Novel Cancer Drug Gets Stymied by Medicare Rigid Billing System

(Bloomberg) -- A U.S. government reimbursement system that doesn’t fully cover the costs for Gilead Sciences Inc.’s complex blood cancer therapy is partly to blame for the slow uptake of the novel life-saving treatment, according to doctors who are trying to treat patients.

Only a handful of patients have received the therapy, Yescarta, two months after its approval, while waiting lists have risen to the hundreds at the 15 cancer centers authorized to administer the treatment in the U.S., Bloomberg News reported Thursday.

The problem, say doctors at those centers, is that there’s no billing code for the $373,000 therapy in Medicare, the government plan that covers millions of elderly and disabled Americans. Gilead estimates that Medicare is responsible for about a third of eligible patients, which has left hospitals to decide whether to risk losing millions of dollars or turn down dying patients.

“In general, Medicare is slow to respond to new technologies, and we have a relatively unprecedented price point for which no payment model exists,” said Krishna Komanduri, president of the American Society for Blood and Marrow Transplantation. “We would not discriminate against Medicare patients, we don’t want to do that. But we also don’t want to be forced into a position that’s not sustainable.”

The challenge highlights the mismatch between the government’s rigid payment process and treatments that cross categories between drugs and hospital procedures.

Gilead made a $12 billion bet on the type of next-generation therapies Yescarta belongs to -- called CAR-Ts -- when it acquired the product from Kite Pharma Inc. this year. But instead of gaining a first-mover advantage in the form of advanced blood cancer that Yescarta treats, Gilead is blazing the paperwork trail for competitors like Juno Therapeutics Inc.

The Centers for Medicare & Medicaid Services said by email that while there’s no specific billing code for Yescarta, there are mechanisms in place to reimburse hospitals, declining to comment on the financial shortfall the cancer centers say they face. Gilead will continue to “engage actively with Medicare to ensure we are doing all we can to support access,” spokeswoman Sonia Choi said.

Unprecedented Challenge

Yescarta was approved in October for an advanced form of lymphoma. Administering the potent therapy involves a lengthy hospital stay, the intricate harvesting and re-engineering of cells to attack the blood cancer, and a host of other drugs to help the patient weather potentially fatal side effects.

For Medicare, the issue isn’t Yescarta’s hefty price tag by itself, since the agency by law isn’t allowed to negotiate prices. The problem is that total costs may vary widely depending on whether the patient is cured with the one-time treatment, or develops complications that require prolonged intensive care. Expenses can reach $1 million for those patients.

Yescarta is being given mainly to hospitalized patients, meaning it falls under what’s known as Medicare Part A. Doctor-administered drugs, however, are reimbursed under Part B of the program. Under Medicare Part A, the typical lymphoma code would give hospitals a base pay of about $17,000, according to the American Society for Blood and Bone Marrow Transplantation.

That’s a fraction of the $373,000 price tag that cancer centers pay upfront to Gilead. Even if they apply for what’s known as an outlier payment, hospitals lose money, according to analysis by the American Society for Blood and Marrow Transplant, or ASBMT.

Medicare only updates its billing codes once a year. It isn’t scheduled to review them until next spring, and if a new code was created for CAR-T, it wouldn’t go into effect until next fall.

‘Too Long’

“That’s a long time -- too long for hospitals to sustain those sorts of losses and too long for Medicare patients to wait,” said Amy Emmert, vice president of hematopoietic stem cell transplantation and cell therapies at Dana Farber, one of the 15 Yescarta centers.

The billing complexity doesn’t let Gilead off the hook. Hospitals have long lost money on publicly insured patients, and usually make up the difference by raising prices for privately covered ones. Yescarta’s high price makes that almost impossible, doctors said.

The ASBMT and other advocacy groups tried to get ahead of the problem well before the first CAR-T was approved. Starting in April, they sent CMS letters requesting a new billing code specifically for cell therapies.

Deadline Missed

At the time, Gilead wasn’t in the picture. The Foster City, California-based agreed to buy Yescarta’s owner, Kite, on Aug. 28, and closed the deal early October, two weeks before the CAR-T got approval. Kite, a much smaller company that was working to bring its first product to market, applied early on for an add-on payment. It had to withdraw the request when the therapy wasn’t approved by the July 1 deadline.

Yescarta was only the second CAR-T approved in the U.S. after Novartis AG’s Kymriah, approved in August to treat a much smaller group of patients: children and young adults with a form hard-to-treat leukemia.

Novartis, a Switzerland-based global giant with experience in launching novel drugs, tried to side-step the problem by reaching an agreement with CMS for its $475,000 CAR-T. Under the agreement, the company will only get paid if patients show signs that the treatment is working within a month of getting it.

Resolving the Yescarta issues could take a year, according to Brian Abrahams, an analyst at RBC Capital Markets, all time in which Gilead may see its first-to-market advantage in advanced lymphoma slip away.

“It would have been difficult to preempt any of the logistical and reimbursement complexities that are at play here,” said Abrahams, who rates Gilead stock outperform and doesn’t include any Yescarta sales in his 2017 estimates. “There’s going to be some natural growing pains over the course of the first year.”

©2017 Bloomberg L.P.