CMS proposes value-based payment on prescription drugs
CMS has proposed a new rule that aims to enable value-based purchasing agreements across states with drug companies to bring down Medicaid drug prices. CMS Administrator Seema Verma laid out the proposal, which she called an “overhaul of Medicaid regulations,” in a blog post in Health Affairs.
States will have more flexibility to negotiate with drugmakers for certain prescription medicines, according to CMS. According to Verma, “value-based payment for prescription drugs is still in its infancy.” And the new proposal would tie outcomes to payments, potentially leading to alternative such as prior authorization or step therapy, which requires other, cheaper alternative treatments to be attempted before more expensive therapies.
“CMS’s proposed rule to support value-based purchasing for prescription drugs aims to modernize CMS regulations, promote competition based on outcomes, and spur the development of arrangements that demand value from manufacturers in exchange for payment,” Verma wrote.
In particular, the proposal addresses new gene therapies, which are some of the most expensive treatments today. Though these types of treatments are innovative, even private insurers have had to find new ways to pay for them.
“The list prices of gene therapies and other groundbreaking medicines can approach or even exceed a million dollars for a course of therapy, creating challenges for payers and patients,” Verma wrote. … “Given the advent of these new medicines, the nation’s payment systems need to evolve to reward value.”
Currently, the Medicaid program’s reporting requirements for “Medicaid Best Price,” in which manufacturers must report their drug’s best price or lowest net price to CMS, is a “barrier” to developing new payment models, according to Verma. Drugmakers pay Medicaid a 23.1% rebate on a drug’s average manufacturer price if the rebate amount is lower than or equal to the best rice.
A value-based payment arrangement means that expensive, one-time therapies that don’t work as intended won’t come with a cost. But the best price rule means Medicaid is currently paying for those therapies anyway. A handful of states have already asked CMS to approve proposals for value-based arrangements for prescription drugs in the form of supplemental rebates, which states receive in addition to required rebates from manufacturers that participate in Medicaid.
The proposal allows commercial plans to negotiate based on value and also extends those discounts to Medicaid.
See the proposed rule here.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."