States Weigh Medicaid Risk as Cell and Gene Therapy Costs Rise

Cell and gene therapies promise transformative clinical breakthroughs, including curative potential for diseases once deemed untreatable, but for state Medicaid programs these therapies present unprecedented fiscal and operational challenges. More than 30 CGTs now appear on FDA’s list of approved products, with prices ranging from nearly $1 million to over $4 million per therapy, and the pipeline is accelerating with more than 4,000 gene therapies in development.

Medicaid programs are particularly exposed for three reasons. Medicaid enrollees are disproportionately likely to be eligible for CGTs given the program’s coverage of children with congenital or inherited conditions and adults with rare diseases, and about half of children with special health care needs are covered by Medicaid or CHIP. Medicaid and CHIP covered about 77.7 million people in June 2025, while the structure of Medicaid itself limits states’ ability to defer or distribute these costs over time because states are required to manage annual budget cycles and federal law requires states to cover nearly all FDA-approved drugs and therapies.

Most Medicaid agencies operate with lean staff and limited analytic infrastructure, making it difficult to design or manage the kinds of outcomes-based or risk-sharing arrangements that might be feasible in commercial markets. This difficulty has become particularly acute over the past year as states face substantial cuts to federal Medicaid funding alongside challenging new operational requirements.

The CMS’ Cell and Gene Therapy Access Model, announced in 2024, represents the first structured national framework for addressing these challenges. It allows the federal government to negotiate outcomes-based contracts with manufacturers on behalf of all participating states, rather than each state negotiating separately with manufacturers.

The model offers a foundation for more equitable access because it centralizes negotiations, leverages federal scale, and provides technical assistance to participating states. At the outset, the model only addresses therapies approved to treat sickle cell disease, and CMS has been clear that it plans to expand to other conditions but ultimately can only offer the model for a subset of FDA approved cell and gene therapies.

Additional solutions will be needed for therapies and conditions not addressed in the CMMI model. The CMMI model also does not optimize the provider network for rare or specialized procedures for covered therapies, and states or Medicaid managed care companies will need to focus on optimizing quality of care delivery by establishing criteria for network inclusion and contracting constructively to share clinical data.

As policymakers seek durable solutions, states have become policy laboratories, experimenting with financial and operational mechanisms to balance access and sustainability. A durable national strategy will require alignment across five domains: manufacturer negotiations, provider networks, clinical criteria, financing mechanisms, and data infrastructure.