Ann: Ryoncil Pricing Set and Available This Quarter, page-517

I can tell that understanding of the US healthcare/insurance system is low. One comment I see often relates to 'Mesoblast agreeing with insurance' on the price of the treatment. This isn't a thing.

Insurance in the US is regulated at the state level, and there are 50 states. There are more than 1000 health insurance companies in the USA. Even though a company might have the same name as another e.g. "Blue Cross", they are different because of the state regulations. Imagine if every drug/treatment manufacturer had to visit every insurer to negotiate how much each one would pay for a treatment. In the case of Ryoncil, Mesoblast would be negotiating with more insurance companies than treated patients in a year. That would be bonkers and would obviously waste a lot of time not just for Mesoblast in this instance but also for the insurance companies and more broadly for the system when all drugs are considered.

Instead, once a treatment is approved it is assigned a code and the manufacturer, or their rep/distributor sets the price known as the Wholesale Acquisition Cost (WAC). The companies might also establish a series of discounts, or rebates or other price reductions which leads to the Actual Acquisition Cost (AAC). A discount might be for prompt pay for example. Pay within 15 days and get 5% off type of deal for example. A rebate might be a similar reduction in WAC offered to people who set the treatment as standard of care, or for public (government) payers. There can be many. When you consider all the steps in the process of getting a treatment from manufacturing plant to the patient's body, there are multiple other costs added as more services are provided. The actual administration of Ryoncil would include the thawing and injection of the treatment. Those would be costs added and therefore not included in the WAC. There are before the approval for treatment, and costs for after approval for treatment. Generally speaking, costs related to the treatment are reimbursed by the insurance company and costs before any treatment are borne by the distributor.

With a system so complex, imagine if a company had to negotiate all of this.

The biggest step in the launch process is getting the insurance companies to add the 11-digit code for the treatment to their drug list. Some companies do not explicitly add a drug but instead add a class of treatment. Some use third parties to update their lists based on new approvals from the FDA. No insurance company can explicitly say they won't cover a particular treatment. In most cases there are multiple options for treating a patient's condition. An insurance company may say they will prefer a generic version of a treatment and say they will reimburse at the generic price. There is no such option with Ryoncil. It will be added to the list of all approved treatments. Insurance companies will not want doctors to treat patients with this expensive treatment with a real need, so they will require a doctor to get approval beforehand. This shouldn't be an issue, as the use case is very specific and there is no other treatment.

Any off-label use would need to be documented and would likely face some pushback, however. You could also expect to see some resistance for pediatric patients above 12 years old where Rux is approved. Even though Rux fails a lot in this group, being that it is cheaper, a doctor seeking to use Ryoncil before trying Rux would get pushback. Over time this will likely change if doctors show that application of Ryoncil before even trying Rux in this 12+ population will lead to a better or cheaper outcome for their patients and the system.

The key takeaway is that the price isn't individually negotiated, and while insurance companies won't want doctors using it willy nilly, they will approve payments when the treatment is used as approved by the FDA.