The last decade has ushered in exploding prescription drug costs with the proliferation of specialty drugs. My colleague, Craig Hasday, blogged about controlling these health plan costs last week. And although many of those drugs placed a major dent in our client’s healthcare plans, the next batch of specialty meds – gene therapy drugs – will have employers pining for the good old days of Hepatitis C drugs that were “only” $80k.

Two gene therapy drugs – Luxturna and Zolgensma – have recently hit the market, with price tags of around $1 million to $2 million. That’s right, these miraculous drugs will blow a hole in any employer plan because, given the obscurity of the conditions they treat and the costly research and development (R&D) required for their production, manufacturers have established obscene pricing levels. And right behind them are a band of others that will push this market from an estimated $282 million today to possibly more than $8.6 billion in five years.

Viewpoints from Adam Okun

So, this all begs the question ­– what is an employer to do beyond praying their population simply doesn’t have a claim?

Well, Cigna has developed a unique program to socialize all these costs and ensure these new drugs don’t crater the group experience and stop loss market. Titled “Embarc Benefit ProtectionSM,” the program will charge all participating clients a minimal fixed per-member monthly cost that ensures if any of these drugs are needed, it doesn’t get paid by the employer plan. Initially, it will only address these two drugs, but the intent is for the plan to expand to include future high-cost gene therapy solutions. Aetna and Anthem are also working on addressing gene therapy coverage.

This seems like a pretty rational consideration for employers to think of purchasing to protect their programs.

If insurance is all about risk mitigation and these low frequency but very high-cost events can endanger employer plans, an effective low-cost reinsurance solution seems to make a lot of sense. Kudos for some out-of-the-box thinking… We’ll be watching the evolution of this space as this market ramps up.

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Adam Okun

Northeast Region Employee Benefits Practice Leader – New York, NY