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What Actuaries Need to Know About Emerging Therapies

What Actuaries Need to Know About Emerging Therapies

By Ankit Nanda

As cell and gene therapies evolve, actuaries must adapt models to account for evolving regulations, uncertain clinical outcomes, and changing financial frameworks.

The U.S. regulatory environment for cell and gene therapies is evolving, although it is arguable whether its pace of evolution is at par with the speed of scientific and technological innovation in the field.
In recent years, the Food and Drug Administration (FDA) has sharpened its focus on areas such as facilitating treatments for rare diseases, modernizing manufacturing, advancing regulatory science, and streamlining development pathways.[1] The pace of innovation continues: In 2024, the FDA approved eight novel Cell and Gene Therapies (CGTs) and at least six new indications for existing products.[2] Recent 2025 approvals include Waskyra, the first gene therapy for the Wiskott-Aldrich Syndrome—notably from a nonprofit sponsor.[3]

These developments come as many FDA watchers note a trend toward approving therapies based on limited data around their safety and efficacy.[4] The agency maintains that it is simply responding to a less-than-ideal market environment where patients suffering from rare diseases often face a lack of choices. According to the FDA, risk-benefit assessments for these transformative therapies are anything but binary and must allow room for interpretation within the context of the disease’s severity and the lack of existing alternatives.[5]

Meanwhile, an adjacent regulatory development with far-reaching consequences for health care in the U.S. involves the federal government’s foray into negotiating—and effectively setting—Medicare drug prices for a set of high-value drugs under the Inflation Reduction Act (IRA).[6] The pharmaceutical industry has unsuccessfully contested this as an overreach of government power.[7]

Cell and gene therapies will eventually come under the Medicare drug price negotiation provisions of the IRA, though the timeline is longer than some observers initially expected. Under the law, biologics can only be selected for Medicare price negotiation after 13 years on the market—meaning most currently approved CGTs will not face negotiation until the early-to-mid-2030s.[8] Moreover, current cell therapies such as CAR-T often do not meet the criteria for negotiation because they are typically administered in inpatient settings or serve too few patients to meet Medicare spending thresholds.[9]

The more immediate policy lever is the Centers for Medicare & Medicaid Services’ (CMS) Cell and Gene Therapy Access Model, a voluntary initiative that would allow state Medicaid agencies to participate in multi-state outcomes-based agreements with manufacturers. Originally planned for 2026, the CMS accelerated its timeline and launched the model to 2025 in response to state demand.[10] However, the current administration rescinded the Biden-era executive order that had directed the Department of Health and Human Services (HHS) to develop this and related drug pricing models, leaving the program’s future uncertain.[11]

Critically, U.S. policy has periodically explored international reference pricing approaches—including “most-favored-nation” proposals at the executive level.[12] Actuaries should monitor both the IRA’s long-term trajectory for biologics and the near-term evolution of Medicaid-focused CGT access models, as these developments will shape the financial environment for gene therapy coverage over the coming decade.

Perhaps the most consequential regulatory development in recent months is the FDA’s February 2026 draft guidance establishing a “plausible mechanism pathway” for individualized gene editing therapies. Previewed by FDA Commissioner Marty Makary and Center for Biologics Evaluation and Research (CBER) Director Vinay Prasad in a November 2025 New England Journal of Medicine article, the new framework shifts the regulatory paradigm from approving each individual therapy to clearing therapeutic platforms—enabling approvals for bespoke treatments targeting individual genetic mutations based on demonstrated biological plausibility rather than traditional large-scale randomized trials.[13]

For actuaries, this represents a structural change in pipeline modeling: Platform-level approvals could dramatically accelerate the volume of approved therapies, moving from a predictable cadence of individual biologics license application decisions to a potentially high-frequency stream of bespoke treatments that are harder to forecast using traditional incidence-based utilization models. The “plausible mechanism” standard is also inherently less defined than traditional efficacy endpoints, which widens the confidence intervals on both utilization projections and outcome durability assumptions.
Taken together, evolving approval standards, new platform-based regulatory pathways, and government price-setting are shaping a complex landscape where traditional actuarial tools may no longer suffice.
The prospect of government price-setting—coupled with the inherent uncertainty of long-term clinical outcomes—poses unprecedented challenges. Meeting these challenges requires moving beyond traditional models toward innovative actuarial solutions in pricing, reinsurance, and outcome-based contracts. Potential approaches include moving from fixed-­assumption drug cost models (e.g., “70% success rate”) to probabilistic approaches such as scenario modeling, stochastic simulations, decision-tree analyses for confirmatory trial failures, and longevity-style models that help understand therapy durability.[14]

Regulatory Takeaways from the Elevidys Case

The tensions inherent in this evolving regulatory landscape are not merely theoretical; they are vividly illustrated by the controversial approval and subsequent expansion of the first gene therapy for Duchenne muscular dystrophy (DMD), Elevidys.[15] DMD is classified as a rare disorder by the World Health Organization.[16] Affecting roughly one in 3,500 to 5,000 live male births in the United States, it is characterized by a gradual loss (dystrophy) of muscle strength, ultimately rendering the patient immobile and prone to cardiac and respiratory failure. Since the condition was first described in 1861 by a French neurologist, no drug had been found to alter its general trajectory.[17]

In 2023, the FDA granted accelerated approval to Elevidys for a small subset of the potential patient population (4- and 5-year-olds) suffering from DMD, based on preliminary evidence of biomarker expression despite the therapy missing its primary clinical trial endpoint.[18] The drug subsequently failed to meet its primary endpoint in a larger phase 3 trial completed in 2024[19], although company executives argued that it achieved its secondary and exploratory endpoints. The FDA nonetheless broadened the approval to include all patients over age 4.[20]

The CBER approved the decision despite recommendations from its scientific staff,[21] raising questions about the agency’s standard decision-making process.

However, the Elevidys story took a dramatic turn in 2025. In mid-2025, two non-ambulatory patients died of acute liver failure following Elevidys infusion.[22] The FDA investigated, and Elevidys developer Sarepta Therapeutics voluntarily paused all shipments in July 2025.[23] Within a week, the FDA permitted shipments to resume—but only for ambulatory patients.[24] By November 2025, the FDA had added a boxed warning for acute serious liver injury and acute liver failure, and formally revised the indication to exclude non-ambulatory patients entirely.[25]

The commercial impact was immediate: Elevidys sales fell from $282 million in Q2 2025 to $131.5 million in Q3, and Q4 sales of approximately $110 million missed analyst expectations.[26] Sarepta has since initiated a clinical study evaluating an enhanced immunosuppressive regimen (using sirolimus) in hopes of restoring access to non-ambulatory patients, with results expected in late 2026.[27]

The accelerated approval program is considered a noble, effective, and arguably necessary tool in the FDA’s toolbox in its effort to bring quickly to market drugs with the potential to address urgent, unmet patient needs, based on science that is still evolving.[28] It allows companies to demonstrate a treatment’s impact on a biomarker that serves as a reliable proxy for clinical benefit. Conditional approval follows, pending results from larger confirmatory trials. Its origin lies in the 1980s HIV/AIDS epidemic, when patient advocacy groups like ACT UP pressured FDA to demand faster drug approvals.[29] This historical pressure is compounded by a practical reality: Late-stage clinical trials are prohibitively expensive.

Consequently, results that seem imperfect in a purely scientific light can appear “good enough” from a practical, life-saving perspective. Confronted with cold data, regulators may appear objective but often respond to the pressures of popular opinion and medical urgency.[30]

For actuaries, the Elevidys case illustrates not only how sudden label expansions can affect utilization forecasts, but also how quickly those expansions can reverse when post-marketing safety signals emerge. The 2025 developments underscore the need for dynamic reserving approaches that can accommodate rapid changes in approved indications. Pricing assumptions can no longer rely on fixed expectations but must be scenario-based, with explicit contingencies for label restrictions, boxed warnings, and temporary market withdrawals. European precedents in Italy and Germany with “pay-for-performance” (P4P) contracts provide pathways to mitigate financial risks—with reimbursement directly tied to clinical outcomes.[31] Reinsurers and stop-loss carriers should consider whether their contracts include provisions for indication changes that materially affect the insured population.

The Market Challenge

When a drug finally reaches the market, it may feel like a moment for cautious celebration. With the scientific frontier crossed, investors might expect windfall returns for their patience. Wall Street, however, is less convinced. Case studies abound of biotech firms that brought forward innovative therapies for unmet needs, only to see their stock prices stagnate—or worse, fall—and their futures clouded with uncertainty.[32]

Despite new financing models, revenue—still the simplest measure of success—is a function of quantity and price. Or, as an actuary would put it: utilization times severity. Yet, limited uptake can prevent even the most transformative therapy from reaching its full impact.

Beyond pricing, manufacturing continues to remain a major barrier. Viral vector production for many therapies is highly inefficient, with downstream recovery often as low as 25%–30%, and in some clinical trials as little as 2% of manufactured drug substance reaching patients.[33] Analysts estimate that a 10- to 100-fold improvement in manufacturing productivity is required to make gene therapies broadly accessible.

Recognizing these barriers, the FDA in January 2026 announced a more flexible approach to chemistry, manufacturing, and control (CMC) oversight for cell and gene therapies. Under the new framework, manufacturers are no longer required to meet current good manufacturing practice (cGMP) standards before Phase 2 or 3 trials, and the agency will permit flexibility in commercial specifications for small patient populations where limited manufacturing lots are available. Process validation flexibility now includes concurrent release of qualification lots without mandating the traditional three-lot requirement.[34] While these reforms may lower production barriers over time and potentially accelerate time-to-market for pipeline therapies, their near-term effect on list prices remains uncertain given the monopoly positions many of these therapies occupy. For actuaries modeling high-cost claim frequency, this development suggests that manufacturing-driven constraints on utilization may ease sooner than previously assumed.

Why limited uptake? After all, who would not prefer a one-and-done treatment to the agony of repeated hospitalizations? Surely the $1 billion-plus spent on drug development relied on accurate uptake forecasts as the most critical assumption. The science behind these therapies is still emerging, and with it comes risk: A treatment may misfire, irreparably damaging human DNA and precluding other, potentially more promising candidates.[35] For reasons of both safety and cost, these therapies are not considered first-line treatments.

Meanwhile, pricing missteps can alienate governments, regardless of a drug’s potential. Bluebird Bio’s Zynteglo was withdrawn from Europe after failed pricing negotiations,[36] and its Skysona was also pulled from the EU market.[37] At the same time, Hemgenix® launched at $3.5 million per dose to treat Hemophilia B, justified by its potential to replace $20 million in lifetime care.[38]

Finally, insurance carriers and government agencies may balk at covering these drugs except under the strictest conditions.[39] Taken together, FDA approval resembles less a decisive victory than a temporary, conditional reprieve. This leads to the question posed in a recent Goldman Sachs biotech report: Is curing patients with expensive, one-off therapies a sustainable business model?[40]

The Commercial Reckoning of 2025

The Goldman Sachs question proved prescient. By early 2025, several high-profile commercial failures had crystallized the sector’s challenges into stark financial realities.

Bluebird Bio—once valued at over $10 billion and widely considered a pioneer of modern gene therapy—was acquired in early 2025 by private equity firms Carlyle Group and SK Capital Partners for less than $30 million.[41] Despite having three FDA-approved gene therapies (Zynteglo, Lyfgenia, and Skysona), Bluebird’s commercial uptake had been devastatingly slow: By late 2024, fewer than 60 patients had started treatment across all three products.[42] Real-world data presented at the 2025 American Society of Hematology meeting revealed that of 312 patients enrolled for Zynteglo or Lyfgenia treatment, only 77 (25%) had actually been infused, with an average time from enrollment to stem cell collection of over five months.[43]

Bluebird was not alone. Pfizer discontinued commercialization of its hemophilia B gene therapy Beqvez in February 2025—less than a year after FDA approval—after extremely limited post-launch uptake.[44] The $3.5 million therapy, priced identically to the competing Hemgenix, found no takers among patients or their physicians.

The retreat extended beyond individual companies. Major pharmaceutical firms that had once positioned gene therapy as a portfolio cornerstone began exiting the space: AstraZeneca sold its preclinical gene therapy portfolio in 2023; Roche disbanded the Spark Therapeutics brand in early 2025; Takeda announced discontinuation of its cell therapy efforts in October 2025.[45] Even Gilead Sciences, among the most commercially successful CAR-T developers, saw its cell therapy franchise sales decline 11% year-over-year in Q3 2025.[45]

For actuaries, these developments have profound implications. First, they suggest that utilization assumptions based on eligible patient populations may systematically overstate near-term demand—the “build it and they will come” thesis has not materialized. Second, they raise counterparty risk concerns for outcome-based agreements: Manufacturers exiting the market may be unable to fulfill long-term payment commitments. Third, they underscore the importance of manufacturing and operational constraints—not just pricing—in determining patient access.

Key Takeaways for Actuaries

As cell and gene therapies reshape the health care landscape, actuaries face new challenges in modeling risk, pricing, and access.

  • Evolving Approvals: Accelerated Food and Drug Administration (FDA) pathways and label expansions can quickly shift utilization and reserve needs. But as the 2025 Elevidys experience shows, safety signals can just as quickly narrow indications. Models should incorporate scenarios for both expansion and contraction of approved populations.
  • Dynamic Pricing: Fixed assumptions are risky; scenario modeling and outcome-based reimbursement can help manage financial exposure. The 13-year biologics exclusivity under the IRA provides some near-term pricing stability, but Medicaid outcomes-based models may reshape expectations sooner.
  • Manufacturing Limits: Low production efficiency and high costs can restrict patient access and revenue. Real-world data shows only 25% of enrolled patients progressing to infusion—operational constraints, not just pricing, determine uptake.
  • Long-Term Uncertainty: Therapies may lose effectiveness or cause delayed side effects, requiring long-tail reserving and stochastic simulations. The FDA currently recommends up to 15 years of post-treatment follow-up for certain gene therapies, though this may evolve.
  • Commercial Viability Risk: The 2025 exits of Bluebird Bio, Pfizer (from Beqvez), and other major players raise counterparty risk concerns for outcome-based agreements. Actuaries should assess manufacturer financial stability when structuring long-term payment arrangements.
  • Data Gaps: Limited historical data demand probabilistic approaches and longevity-style models to forecast outcomes decades ahead.

The Hope Dilemma: A Case Study in Adverse Selection and Misaligned Incentives

What options does a patient like Hope have when she faces a debilitating genetic disease and a miraculous but unaffordable cure? If able, Hope could consider finding employment with an employer whose drug formulary includes coverage for the therapy. Unlike other benefits (e.g., disability insurance) that have long waiting periods to prevent adverse selection, health benefits typically have a minimal waiting period of one month or less.[46] To make herself a more attractive candidate, she could even offer to join at a significant discount to her market-rate salary. It is highly unusual—and a public relations disaster—for an employer to deny specific drug coverage to certain classes of employees.

After receiving the one-time therapy in her first year of employment, Hope could then switch employers the next year to command her full market salary. For her, and most employees, the financial math of this arrangement is rational and compelling. This scenario presents a severe case of adverse selection and illustrates the acute problem plaguing risk designers structuring financial arrangements for these drugs: The sky-high costs are borne in the short term by a single entity, while the long-term benefits are enjoyed by others.[47]

This misalignment of cost and benefit is a fundamental barrier to sustainable financing. Companies covering these therapies could become magnets for high-cost patients, driving premiums into a “death spiral.” Consequently, efforts to form large employer and carrier risk pools, using subscription models and per member per month (PMPM) fees, are gaining traction.[14] Public payers like Medicaid and Medicare, meanwhile, must evaluate each therapy on a case-by-case basis.[39]

CRISPR: The Vanguard of Scientific and Ethical Disruption

CRISPR/Cas9, a flexible and efficient, Nobel Prize-winning gene editing platform, illustrates the balance between rapid scientific advancement and regulatory oversight.[48] Based on a bacterial immune system, it uses a protein that can cut DNA and a short strand of programmed RNA that identifies the desired location of the cutting. Discovered in 2012, the technology moved rapidly from lab to market, with the first therapy, Casgevy, approved by the FDA in November 2023 for sickle cell disease and beta thalassemia at a price tag of $2.2 million.[49] In 2018, Chinese biophysicist He Jiankui used CRISPR to edit the genes of two newborn girls to resist HIV, an action that prompted global condemnation and a prison sentence.[50]

Real-world uptake data for CRISPR-based therapies has tempered initial expectations. Public reporting suggested that Casgevy saw fewer than approximately 30 patients commercially treated in its first 18 months on the market.[45] The complex treatment process—requiring stem cell collection, genetic modification, conditioning chemotherapy, and extended monitoring—creates operational bottlenecks that limit throughput regardless of demand. Actuaries modeling CGT utilization should incorporate these operational constraints alongside clinical and financial factors.

For actuaries, CRISPR presents unique modeling challenges. Its efficiency and flexibility imply a rapid succession of therapies across multiple conditions. This necessitates stop-loss coverage and pooled subscription models to distribute risk, while also prompting underwriters to refine definitions of “medical necessity” to prevent performance-enhancement misuse. Long-tail reserving becomes critical, as therapies may show waning effectiveness or delayed side effects. FDA guidance has historically recommended up to 15 years of post-treatment follow-up for certain gene therapies, though these expectations may evolve over time.[2] With no historical data, stochastic modeling and longevity frameworks must simulate outcomes decades ahead.

Managing Costs

As these remarkable therapies move from miracle to medicine, the central challenge for the health care ecosystem is to build financial and ethical frameworks robust enough to support the cost of hope. If actuaries can develop structures that distribute costs across time, stakeholders, and uncertainties, they will not only help preserve the solvency of insurers and employers but also extend the access to cures for patients who might otherwise be excluded. In the end, the actuarial role is clear: to translate the uncertainty of discovery into sustainable access.[51]  

ANKIT NANDA, MAAA, FSA, FCA, is manager of Actuarial Advisory Services with Optum Global Solutions and based out of Gurugram, India. He serves on multiple Academy committees and IFoA working parties and is a member of the SOA India committee.

References

  1. FDA Strategic Priorities 2022–2025; U.S. Food and Drug Administration (FDA); 2022.
  2. Cell & Gene Therapies: Will 2025 Represent A Continuation of FDA’s 2024 Developments?; Cell and Gene; January 2025.
  3. FDA Approves First Gene Therapy Treatment for Wiskott-Aldrich Syndrome; FDA; Dec. 9, 2025.
  4. Trends in FDA Approval of Cell and Gene Therapies; JAMA; April 2023.
  5. Risk-Benefit Perspectives in Rare Disease Approvals; New England Journal of Medicine; 2022.
  6. The Inflation Reduction Act: Drug Pricing Reforms; Health Affairs; Aug. 16, 2022.
  7. Pharma Industry Sues to Block Medicare Price Negotiation; The New York Times; July 11, 2023.
  8. The Inflation Reduction Act’s Potential Impact on Cell Therapies; Guidehouse; 2024.
  9. Ibid.
  10. More Drug Cost Initiatives: CMS Updates Drug Pricing Models for Cell and Gene Therapies; Sidley Austin; November 2025.
  11. Inflation Reduction Act Continues to Reduce High Medicare Drug Prices as New Administration Rolls Back Other Efforts; Center for Medicare Advocacy; Jan. 23, 2025.
  12. Executive Order on Most Favored Nation Drug Pricing; White House; September 2020.
  13. Makary M, Prasad V. A New Pathway for Individualized Genetic Medicines; New England Journal of Medicine; November 2025. See also: FDA Unveils Rules for Bespoke Gene Therapies, Predicting Flood of Rare Disease Applications; STAT News; Feb. 23, 2026.
  14. Risk Corridors and Innovative Insurance Models for Gene Therapies; SOA Health Section Newsletter; May 2024.
  15. FDA Approves First Gene Therapy for Duchenne Muscular Dystrophy; FDA; June 22, 2023.
  16. Rare Disease Facts; World Health Organization; 2024.
  17. History of Duchenne Muscular Dystrophy; Orphanet J Rare Diseases; 2019.
  18. Elevidys Phase II Trial (NCT03375164); ClinicalTrials.gov; accessed 2025.
  19. Elevidys Phase III Trial (NCT04655408); ClinicalTrials.gov; 2024.
  20. FDA Expands Approval of Gene Therapy Elevidys; FDA; June 20, 2024.
  21. FDA’s Internal Debate over Elevidys Approval; STAT News; July 2024.
  22. FDA Investigating Deaths Due to Acute Liver Failure in Non-ambulatory Duchenne Muscular Dystrophy Patients Following ELEVIDYS; FDA; June 24, 2025.
  23. Sarepta Therapeutics Announces Voluntary Pause of ELEVIDYS Shipments in the U.S.; Sarepta Press Release; July 21, 2025.
  24. FDA Informs Sarepta That It Recommends That Sarepta Remove Its Pause and Resume Shipments of ELEVIDYS for Ambulatory Individuals; Sarepta Press Release; July 28, 2025.
  25. FDA Takes Action on New Boxed Warning for Acute Serious Liver Injury and Acute Liver Failure Following Treatment with Elevidys; FDA; Nov. 14, 2025.
  26. Sarepta falls after gene therapy Elevidys misses estimates; The Boston Globe; Jan. 12, 2026.
  27. Sarepta gets FDA’s go-ahead to study immunosuppressive Elevidys regimen; Fierce Pharma; Nov. 25, 2025.
  28. Accelerated Approval Program; FDA; 2024.
  29. ACT UP and the Early History of the FDA’s Accelerated Approval Pathway;The Atlantic; June 2, 2017.
  30. Surrogate Endpoints in Drug Approvals; NEJM; 2022.
  31. Outcome-Based Contracts in Europe; Health Policy; 2021.
  32. Commercial Realities of Gene Therapy Launches;Nature Biotechnology; October 2023.
  33. Manufacturing Bottlenecks in Gene Therapy; Molecular Therapy Methods & Clinical Development; 2022.
  34. Flexible Requirements for Cell and Gene Therapies to Advance Innovation; FDA; January 11, 2026. See also: FDA Outlines Flexible Approach to CMC Oversight for Cell and Gene Therapies; OncLive; January 2026.
  35. Risks of Gene Therapy Misfires; Science Translational Medicine; 2021.
  36. Bluebird Bio to Withdraw Zynteglo from Europe; Endpoints News; Aug. 18, 2021.
  37. Bluebird Bio Pulls Skysona from EU; Fierce Pharma; November 2021.
  38. Hemgenix: FDA Approval and Cost Justification; Reuters; November 2022.
  39. Medicare and Medicaid Coverage of Gene Therapies; Health Affairs; 2023.
  40. Biopharma Outlook 2024; Goldman Sachs Research; December 2023.
  41. Bluebird Bio’s cut-price sale highlights challenges for gene therapy field;Nature Reviews Drug Discovery; March 2025.
  42. 50 cell and gene therapy leaders to watch in 2026; Drug Discovery Trends; January 2026.
  43. Gene therapy in the real world: High priced, a long process and still relatively few patients; Managed Healthcare Executive; ASH 2025.
  44. StockWatch: Bluebird Bio Plunges on Buyout, as Gene Therapy’s Woes Grow; GEN; Feb. 24, 2025.
  45. Why Big Pharma is Retreating from Cell and Gene Therapy; Brain Trials Substack; Oct. 24, 2025.
  46. Employer Health Benefits 2023 Survey;KFF; 2023.
  47. Adverse Selection in Health Insurance;J Health Econ; 2020.
  48. CRISPR Technology Overview; Nature Rev Genet; 2017.
  49. FDA Approves First CRISPR-Based Therapy; FDA; Dec. 8, 2023.
  50. Chinese Scientist Who Edited Babies’ Genes Jailed; BBC News; Dec. 30, 2019.
  51. Financing Innovation in Cell and Gene Therapies; World Economic Forum; 2022.