U.S. Medicare sets outpatient rate for Yescarta reimbursement

(This April 5 story corrects to show that co-payment is capped)

FILE PHOTO - An empty hallway is pictured in a hospital in Philadelphia , Pennsylvania, U.S. May 30, 2017. Picture taken May 30, 2017. REUTERS/Carlo Allegri

(Reuters) - Medicare, the U.S. government healthcare program for the elderly and disabled, will pay hospitals close to its standard mark-up rate for administering cell therapy Yescarta for cancer outpatients, according to the Centers for Medicare & Medicaid Services (CMS).

For inpatients, additional Medicare reimbursement has been requested by Yescarta maker Gilead Sciences Inc and Novartis AG, which makes a similar therapy called Kymriah. Both cell therapies were approved last year by the Food and Drug Administration and are being used by growing number of major cancer centers.

CMS has not made a decision on the requests, it said in an emailed statement on Thursday.

As of April 1, CMS said it would pay $395,380 to health providers who use Yescarta, which has a list price of $373,000, on an outpatient basis. The agency also set the co-payment for Yescarta at $79,076, but said patient costs are capped at the annual inpatient hospital deductible of $1,340 in 2018.

For Kymriah, with a list price of $475,000, the Medicare payment rate as of April 1 is $500,839.

Reimbursement has been a major issue for investors because the high costs of the so-called CAR-T therapies could affect usage, especially for the Medicare population.

The therapies involve drawing white blood cells from a patient, processing them in the lab to target cancer, and infusing the cells back into the patient.

Most patients are first admitted to the hospital because the treatments may have life-threatening side effects, and inpatient services can bring the total cost to as much as $1.5 million.

For outpatient drugs, Medicare typically reimburses providers at the net price (after discounts and rebates) plus 6 percent. New drugs are paid at the manufacturer’s wholesale acquisition cost plus 6 percent for the first three quarters.

Yescarta is approved for patients with a type of lymphoma who have failed to respond to other therapies, while Kymriah is approved for children and young adults with acute lymphoblastic leukemia that has not responded to other treatments.

Novartis has also filed for use of Kymriah in lymphoma patients and a decision from the FDA is expected by mid-year.

Reporting by Deena Beasley; Editing by Richard Chang