Gene Therapies and Specialty Drugs: The New Frontier of Stop-Loss Risk

# Gene Therapies and Specialty Drugs: The New Frontier of Stop-Loss Risk

Specialty drug costs continue to outpace overall medical trend, creating significant challenges for stop-loss underwriting. But it's gene therapies—with single treatments exceeding $4 million—that are truly reshaping the market.

## The Specialty Drug Challenge

Therapies for oncology, autoimmune conditions, and metabolic disorders are driving sustained cost growth. [Milliman's 2024 pharmacy trend analysis](https://www.milliman.com/en/insight/2024-group-health-insurance-cost-benchmarks) highlights:

- Rising unit costs for existing therapies
- Introduction of novel high-cost treatments
- GLP-1 drugs for diabetes/weight management
- Oncology agents with expanding indications

## Gene Therapy: A New Risk Category

Gene therapies amplify the challenge exponentially. These treatments often involve a single administration with multi-million-dollar price tags:

| Therapy | Condition | Approximate Cost |
|---------|-----------|------------------|
| **Zolgensma** | Spinal muscular atrophy | >$2.125 million ([FDA-approved 2019](https://www.fda.gov/news-events/press-announcements/fda-approves-innovative-gene-therapy-treat-pediatric-patients-spinal-muscular-atrophy)) |
| **Lenmeldy** | Metachromatic leukodystrophy | ≈$4.25 million WAC ([FDA-approved March 2024](https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapy-children-metachromatic-leukodystrophy)) |

And the pipeline is growing rapidly—**over 4,000 new therapies** are in development (Emerging Therapy Solutions).

## Impact on Stop-Loss Underwriting

This creates enormous pressure on stop-loss premiums. Without a clear strategy, groups face:

- **Lasers** on gene therapy candidates at renewal
- **Skyrocketing rates** as carriers manage unpredictable risk
- **Coverage exclusions** for certain conditions
- **Premium volatility** year-over-year

## How Carriers Are Responding

Carriers are developing innovative solutions to spread risk and stabilize pricing:

### Embedded Programs (No Additional Cost)

**Companion Life** - CompanionCARE Gene Therapy Program:
- Covers FDA-approved gene therapies
- Eliminates new lasers for gene therapy candidates at renewal
- Provides access to negotiated centers of excellence

**Sun Life** - No New Laser Gene Therapy Enhancement:
- No new lasers tied to gene therapy drugs at renewal
- No increases specifically for gene therapy risk

**Crum & Forster**:
- Similar integrated protection within stop-loss rates

### Standalone Enhancements

**Anthem/Wellpoint**:
- Standalone solution at approximately **$3.50 PEPM**
- Offsets catastrophic drug costs

### Market Carve-Out Solutions
- Typically range from **$3–$8 PEPM**
- Vary by exclusions and pre-existing condition disclosures
- Integrated solutions generally preferred for simplicity

## Strategic Recommendations

1. **Evaluate carrier programs early** - Don't wait for renewal
2. **Understand coverage limits** - Including non-drug costs like inpatient care
3. **Disclose known risks** - Transparency helps pricing accuracy
4. **Compare embedded vs. standalone** - Consider total cost and alignment
5. **Plan for the pipeline** - More therapies are coming

## Key Takeaways

- Specialty drugs continue to outpace medical trend
- Gene therapies introduce multi-million-dollar single-claim risk
- Over 4,000 new therapies are in development
- Carriers offer embedded and standalone protection options
- Proactive planning is essential for sustainable pricing

*This article is part of our series on stop-loss underwriting. For a comprehensive overview, see our whitepaper: [Stop Loss Underwriting: A Deep Dive](/resources/whitepapers/stop-loss-underwriting-deep-dive).*