CMS Proposed Rule Supports Value-Based Arrangements, Innovative Therapies

The Centers for Medicare & Medicaid Services (CMS) proposed new rules that are intended to encourage innovation by allowing states to pay for prescription drugs based on clinical outcomes—fostering more value-based payment arrangements.

“Therapies are coming to market today that fight disease in an entirely new way, including at the genetic level. While the impact of these therapies can be transformative, their costs are unprecedented,” said the agency in its press release.

“CMS’ rules for ensuring that Medicaid receives the lowest price available for prescription drugs have not been updated in 30 years and are blocking the opportunity for markets to create innovative payment models,” said CMS Administrator Seema Verma. “By modernizing our rules, we are creating opportunities for drug manufacturers to have skin in the game through payment arrangement that challenge them to put their money where their mouth is.”

The newly proposed rules loosen restrictions on payment models with drug manufacturers so that not every arrangement will be based on the quantity of drugs sold, but the quality of the drug product. CMS explained in the press release that by encouraging payments based on the value of the treatment, the collection of clinical outcomes research and evidence could increase as payers seek to justify pricing.

The new rule will also modify manufacturer reporting regulations surrounding average manufacturing price.

“Consistent with current statute and regulation, this will help modernize our interpretation of how manufacturers adapt the interpretation of the ‘best price’ law—which was enacted 30 years ago, and has only allowed one single best price for each drug to be available to state Medicaid agencies—to contemporary arrangements where more than one price could be available for a drug based on its outcomes in a patient,” explained CMS in a fact sheet.

Another goal of the proposed rules is to reduce opioid-related fraud, misuse, and abuse by adding new standards for identifying and limiting inappropriate prescribing.

“By offering more flexibility for payers and manufacturers to enter into value-based agreements while still ensuring that Medicaid always gets the best deal, CMS is continuing our efforts to foster innovation, increase access to the latest technologies, and ensure that the Medicaid program is sustainable and can continue to serve our most vulnerable populations,” concluded CMS in the press release. —Edan Stanley