The following analysis was completed in collaboration with Octaviant Financial and Oliver Wyman Actuarial.

The high costs of gene and cell therapies (GCTs) coupled with concerns regarding their efficacy and long-term durability are rapidly changing the coverage decision calculus for payers of pharmaceutical health care benefits.  

While the overall financial impact of GCTs to the broader US healthcare system has been analyzed to better understand their effect on all payers in aggregate, the variability of financial risk for individual commercial payers has not been well studied. These commercial payers vary in size from a small business self-insuring its employees’ health expenditures to the large publicly traded companies that insure and administer millions of lives. Each of these organizations have different risk exposures to the financial impact of GCTs, but all could benefit from mechanisms that reduce the risk of potential economic loss from high-cost GCTs. 

Together with Octaviant Financial we completed an analysis, one of the first in the market, to provide commercial payers across the coverage spectrum with a better understanding of both the range of financial expenditures associated with GCTs as well as the potential economic loss that arises when these therapies fail to achieve a successful clinical outcome.  

Three smart approaches to cost impact, variability and expense recovery

1. Smart cost strategies for payers covering GCT beneficiaries

With the accelerating approval rate of GCTs across multiple indications, payers — both large and small — must take a proactive, data-driven approach to managing the expanding pool of beneficiaries who may require these high-cost treatments. Strategic forecasting, risk-sharing models, and value-based reimbursement frameworks are critical to ensuring sustainable access while mitigating financial impact.

2. Budget strategies for payers facing variable GCT costs

In their budgetary considerations, payers must account for the financial volatility caused by the unpredictable distribution of GCT-eligible beneficiaries, which can lead to significant cost variability and impact long-term sustainability. Advanced actuarial modeling and risk mitigation strategies are essential to navigate these uncertainties effectively.

3. Managing GCT failure risks with cost recovery and financial solutions

Payers should also be hyper-aware of GCT failure rates and their variability within the treatment population. They should evaluate expense recovery mechanisms such as therapeutic warranties, to minimize economic loss. 

Four insights on GCT risks, cost variability and financial protection

Specifically, our analysis shows that for the largest payers, the absolute dollar risk associated with GCTs can approach $50 million per year. For the smallest payers, risk variability is high and can vary by a factor of four. GCT efficacy has a larger impact on the variability of economic waste than prevalence, number of approvals, or price of the GCT. Additionally, a therapeutic warranty can significantly decrease the payer risk of economic waste related to GCTs.  

By better characterizing the expected range of potential financial exposure we believe that commercial payers can make more informed GCT coverage decisions for their beneficiaries and are better empowered to critically evaluate the benefit of risk mitigation mechanisms such as therapeutic warranties.