When Should a Biotech Plan for Reimbursement? Earlier Than You Think
A biotech should start planning for reimbursement early in development, and build it into the target product profile rather than leave it for a partner or an acquirer. That was the advice of David Crean, an investment banker and founder of Cardiff Advisory, on Open Door Salon. Phil Vanek, chief commercialization officer of the International Society for Cell & Gene Therapy (ISCT), added that a launch strategy has to account for payment systems that differ from country to country.
Where does reimbursement rank among a biotech's risks?
Second, behind capital and ahead of manufacturing cost. Lori Ellis asked when a company should arrive with a reimbursement plan, and Crean ranked the three pressures:
Capital first, reimbursement second and manufacturing costs third.
Capital comes first because without it the program stops before the other two are tested. Reimbursement comes before manufacturing cost because, in his words, you cannot manufacture your way out of a product that no one is going to reimburse. These therapies, he noted, are not cash pay.
What is the four-legged stool?
It is Crean's description of what a therapy needs to succeed, and it adds two legs to the ones he was taught first:
I was always taught, hey, it's about safety and efficacy ... and it's really missing the point. It's actually a four-legged stool. Safety, efficacy, who's going to pay for it, and what price?
He pointed to a structural problem with one-time therapies in particular:
These one-time therapies create a real mismatch when the cost is incurred and the health care system needs to realize the benefit and that's a problem that's not particularly solved very well.
We looked at the payer side of that mismatch in why gene therapy reimbursement takes so long.
Why is reimbursement for advanced therapies hard in the US?
Because the rules of payment matter as much as the willingness to pay. Vanek said US price expectations tend to anchor on the Centers for Medicare & Medicaid Services (CMS) and Medicare. The companies that launched the first advanced therapies, he said, did well to find guidance on navigating that system. He described where the difficulty sits:
I think the bigger challenge is the willingness to pay but also the rules of how they will reimburse.
A CAR-T or a gene therapy for sickle cell disease or beta thalassemia is often paid for by the hospital first and reimbursed later, after pre-approvals and negotiation with the insurer. That timing puts significant cost pressure on hospitals. Medicare is adding obligations after the procedure too: the CMS TEAM model makes selected hospitals accountable for a patient's care in the 30 days after surgery.
How does the UK approach pricing differently?
With a more structured, analytic process. Vanek pointed to the UK as a system that handles this well:
They take the scientific approach and then they bring it to the reimbursers as this would be our recommendation for a payment level or a pricing level.
He also cited the health technology assessments used across Europe as tools for establishing a price that makes sense for developers, patients and providers. For a global company, he said, the choice of launch markets is part of the payment problem:
Figuring out what your launch strategy is, what geographies you will ultimately launch your product into, adds a confounding effect because not all systems will be able to afford a high price.
Which indications can carry a high price?
Ones where conventional treatment falls short and the therapy is durable. Vanek said the promise investors underwrite is unmet medical need and durability, a curative or nearly curative effect, and he was clear about where a costly therapy will struggle:
You're not going to win with a very costly therapeutic in an indication that's already well served by conventional methods.
He tied the investment case to evidence that takes time to build: real-world evidence, consistency and supply chains. In his phrase, there is a lot of complexity, so the juice has to be worth the squeeze.
What does the aducanumab story teach founders about payers?
That clinical results alone do not secure payment. Crean described what he calls a Harvard Business School case study he returns to: Biogen's aducanumab for early Alzheimer's disease. He said it had safety and efficacy but failed on reimbursement in the US and abroad. Biogen announced in January 2024 that it would discontinue Aduhelm, citing a reprioritization of its Alzheimer's resources. His conclusion for investors:
It goes well beyond just from a safety and efficacy standpoint, that it's showing competitive differentiation versus standard of care and that you really need to understand that other dynamic, the payer dynamics.
Crean's view on how a board decides which asset to fund, when it cannot fund everything, is covered in how biotech companies prioritize their pipeline.
Can an early-stage company leave reimbursement to a partner?
Crean argued it cannot. He acknowledged that payer research is expensive and that early companies would rather spend on research and development, but said the thinking has to start well before a deal:
But at some point you have to turn that light switch on to have them start thinking about it. You can't just say, oh, I'm going to partner this out, I'll let my partner deal with it.
His answer is to make it part of the target product profile, covered in what a target product profile is. The manufacturing plan belongs beside it, as discussed in what CMC means in cell and gene therapy. Finding that partner takes time as well. In how long biotech M&A deals take, Crean explains why a deal announced at the J.P. Morgan Healthcare Conference usually began months earlier.
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This post is drawn from the recorded, on-the-record conversation between Lori Ellis, Phil Vanek and David Crean on Open Door Salon; quotes are lightly edited for clarity, and the full episode is the record.