A new category of pharmaceutical therapy is proving revolutionary for diseases and conditions once thought to be untreatable or inevitably fatal. The downside is their cost, which is bad news for employers and workers already shouldering rising healthcare costs.

Some providers are warning that new and novel life-saving treatments could threaten the relative stability of that growth, creating huge volatility for self-insured employers. This was the topic of discussion during a From Day One webinar on the high-cost claim many benefits leaders aren’t ready for: cell and gene therapy. 

Cell and gene therapy, or CGT, targets disease at the cellular level by introducing new, healthy cells to replace damaged ones. Many cell and gene therapies target conditions once considered hard to treat or even incurable, like sickle cell disease or the brain cancer glioblastoma. Many such therapies are still considered investigational.

It’s often cost-prohibitive for patients to pay for these treatments. “They’re new and they’re incredibly expensive,” said Will Shrank, MD, the CEO of Aradigm, a cell and gene therapy carveout provider. “There’s a huge amount of research that goes into designing, developing, and bringing these therapies to market. They’re often used to treat a very, very small number of patients for very rare conditions.” 

Conversations about CGT are often driven by sticker shock, he says. Cell and gene therapies are a high cost category for self-funded employers, and they can create unpredictable spending spikes, says Caitlin Hohman, a ​​clinical pharmacist at Quantum Health, a healthcare navigation firm partners with Aradigm to provide CGT coverage through employers. Their data shows that a single member can potentially trigger a $4 million claim, which makes it tough, if not impossible, to budget and plan for therapies like these. Plus, she said, “there’s not a pre-existing or industry standard on rates for these drugs.”

Claims are often subject to single-case negotiation with no benchmark for what an employer pays. There’s also little infrastructure for post-treatment monitoring, which makes it hard to track the outcomes for patients. Additionally, many CGTs get accelerated approval, and durability is still being studied.

“Put all these factors together,” said Hohman, “and you’re creating such a uniquely unpredictable financial landscape for self-insured employers, specifically.”

There’s year-over-year volatility too, with per member per month costs fluctuating significantly over time. And it’s not the result of a single outlier, Hohman says. “Over the last five years, we’ve had employers show up consistently across multiple years with cell and gene therapy claims, which tells us this is an ongoing exposure.” 

Employers of all sizes are feeling the impact. While small companies are disproportionately affected, even large employers are seeing $1 million to $2 million per member per month cost, according to Quantum Health data.

Shrank said Aradigm is able to mitigate some of these costs thanks to the volume of patients they manage. They charge employers a monthly premium, where risk is capped, pooling those funds into a larger pool to ensure price stability. Employers pay nothing beyond those premiums.

By building a national network of providers, Aradigm guarantees them more volume, and in return, they get discounts from manufacturers, in some cases based on patient outcome, which means some dollars return to the pool when treatments aren’t successful. 

While Aradigm works behind the scenes, Quantum is a single point of contact for patients, which enables the company to form what Shrank and Hohman describe as a “bear hug” around the patient. “From an operational perspective,” said Hohman, “there is such an identified need in this space to support patients and providers with end-to-end coordination, before, during and after administration of these drugs.”

Care navigation is critical, Hohman says. “Employers are coming to us for help navigating applicable benefits and putting the pieces of the puzzle together—because there are so many pieces out there.”

Editor’s note: From Day One thanks our partner, Quantum Health, for sponsoring this webinar. 

Emily McCrary-Ruiz-Esparza is an independent journalist and From Day One contributing editor who writes about business and the world of work. Her work has appeared in the Economist, the BBC, The Washington Post, Inc., and Business Insider, among others. She is the recipient of a Virginia Press Association award for business and financial journalism. She is the host of How to Be Anything, the podcast about people with unusual jobs.

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