Guidelines Needed to Establish Medicare Drug Pricing

Established guidelines for setting Medicare drug pricing are needed, according to an article published in JAMA Health Forum.

The Inflation Reduction Act of 2022 included provisions to lower prescription drug prices for Medicare beneficiaries and required drug manufacturers to pay rebates to Medicare if they increase beneficiaries’ medication prices faster than inflation.  

“Perhaps the most far-reaching of these provisions was new authority given to the Centers for Medicare & Medicaid Services (CMS) to negotiate with drug companies the prices that Medicare pays for small-molecule drugs that have been marketed for at least 9 years and biologics on the market for 11 years, even if the drugs still have patent exclusivity,” wrote Scott Gottlieb, MD, American Enterprise Institute in Washington, DC.  

Congress gave CMS the power to set drug prices but didn’t provide clear guidelines on how to do so. To avoid a lengthy process, CMS will issue nonbinding guidance documents instead of going through formal rulemaking. Recently, CMS solicited public comment on implementing one aspect of the new law- rebates that drugmakers must pay to Medicare if they raise prices faster than inflation. 

To improve the pricing of drugs under the new legislative framework, independent organizations could conduct technical assessments of innovations transparently and objectively. This would guide the proposed prices established by the CMS. The Institute for Clinical and Economic Review and Coalition for Health Advances and Research in Massachusetts are potential candidates for such assessments. Experts have also proposed establishing a publicly funded, advisory-only health technology assessment body. 

The Social Security Act instructs the CMS to use external compendia to determine the ”medically-accepted indication” of drugs used off-label in treating cancer. Outsourcing this process to competing compendia has provided a more objective way of establishing criteria. If Congress directs the CMS to rely on outside organizations, the external analysis could inform federal decisions in many ways. Patients, health care professionals, payers, government officials, and manufacturers could help inform the analysis through a carefully defined public process. 

“By getting the math right, key stakeholders can have empirical conversations about cost and innovation and establish objective principles for pricing drugs under the new law,” wrote Dr. Gottlieb. “If drugmakers understand how federal officials price their products, they can make investment decisions in research and development that will seek to maximize these same measures of value.” 

Reference 
Gottlieb S. Bringing transparency and rigor to Medicare drug pricing. JAMA Health Forum. 2023;4(3):e230639. doi:10.1001/jamahealthforum.2023.0639