvals mount and the drizzle of available therapies turns into a downpour, access challenges will arise, creating pressure for government intervention. A sense of urgency may take hold, but then again, there are always competing priorities.

Flood insurance — a case study

While a targeted solution would be easier to design, implement, and evaluate, critics of a national program will surely fear the potential for mismanagement and fiscal insolvency. The chances of establishing, adopting, and successfully running such a program increases if insights from other programs are leveraged. One potentially useful case study is the National Flood Insurance Program (NFIP).

Following the death and destruction caused by Hurricane Betsy in 1965, the U.S. government established the NFIP in 1968 to provide flood insurance coverage for individuals and businesses in flood-prone areas. The NFIP had two competing goals: to keep premiums affordable and to keep the program financially solvent. But in offering discounted premium rates to many policyholders, the NFIP eventually experienced a shortfall in revenue and was forced to borrow from the Treasury.

While the NFIP premiums were generally sufficient to cover losses early on, they were insufficient for catastrophic losses from storms like Hurricane Katrina and Superstorm Sandy. As the earth warms, precipitation events will be more intense and more frequent (and?payers’ costs will rise). The analogy for a national insurance program for gene therapies is that premiums must increase in pace with the rising number and costs of gene therapies.

A national insurance program for gene therapies should ensure that premiums are both affordable and sustainable — an exquisitely delicate balance. Charging the “right” premiums is one of several important lessons learned from this case. And lessons learned from this and other cases (e.g., the terrorism risk insurance program, the crop insurance program) should help to inform the design, implementation, and evaluation of national insurance for gene therapies.

Cloud seeding

The probability of a deluge of expensive gene therapies is 100%. So, what’s the forecast for a national insurance program for gene therapies? Cloudy.?But just as meteorologists rely on multiple forecasting models to make a call, let’s discuss all alternatives for financing gene therapies, including a national insurance program, when we huddle under the umbrella.