Zolgensma: Nine Steps Health Plans Can Take to Reduce Financial Exposure

By Martha Allen
Wed, Sep, 11, 2019

Zolgensma, the first single-dose gene therapy for SMA type 1, exposes health plans to significant financial risks because of its extraordinarily high price tag. The wholesale acquisition cost (WAC) for a one-time dose of Zolgensma is $2,125,000. The good news is that with advance planning, proactive review of existing contracts, and proactive discussions with your reinsurer, you can help reduce your plan’s potential financial liability associated with this unique and extremely costly specialty drug.

What is Zolgensma?

The FDA approved Zolgensma in May 2019 for the treatment of spinal muscular atrophy (SMA) in pediatric patients less than 2 years of age who have bi-allelic mutations in the survival motor neuron 1 (SMN1) gene. SMA is a rare, genetic, autosomal recessive neuromuscular disorder caused by deletions or mutations in the SMN1 gene. This mutation undermines the production of proteins essential for proper motor neuron development. SMA incidence is estimated at 1 in 10,000 live births.

Depending on the disease subtype, some infants who are not treated will not be able to sit up and will likely die before age 2. Infants with other subtypes of the disease may live longer but will not be able to stand or walk without assistance. Other subtypes may result in children having a normal lifespan but losing the ability to walk once they reach adulthood. Another subtype only manifests in adulthood and results in proximal muscle weakness.

Why Zolgensma is a Game Changer

Zolgensma (onasemnogene abeparvovec-xioi), by drug maker Novartis, is the first single-dose gene therapy for SMA type-1 to come to market and has an exceptionally high price tag. This makes it unlike anything plans have had to prepare for and manage previously.

There is also uncertainty regarding how often the drug will fall under the medical versus pharmacy benefit. Pricing and discounts are being offered in both settings. Because a skilled specialist must administer Zolgensma in a one-time injection, many health plans assumed the drug would be covered under the medical rather than pharmacy benefit. However, like other specialty drugs, it may be ordered through a specialty pharmacy and shipped to the patient or to the provider prior to administration. These practices are known as “white bagging” or “brown bagging”, respectively. In such cases, the drug would likely fall under the pharmacy benefit.

Also, given the nature of the disease and the fact that it often kills and/or severely disables very young children, there is a lot of emotion involved in providing access to this therapy. The FDA approved a very narrow indication based on efficacy studies. The result is that a health plan might potentially see only one Zolgensma claim out of every 300,000 members, but this could increase if the FDA approves expanded indications for the drug.

Another unique aspect of the drug is that given its exceptionally high cost, payers are given the option to pay for the drug in installments rather than face a one-time charge when a claim is presented.

What Health Plans Need to Do

Here are 9 steps health plans should take if they haven’t done so already to minimize their financial exposure and maximize their potential reinsurance recoveries should they receive claims for Zolgensma:

1. If you have capitated provider contracts, know whether it is the provider or your plan that is financially responsible for Zolgensma.

2. Review and modify your provider contracts as necessary to clearly specify where (place of service) injectables like Zolgensma are covered – pharmacy or medical benefit. Some provider excess coverage will include limits or exclusions on pharmacy, particularly in non-medical (retail/mail order) settings There are inherent incentives by each party (provider and plan) to have this drug billed in a setting that will push the financial responsibility to the other party. If injectable or other specialty drugs like Zolgensma are completely carved out of your capitated provider contracts, your plan will clearly be liable.

3. Review and understand your health plan’s reinsurance policy. Know whether it covers pharmaceuticals in a pharmacy or medical setting. If it covers both, it won’t matter where the claim falls. But if there are reinsurance coverage limitations within certain categories (such as annual aggregate or specific maximums for non-medical (retail) pharmacy), it will be advantageous to have Zolgensma billed under the medical benefit.

4. Also, be clear on any other coverage exclusions or limitations specified by your reinsurer, such as coverage limitations for injectable drugs and/or for new gene therapies.

5. Consider your annual reinsurance deductible and be aware of lasering (excluding completely or applying a higher deductible) of the member upon your annual reinsurance renewal. You should calculate the discount of the drug and the installment payment options you are given, keeping in mind the re-accumulation of the reinsurance deductible (and potential lasering) year-over-year. For most plans that have reinsurance, paying for the drug upfront rather than in installments will push more of the cost to the reinsurer.

6. For your plan’s self-insured employer clients (ASO contracts), it is likely beneficial to have Zolgensma claims fall under the medical benefit, rather than pharmacy benefit, so that the employer’s stop-loss coverage will apply. Most employer stop-loss contracts exclude retail or mail order pharmacy claims. Some plans offer ASO clients stop-loss insurance which is either funded entirely by the plan or up to an excess attachment point. Either way, having clear communications with these clients before they receive a Zolgensma claim can avoid conflict and demonstrate the added value your plan brings.

7. Have clear Prior Authorization (PA) criteria in place. If you are working with a PBM, make sure your plan and the PBM are in agreement on the PA clinical criteria and that these are implemented in accordance with that protocol. Make sure there are clear communication channels in place regarding exceptions and who in your organization needs to be involved in these discussions.

8. Know that making exceptions to a PA or other clinical protocols can jeopardize your ability to collect from your reinsurer. Health plans sometimes make coverage exceptions for “compassionate use” related to employer or member relations, avoiding negative publicity, or other reasons. Should your plan make an exception in the case of Zolgensma, your reinsurer may likely disagree and you could be left responsible for the entire claim.

9. Have early discussions with your reinsurer. Notify them immediately if you become aware of an SMA member that is eligible for treatment. This is usually spelled out within your reporting responsibilities in a “trigger diagnosis” list. Discuss with your broker or reinsurer your best options for handling a potential Zolgensma claim.

Although Zolgensma poses unique challenges for health plans, performing some due diligence will go a long way in reducing health plan financial exposure and maximizing reinsurance recoveries. Additionally, it is important that health plans are proactively taking a broader approach to cost management that goes beyond simply working more closely with your PBM. When in doubt, consider working with a reputable, outside firm that specializes in health plan reinsurance and financial risk management issues, in addition to pharmacy benefits management consulting.