This is unabashedly good news:
The FDA has approved elexacaftor, tezacaftor, and ivacaftor as a combination pill (marketed as Trikafta) for treatment of CF in patients >=12. The 3 drugs improve the function of CFTR protein resulting from a mutation responsible for ~90% of CF cases https://t.co/G7lAufg94o
— JAMA (@JAMA_current) December 5, 2019
And now I will be a ball of fun at parties. This is also a massive risk adjustment problem.
This drug cocktail will be expensive. The list price is over $300,000 per person per year. It is not a cure, it is a chronic medication. The economics of this particular drug category don’t support the idea that there will be large rebates so the net vs gross price spread won’t be huge.
Cystic Fibrosis is not randomly distributed in the population. It is clustered in families as it is a genetic condition. When insurers were setting their 2020 rates, cystic fibrosis treatments were a small population with a particular mutation who had access to a very expensive and effective treatment and most everyone else. Now there is a big technological shock that is expensive and will quickly become the new standard of care for most individuals with cystic fibrosis. Risk adjustment payments either through “widget” payments like in Medicare Advantage where an additional diagnosis triggers a lump sum transfer, or revenue neutral risk adjustment like in the ACA markets will be significantly underpaying for the soon to be standard of care for CF.
When an insurer is obligated to cover a standard of care that is not supported by net revenue which is premiums plus reinsurance plus risk adjustment flows, the incentive to dodge and delay treatment increases quickly. I would be shocked if insurers do not institute pre-authorization, screening and strict limits on this new CF drug cocktail for the first year. This will bring lawsuits or at least the threat of lawsuits of course, but until the revenue model catches up to the care model, insurers will have an incentive to delay care payments.
As a side note, technological shocks that are effective but expensive also blow up strict block grants in Medicaid.