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CMS approved its plan to make it easier for private insurers, state Medicaid programs and prescription drug manufacturers to create value-based payment arrangements tied to clinical outcomes.
The agency overhauled regulations that get in the way of those arrangements, with the goal of expanding access to new, high-cost drugs, including gene therapies. The rule allows private insurers to create value-based arrangements with pharmaceutical companies and drugmakers to report multiple best prices for specific value-based arrangements. Insurers and drugmakers can create bundled contracts, among other changes.
“Medicaid’s outdated rules have consistently stymied the ability of payers and manufacturers to negotiate drug reimbursement methods based on the actual outcome of the treatment. A new generation of approaches to payment methods is needed to allow the market the room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable and continue to receive their statutorily required discounts,” CMS Administrator Seema Verma said in a statement.
CMS said the changes would make drugmakers more willing to negotiate with payers, including Medicaid.
“Payers will be able to negotiate prices with manufacturers for these genetic-based treatments based upon outcomes and evidence-based measures such as reduced hospitalizations, lab visits and physician office visits, ensuring that if such measures fail to support the value of a drug, the payer is not held accountable for the full price,” CMS said in a statement.
The changes take effect in January 2022. Regulators expect new value-based payment arrangements could lower federal and state Medicaid spending by $228 million through 2025.
According to CMS, the rule makes several other changes to reduce opioid misuse and abuse, lower Medicaid spending on older drugs and ensure cost-sharing assistance benefits patients instead of insurers or pharmacy benefit managers, among other things. The clarified definition for line extension drugs could save $2.3 billion through 2025 thanks to additional manufacturer rebates to states, the agency said. CMS excluded so-called “combination drugs,” a drug that is a combination of two or more drugs or a drug that is a combination of a drug and a device, from the line extension definition in its final rule.
“The new rules make clear that if the discounts are not benefiting the patient and instead lower the costs for health insurance companies and their pharmacy benefit managers, they must be counted in drug manufacturers’ reporting to CMS for Medicaid rebate purposes,” CMS said in a statement.
The agency delayed the start of the cost-sharing assistance policies until Jan. 1, 2023, to give drugmakers and payers time to prepare.
“If this policy were to be implemented, drug manufacturers would be less willing to offer copay assistance to patients in the private market, all due to a Medicaid rule and damaging actions that are being taken by insurers and their PBMs,” Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, said in a statement.
Hospitals, insurers, drug companies, medical schools and Medicaid directors argued this summer that CMS rushed its plan to help state Medicaid programs, health plans and drugmakers create value-based arrangements for prescription drugs. They warned they needed more time to understand CMS’ plan since the agency didn’t look into how it would affect states and the healthcare industry or say how it would ensure the rule would work as intended. Drugmakers were concerned the regulation could lower the price they are allowed to charge hospitals in the 340B drug discount program. Others worried it would create mind-boggling administrative problems and costs for providers, states and insurers.