Improving Management of Gene and Cell Therapies

The Orphan Reinsurer and Benefit Manager (ORBM)
Sep 10, 2018

After decades of anticipation, 2017 saw the approval of the first of a new generation of durable and potentially curative gene and cell therapies. Over the next five years, it has been estimated that about 40 new gene and cell therapies will launch1 [1], with more to come from a global pipeline of 1,148 products in clinical development spanning a wide range of diseases.2 While these products have the potential to improve the lives of patients dramatically, they will also create substantial challenges for the healthcare system, including concerns about affordability and the need for novel financing approaches to manage the disconnect between short-term treatments and extended/uncertain periods of benefit.3

Many of these therapies target orphan (<200,000 patients in the US4) or ultra-orphan (<10,000 patients in the US5) diseases, and often only subsets of patients with particular mutations or clinical characteristics. This may mean that larger insurers might only cover one or a handful of patients each year, while smaller self-insured employers may go years without seeing a patient and may not establish capabilities to manage them appropriately. This will lead to a variety of challenges for payers:

  • Volatile number of affected patients (actuarial risk), which could lead to significant swings in plan cost in some years
  • Internal inefficiencies in developing management plans for a small number of potential patients
  • External inefficiencies in establishing treatment networks and contracting with manufacturers

We suggest that intermediaries designed to consolidate risk and treatment management for rare diseases could fill important gaps in the rare disease space, with similarities to carve-outs for mental health and provider centers of excellence in other areas (transplant centers, cystic fibrosis care centers, etc.). We propose that these groups be called Orphan Reinsurer and Benefit Managers (ORBMs). In this paper, we will start by describing the ORBM in its complete form, discuss potential issues with the model, and suggest variants of the model.



ORBMs (Figure 1) are organizations that develop expertise in the management of patients with a set of rare diseases that are difficult for individual payers to manage. Because of the unique issues associated with gene and cell therapies, we have designed the canonical ORBM to focus on the 65 rare diseases (outside of oncology) for which gene and cell therapies are likely to emerge in the near future based on current industry pipelines (see Appendix 1).


For ultra-orphan diseases, even relatively large payers would be expected to have no more than a handful of patients. An ORBM provides economies of scale for managing these patients that few individual payers would be able to achieve. While non-disease related treatments would still be managed by the primary payer, disease-related treatments are carved out to the ORBM in return for a capitated payment based on the overall size of the primary payer’s plan. Ideally, this carve-out is mostly invisible to the patient. The ORBM provides the following services (see Appendix 2 for additional details):


  • Carving out risk
    • Determines appropriate cost of rare disease patients
    • Removes actuarial risk from primary payers
  • Financial Operations
    • Manages performance and financial risk by contracting with treatment developers
    • Adjudicates and pays claims
  • Care Coordination
    • Determines patient eligibility for management by the ORBM
    • Develops and manages treatment pathway
    • Develops network of treatment centers with disease and treatment specific expertise
    • Collects patient data for performance contracts and quality improvement
    • Collaborates with patient support groups and disease organizations as appropriate


The healthcare market could potentially support the existence of multiple ORBMs, which could be newly created entities or could be formed by existing players such as large health plans or Pharmacy Benefit Managers (PBMs). ORBMs could also choose to specialize.


ORBM Model Considerations


The following sections discuss some potential issues with the core ORBM model.


Economic feasibility of an ORBM

Based on a high-level analysis of costs relating to the 65 orphan diseases with near-term potential to launch gene or cell therapies, it appears that current and expected costs are comparable in magnitude to the costs for other disease areas that have been able to support carve-outs (see Appendix 3). However, ORBM economics could be challenged if some assumptions are not met.

The diseases that were included in this analysis range from ultra-orphan diseases to somewhat more common diseases (such as hemophilia and cystic fibrosis) that many payers already have experience managing. Unless the ORBM can provide incremental benefits, larger payers may choose to continue managing some of the diseases themselves. As 80% of total costs in this analysis relate to the 9 to 12 most common diseases (see Appendix 3), this could substantially limit ORBM revenues or restrict them to ORBMs created and operated by large payers.

In addition, yet to be launched gene and cell therapies represent a significant proportion of the total estimated costs for this group of diseases (see Appendix 3). In early years, few of these therapies will have launched, and pipeline failures may delay or limit subsequent growth. If the ORBM is unable to achieve economies of scale for traditional disease management in the diseases targeted by these therapies, it may struggle economically during this period. Sufficient reserves are necessary to overcome this barrier, which may give an advantage to startups originating from existing healthcare system players, who have both capital and an existing base of patients they need to manage. Alternatively, we may not see the broad emergence of ORBMs until sufficient relevant products have launched.


Adverse selection

ORBMs mitigate risk for payers by accepting risk for covered diseases in return for a fixed per-member-per-month (PMPM) fee. Including prevalent patients at initiation of coverage runs the risk of adverse selection, wherein only payers with over the expected number of known patients with covered disease contract with the ORBM. The ORBM needs to assess the risk of payers that initiate a carve-out to determine whether additional fees are appropriate based on the number of patients expected to have the covered disease and the expected time frame for the launch of new therapies for the disease. Alternatively, the coverage could include only newer incident patients.

Care must be taken regarding the movement of patients into and out of a plan subsequent to initiating a relationship with an ORBM (“patient mobility”). If a plan’s coverage is considered more favorable for patients with a particular disease, it may disproportionately accumulate patients of that type, representing an additional form of adverse selection. However, the transfer of a patient from one payer to another where both are covered by an ORBM (even potentially different ORBMs) should not necessarily trigger any special payment (i.e. a surcharge on the receiving payer for adding a prevalent disease patient).

If not carefully managed, other decisions by payers also have the potential to create adverse selection issues. For example, if an ORBM permits payers to select diseases to be covered and a payer initiates a carve-out based on all diseases and then reduces coverage after a few years to diseases in which they have new patients, the ORBM would bear an undue share of costs if the payer is permitted to do so without penalty. Alternatively, if the payer has patients who are covered by one ORBM, they should be able to switch to similar coverage with another ORBM without undue penalty, because requiring a payer to pay for all existing patients covered by the current ORBM if they switch would create an inappropriate barrier to movement.


Overall Patient Management

As noted above, the expectation is that ORBMs specialize in managing rare disease, but that routine patient care and comorbidities should be managed by the primary insurer. On a disease by disease basis, it may be difficult to distinguish disease- and non-disease-related treatments, and this may lead to cost-shifting between the primary insurer and the ORBM. Responsible parties for care and payment should be clearly specified in the ORBM contract.

It is important to permit appropriate data sharing of patient records across the primary and specialty providers. The insurance contract with the covered individual must be written to permit such sharing where necessary, even if the patient does not yet have a condition that qualifies for care under the ORBM.


ORBM Model Variants


We expect that the market may see the emergence of a number of variations on the ORBM concept, both from the perspective of how the ORBMs choose to structure or niche themselves and in how payers choose to utilize them.


ORBM Options

ORBMs can choose to cover a subset or superset of the diseases listed in Appendix 1. Generally, one would expect the ORBM to make such choices thoughtfully in order to improve care management economics, such as by selecting diseases that have common features (e.g. focusing on particular therapeutic areas or having common resource needs for their treatment paradigms). ORBMs could also focus on ultra-orphan diseases or only cover diseases with greater incidence; the former might have fewer eligible patients (but potentially higher margins), while the latter might cover more potential patients, but have many larger payers opt not to do a carve out.

ORBMs can also choose to be a regional or national player. National ORBMs would have increased complexity in creating networks and managing across various state regulatory requirements but might be more appropriate for ultra-orphan diseases where expertise might reside in a small number of academic centers. Consideration must be given for locations of patients relative to treatment centers, particularly if care is expected to be ongoing.

Finally, ORBMs could opt to provide more services or fewer than those described above. Additional services might include financing options (such as helping patients manage out-of-pocket expenses) or alternative payment schemes, such as allowing payers to utilize the ORBM’s treatment and/or contracting expertise on a fee-for-service basis instead of being a full participant in the ORBM to manage risk.


Payer Options

It is expected that payers could opt in to the services offered by ORBMs in a variety of ways based on their own needs. They may choose to select only certain diseases to be included (such as only ultra-orphans), may choose a subset of services, and may (if acceptable to the ORBM) enter into financing options for patients not covered through the risk pooling. They might also retain some risk themselves and use the ORBM as a reinsurer for excess risk. It is anticipated that smaller payers and self-insured employers might be more likely to take the “full service” approach, while larger payers might choose services to complement their own internal expertise and risk tolerance.



In the US, healthcare costs associated with particular conditions (such as mental illness and end-stage renal failure) are often “carved out” of regular risk pools and placed into a condition-specific risk pool. The intention is to remove very unpredictable (but high-cost) needs from the regular healthcare pool and to aggregate patients into an entity that is better able to manage both the costs and the complexity of the conditions. In a similar vein, it may be beneficial to have ORBMs to help manage rare diseases, particularly with the impending introduction of a range of novel gene and cell therapies that increase the range and cost of treatment options. Carving out the associated diseases and pooling them in ORBMs might protect smaller groups from potentially catastrophic calls on their funds and provide specialist management of rare diseases. ORBMs are not necessarily the best solution for every situation, and the desired distribution channel and needs of various stakeholders need to be considered.

ORBMs are likely to arise that cater to a variety of niches, and payers will select one (or more) to partner with that best meets their needs. Payer segments have different financial challenges due to their size, funding sources, and regulatory context. Larger payers may opt for more limited coverage focusing on management of ultra-orphan diseases, while smaller payers might need broader protection from both actuarial risk and the challenges with managing individual patients with rare diseases.

Other stakeholders are also likely to benefit from the creation of ORBMs. Patients may have improved access to higher quality treatment, while providers and disease organizations would benefit from being able to establish long-term relationships with partners that have greater disease expertise. Manufacturers would be able to contract with a smaller number of key entities with a better understanding of treatment cost drivers and value, and there might be an overall reduction in overhead.

The establishment of ORBMs would likely lead to more consistent higher quality care, a reduction in overhead, and better overall management of rare diseases.


1FoCUS, "Portfolio Analysis Modeling #1," MIT NEWDIGS Research Brief 2017F211v11,, 2017.

2C. Young, "Personal Communication," 2018.

3FoCUS, "Framework for Precision Financing," MIT NEWDIGS Research Brief 2018F203v015,, 2018.

4Department of Health and Human Services, "Orphan Drug Regulations.," Federal Register, pp. 78(113), 35117, 2013.

5ICER, "Modifications to the ICER value assessment framework for treatments for ultra‐rare diseases,", 2017.



Donald Han, Market Access Consultant


Daniel S. Mytelka, PhD MBA CFA, Director of Simulation and Policy Research, FoCUS, Massachusetts Institute of Technology

Gregory L. Warren, FSA MAAA FCA, Vice President, Optum Advisory Services

Michael Ciarametaro, MBA, Vice President of Research, National Pharmaceutical Council

Mark Trusheim, MSc, Strategic Director, NEWDIGS, Massachusetts Institute of Technology


To view Appendix 1-3 turn to the next page.



Appendix 1. Non-oncology orphan disease areas with gene & cell therapies in development (20172)


Appendix 2. Activities that can be carried out by ORBMs.

Risk Pooling / Reinsurance

Premium Setting: ORBMs will set premiums based on the patient pool characteristics of contracting parties and/or based on non-customer level experience criteria. The premium will be paid across all plan members and will be determined by a number of factors including:

  • Number of included orphan diseases
  • Pool threshold (first dollar or attachment point)
    • First dollar coverage—provides full coverage for the entire value of a loss without a deductible
    • The dollar amount defined by stop-loss threshold (attachment point). Insurance coverage that takes effect after the initial liability of a claim (specific) or claims (aggregate) has been paid
  • Benefit Design
  • Performance Risk Sharing

Underwriting: The ORBM will underwrite payer risk for orphan and ultra-orphan for payers by pooling members across multiple organizations. This pooling will provide the scale necessary to predict financial exposure and set premiums in a consistent manner. The ORBM will need to manage adverse selection through coverage criteria and pricing approaches, covering only new incident cases (or pricing in the expected cost of known patients) and setting premiums to cover the full cost of incident gene and cell therapy treatment. 


Financial Operations

The ORBM will provide contracting and financial operations support and may also provide additional services depending on the needs of the developers and the payers.

Claims Adjudication and Reimbursement: The ORBM will be responsible for adjudicating and paying relevant medical and pharmacy claims. The ORBM will redirect claims outside of its contract scope back to the responsible payer based on criteria detailed in the contract with payers.

Financing: The ORBM could provide asymmetric payment patterns, such as a lump sum to the developer and fixed payments over time from payers. Potential implications for Medicaid best price and anti-kickback statutes would need to be addressed.

Outcomes Contracting: When payers retain significant costs for patients, outcomes contracts may be used to manage the performance risk of treatments. Outcomes contracts may take the form of rebates from the developer to the payer or milestone payments from the payer to the developer. Key activities include:

(1) Establishing outcome measures in value-based contracts,

(2) Tracking outcomes measures using industry-wide data systems, and

(3) Managing and distributing milestone payments or rebates as appropriate. 


Care Coordination

Patient Eligibility and Utilization Management: ORBM will be responsible for setting and managing patient eligibility criteria for each condition. This process will follow procedures used by payers to write medical policy. The ORBM will also be responsible for implementing coverage criteria via prior authorization.

Network Contracting: The ORBM will negotiate the contracts with Centers of Excellence/providers, evaluating both quality of care, geographic convenience/necessity, and reimbursement levels.

Disease management: The ORBM can work in conjunction with disease experts to establish patient-centric approaches to managing disease. ORBMs could leverage technology platforms such as devices and apps for long-term monitoring of patients, tracking of outcomes, and influencing healthy behaviors.


Appendix 3. Testing ORBM Financial Feasibility and Sustainability.

Healthcare carve-outs exist today across select disease states with high payer incidence uncertainty and risk exposure such as mental health and transplantation. In 2009, approximately $147.4 billion was spent on mental health services, representing 6.3% of total healthcare costs in that year.[1] With respect to transplantation, variability exists in the types of transplant, from solid organ to stem cell or bone marrow procedures. These transplants are infrequent but costly, posing substantial risk to payers. An estimated 49,000 transplants were performed nationally in 2014 at a weighted average cost of $598,000 per transplant and total cost for transplants of about $33 billion (1% of total 2014 healthcare spend).[2]

In order to evaluate financial feasibility for an ORBM, we tested whether costs for orphan diseases are comparable in magnitude to other areas that already support carve-outs. Sixty-five orphan diseases were identified for which non-oncology durable gene and cell therapies are in development (Appendix I). Each orphan disease was mapped to its most relevant ICD codes by a clinical pharmacist. For three orphan diseases, broader ICD codes had to be used. Five of the orphan diseases were combined with others. 

A national private payer proprietary claim database for 2016 and 2017 was evaluated and it was found that claims directly coded with the ICD codes for these 65 orphan diseases currently accounted for approximately 0.2% of total healthcare costs, which can be viewed as a lower bound estimate since not all claims related to the disease may be directly coded with the disease’s ICD code. 80% of these costs came from the top nine orphan diseases.

The total healthcare costs including all claims for the patients having any claims for these 65 orphan diseases accounted for 1.7% of the entire payer population’s total healthcare costs, which may be viewed as a high-end estimate since not all claims for patients with the orphan disease may be attributable to or associated with the orphan disease. 80% of these costs came from the top 12 orphan diseases.

When expanding the analysis to anticipate the costs of the durable gene and cell therapy, the analysis used a simplifying assumption for the percentage of patients that progress beyond early-line treatment regimens to require the durable gene and cell therapy (7.5%, 15% or 30%). It was further assumed that only 50% of those patients were clinically eligible for the durable gene and cell therapy, and three cost levels for the complete durable gene and cell or cell treatment regimen were assumed for illustration purposes only, as shown in Table 1.


Adding existing and new therapy costs together leads to total costs that are likely in the range of 1-5% of total healthcare costs, which is comparable to the range of existing carve-outs. At a high level, an orphan disease carve out for the gene and cell therapy market appears to have sufficient scale based on existing carve outs in other areas.

[1] Substance Abuse and Mental Health Services Administration. Projections of National Expenditures for Treatment of Mental and Substance Use Disorders, 2010–2020. HHS Publication No. SMA-14-4883. Rockville, MD: Substance Abuse and Mental Health Services Administration, 2014.

[2] Hanson S., Bentley T. 2014 U.S. organ and tissue transplant cost estimates and discussion. Milliman, Inc. Published December 30, 2014.


lorem ipsum