OBJECTIVES: This paper tests the clinical and financial properties of a deferred payment model (DPM) in congestive heart failure (CHF) gene therapy relative to status quo payment. It focuses on the perspective of three stakeholder groups: payers, manufacturers and patients.

METHODS: We present an empirical analysis of longitudinal data for cardiovascular admissions and mortality, a Markov transition model for patient progression under different payment scenarios, and a discounted cashflow forecast model. The Markov transition model for patient progression calculates life-years gained and avoided cardiovascular admissions under status quo and deferred payment. We track more than 91,000 Medicare fee-for-service beneficiaries over a period of 5 years (2009-2014) using Medicare Provider and Analysis Review 5% data files. We assume a fixed annual budget constraint of $1 billion.

RESULTS: We find that DPM is associated with earlier treatment and a consequent improvement in clinical outcomes. A 25% down payment is associated with the highest relative improvement and reduces hospital admissions by over 26% and deaths by over 23%, both relative to status quo payment, while spending is held constant. We find that deferred payment results in limited financial gains for payers or manufacturers, primarily because of the small share of expected cost savings on the total cost of therapy. Our results are robust to changes in relative risk for cardiovascular admissions and a change in the cost of therapy.

CONCLUSIONS: DPM results in faster access to a CHF gene therapy and would thus reduce hospital admissions and mortality in contrast to status quo payment with the same budget constraint. Although financial benefits of DPM in a CHF gene therapy are limited, it is possible that deferred payment will show a greater promise for treatments with higher cost offsets, such as a potential cure of hemophilia.