Gene Therapy | What it means for employers

Due to advances in both science and technology, the progress and promise of gene therapy have grown exponentially in the past few years. Initially, gene therapies were believed to have the potential to cure, not merely treat, genetic conditions. However, real-world evidence is providing more insight into the clinical outcomes of these medications. They are often providing treatments or improvements to patients but not achieving “cure” yet. The multimillion-dollar cost and the limited ability to predict/budget for that cost have employers fearful of the financial implications to their health plans.

As more and more gene therapies come to market, it is important to understand what gene therapies are, the impact of the gene therapy pipeline, and the challenges these treatments provide to plan sponsors.

Gene therapy: What is it?

Gene therapy is broadly defined as the introduction, removal or change in the content of a person’s genetic code. These therapies treat the underlying genetic defect, and while the initial results were thought to cure many patients with a single treatment, that has not been the outcome seen in real-world situations. Some of the gene therapies have provided better treatment options and outcomes, but at an extraordinary cost. While the durability of these products are in question, the manufacturers continue to price them as though they are a lifetime cure.

Some of the newer approvals are indicated for continuous use. Some gene therapies are categorized as cellular and gene therapies. In this case, cells are removed from a patient, genetically modified to treat a specific disease, and then transferred back to the patient. This distinction is important when considering language used for defining benefits coverage. The cellular therapies have not experienced the same durability concerns as other gene therapies so far.

At the time of this publication, there are over twenty significant FDA-approved gene therapies and cell therapies on the market at the price points reflected here (opens a new window).

What’s in the pipeline?

In addition to the therapies above, there are numerous other gene therapies in the pipeline, including several targeting rare conditions, but some taking aim at more common diseases. For a therapy to get to market, it must be researched and developed in the laboratory, then move through three phases of clinical trials to assess safety and efficacy. If the therapy is proven to be safe and effective, the manufacturer can file an application with the FDA for market approval.

The standard clinical trial process can take five to 10 years and require a significant number of patients to prove the therapy is market-ready. For rare conditions, the lack of a significant number of patients makes the standard clinical trial process infeasible. Therefore, federal law allows a therapy for a rare condition to obtain an “orphan designation” or “orphan status” and follow an expedited process for market approval.

Gene therapies in the immediate pipeline are focused on rare conditions, which means that their time to market is less than five years.

Near-term pipeline (2023-2024)

Estimated approval

Drug name




Atidarsagene autotemcel

Metachromatic leukodystrophy (MLD)



Fidanacogene elaparvovec

Hemophilia B in adults



Fordadistrogene movaparvovec




Olenasufligene relduparvovec

Lysosomal storage disorders








Wiskott-Aldrich syndrome



Pariglasgene brecaparvovec

Von Gierke disease



Botaretigene sparoparvovec

X-linked retinitis pigmentosa




Myocardial ischemia and refractory angina
due to CAD

1.7% of


Giroctocogene fitelparvovec

Hemophilia A in adults


Gene therapies for common conditions are also on the horizon but are unlikely to command the price of those rare and orphan diseases without available treatment options. Projections are that the cost of these therapies for common diseases is not known.

Gene therapy: To cover or not to cover?

There is much for a group health plan sponsor to consider when deciding whether to cover gene therapy.

Why might a plan sponsor consider not covering gene therapy?

A plan sponsor might consider not covering gene therapy due to the potential multimillion-dollar cost. Many of these conditions are rare, and treating them is likely to be very expensive. For self-funded employers, stop loss policies can protect the underlying health plan, at least temporarily, by transferring the risk of high-cost claimants. However, it is critical to align the terms of the underlying health plan and the stop loss coverage to ensure stop loss reimbursement of claims related to these expensive treatments.

Note: Some carriers/claims administrators will not allow excluding some or all gene therapies.

A plan sponsor that chooses to not cover gene therapy triggers many risks — mainly compliance and public relations risks. The exclusion risks a disabilities-based discrimination claim, even if the exclusion is targeted at an employee’s dependent. If a plan amendment adding the exclusion is installed midyear because of an existing claim or impending claim, the amendment risks a HIPAA violation. If a self-funded employer chooses to exclude gene therapy, then decides it would like to make an exception and cover gene therapy due to extenuating circumstances (negative publicity, child of an executive needs the treatment, etc.), the claim will not be eligible for stop loss reimbursement because the service is not listed as covered in the underlying health plan.

Exclusions create public relations risks as well. These treatments are viewed as essential, and many are for children. There could be adverse publicity implications for not covering FDA-approved gene therapy for a child with a life-threatening condition with limited, if any, treatment options.

If a plan sponsor chooses not to cover some or all gene therapies, there are many additional steps to consider. The plan should be amended to exclude the treatment, with sufficient specificity to avoid any ambiguity. Notice must be provided to the participants within 60 days after the change is adopted. If the amendment affects information reflected in the summary of benefits and coverage, the notice must be provided 60 days prior to the effective date. If the amendment is effectively targeting an existing participant or beneficiary, it should not be effective prior to the first day of the upcoming plan year.

It may be possible for some self-funded employers to cap the amount their plan will pay for specific gene therapy treatments. The Affordable Care Act’s ban on dollar limits applies only to “essential health benefits” (EHBs), as defined by the plan’s relevant “benchmark state,” and self-funded plan sponsors may choose which state’s benchmark plan they’ll use to determine their plans’ EHBs. Some state benchmark plans, for example, require that merely some, but not all, drugs in a specific therapeutic class be treated as EHBs.

The compliance considerations related to excluding some or all gene therapies are complex and involve a variety of federal laws, principally disability discrimination laws. Plan sponsors wishing to avoid gene therapy claims should consult with their legal counsel regarding what these risks are and how to structure a gene therapy-related exclusion. Lockton cannot serve as their legal counsel in this regard.

Why might a plan sponsor consider covering gene therapy?

  • NO OTHER ALTERNATIVES: Often, there are simply no alternatives to gene therapy. Gene therapies treat previously untreatable or difficult-to-treat conditions. Patients with these conditions do not have treatment alternatives, or the current alternatives are costly and only temporarily manage symptoms without significantly improving outcomes.

  • SEVERE DISABILITY: Patients who are candidates for gene therapies can suffer from severe disability and/or painful early death without these treatments.

  • CURATIVE: Some gene therapies may be curative, and cost associated with the ongoing treatment of disease symptoms may be reduced. This isn’t universal to all gene therapies.

  • RECOMMENDED BY ICER: The Institute for Clinical and Economic Review (ICER) is the gold standard in the U.S. for assessing the value of prescription drugs and medical treatments. Of the currently approved gene therapies, ICER has concluded that the therapies demonstrate positive value to society but the pricing often exceeds the maximum value identified.

Payment solutions

If a plan sponsor chooses to cover gene therapy, there are various payment, management, and compliance issues to consider. One potential payment solution is outcomes-based contracting with pharmaceutical manufacturers, of which there are two solutions: milestone-based and performance-based. These solutions will be challenging for employers, as the patient may leave the plan before the multiyear contract ends. The programs currently offered are milestone-based or often called “warranties.” The mechanism for monitoring and coverage for a self-funded employer are not well defined. In reality, these solutions have proven challenging to operationalize. They require ongoing patient monitoring, which necessitates a system that connects the provider, payer, and manufacturer to track outcomes and reconcile with the payment contract. As of this publication, Lockton has yet to see an employer implement one of these payment solutions.


  • Multiyear contract between the plan and manufacturer.

  • Upfront payment for therapy by the plan; refund from manufacturer to the plan based on patient achieving and/or maintaining clearly defined clinical performance metrics.


  • Multiyear payment structure between the plan and manufacturer.

  • Annual installment payment following initial payment based on clearly defined clinical performance metrics.

  • Patient coinsurance/copay potentially limited to initial payment.

New programs are being developed to help finance the risk of gene therapy treatments. Many pharmacy benefit managers and carriers offer coverage of gene therapies for a fixed per member per month (PMPM) fee. These risk pooling programs vary by products covered. They only cover new patients after implementation of the program. It’s important to understand your current stop loss coverage to assess if additional programs like these fit your plan needs.

For now, if a self-funded plan sponsor is wondering how they are going to pay for these therapies, their main payment option should be (on a year-to-year basis) their stop loss policy, as none of our carriers are denying coverage outright for G&CT or requiring you transfer the liability to another entity (e.g., a carve-out program). There could be lasers at underwriting, but none of the carriers are saying they won’t cover gene therapies across the board. It’s important to evaluate each year, because if there is a material change in experience, the stop loss market may adjust pricing, but so far, this just has not been the case.

Management solutions

The management of gene therapy is evolving. Currently, many carriers/claims administrators cover gene therapy under the medical component of the plan. While there could be an argument to cover it under the pharmacy component to better manage the cost, plan sponsors will need to understand the programs their administrator has in place to determine the best option. For example, if outcomes-based contracting is being considered, there may be a preference to cover gene therapy under the medical component of the plan since the member’s outcomes will likely be tracked through the medical claims experience.

Other management solutions include providing access to specific, high-value network providers; limiting out-of-network facility coverage; and adding a travel benefit to enable ease of access to high-value providers.

If the plan sponsor intends to cover cancer gene therapy, it should also consider strengthening programs for cancer care navigation, expert medical opinion, and cancer decision-support services. Cancer program services should include support for identifying gene therapy clinical trials for members.

Compliance considerations

If a self-funded plan sponsor chooses to cover gene therapy, the sponsor should ensure:

  • The plan document, by its terms, provides for coverage (and can’t be reasonably interpreted by the reinsurer to not treat gene therapy as a covered expense).

  • The reinsurer sees eye to eye with the plan sponsor regarding the treatment of gene therapy as a covered expense.

In this regard, there are several places in a plan document that will impact treatment of gene therapy as a covered expense. If the employer intends to cover gene therapy and expects reinsurance protection for that coverage, it’s important that these provisions be consistent with the plan sponsor’s intention and the reinsurance policy. Stop loss carriers have not yet implemented a separate or discrete approach related to gene therapies, nor have they attempted to laser potential gene therapy candidates, but that is likely to change.

To that end, the plan sponsor will want to ensure that the following provisions in the plan document/SPD (and the claim payer’s operational protocols) are consistent with — and don’t negatively affect — the plan sponsor’s desire to cover gene therapy:

  • DEFINITION OF MEDICAL NECESSITY: Can the definition be read to treat gene therapy as not medically necessary? Will the reinsurer accept the plan sponsor’s determination that gene therapy is medically necessary, or make its own determination?

  • EXCLUSION OF EXPERIMENTAL AND INVESTIGATIONAL SERVICES: Does this provision treat gene therapy as experimental or investigational? If not, does the reinsurer have discretion to treat it that way, even if the plan sponsor does not?

  • UTILIZATION MANAGEMENT CRITERIA: For example, does the plan require a step therapy approach to conditions treatable with gene therapy, with gene therapy well down the line in the treatment process?

  • OTHER MEDICAL PLAN COVERAGE CRITERIA AND CLAIM PAYER INTERNAL OPERATIONAL PROTOCOLS: Are there other terms in the plan/SPD or the claim payer’s internal claim adjudication protocols that are inconsistent with the intention to cover gene therapy?


The approach to gene therapies will vary from plan to plan. While gene therapies offer high rewards — including treating or even potentially curing previously untreatable conditions — the cost, both financially and reputationally, associated with these therapies can prove to be too high risk to consider for some plan sponsors. Lockton account teams are prepared to assist their clients in assessing the pros, cons and issues related to gene therapy to ensure the clients make appropriate and informed decisions.

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