CMS arms Medicaid with a new drug payment program

Value-based purchasing elevates state contracts for manufacturers

Photo by Cytonn Photography on Unsplash

On December 22, 2020, CMS issued a final rule entitled “Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements.”

This final rule further arms state Medicaid programs — which are partly endowed by CMS through federal matching funds — to modernize their prescription drug purchasing and give states, Medicaid MCOs, and manufacturers more flexibility to enter into VBP arrangements for prescription drugs.

The rule allows Medicaid payers to experiment with VBP approaches to better manage the proliferation of new therapies coming to market by:

1. Negotiating drug reimbursement methods based on the real outcomes of treatment
2. Considering individual patient-level data, like genomic data for targeted treatments, with high upfront costs
3. Including evidence-based measures and cost offsets, such as reduced hospitalizations, lab visits, and physician office visits

The inclusion of these metrics ensures that payers are not held accountable for the full price of the product if such measures fail to support the value of a drug.

CMS states that the success of the VBP arrangements for the $67.6B Medicaid drug program is highly dependent on the interest of states and manufacturers. As of 2020, there are only 9 such state arrangements, and CMS does not have data or estimates on the impact of these VBP arrangements. However, CMS predicts a minimum a $40M savings in the first year of VBP arrangements for 50% of the top 100 drugs that account for $1.1B in spending.

Other provisions in the final rule impact manufacturers, including cost-sharing programs and pass-through efforts. We expect to see spillover into other health plan types as the new program progresses.

How can we help find your way in to new Medicaid drug programs through targeted data analytics and product value optimization?

Source: https://www.cms.gov/files/document/122120-cms-2482-f-medicaid-dur-ofr-master-webposting-508.pdf