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CMS approves first proposal for states to enter value-based Medicaid arrangements with drug-makers

But agency denies Massachusetts' request to choose drugs for its Medicaid formulary.

Susan Morse, Senior Editor

The Centers for Medicare and Medicaid Services has approved for the first time an amendment to allow a state to negotiate supplemental rebate agreements with drug manufacturers.

Oklahoma submitted to CMS the proposal to add value-based supplemental rebate agreement language to its state Medicaid plan. 

The move gives Oklahoma and other states that receive approval negotiating power, CMS said.

CMS said on Wednesday it did not approve, but continues to work with Massachusetts, on a proposal to exclude certain Medicaid covered outpatient drugs through a closed formulary. 

In a letter sent to all states, CMS clarified that Federal Food, Drug and Cosmetic Act approved drugs are covered as outpatient drugs and states must make these available consistent with the Medicaid Drug Rebate Program. 

The value-based purchasing arrangement with Oklahoma and other states could produce extra rebates for the state if clinical outcomes are not achieved. The voluntary agreements are tailored, with each state and manufacturer agreeing on the health outcomes for the specific population for the drug.

Linking the payment of a drug to its effectiveness and outcomes is among the initiatives outlined in President Trump's blueprint to address the high drug prices facing Americans, according to the Department of Health and Human Services.  

It is already in practice in some contracts between between payers and drug-makers.

"Oklahoma's plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs," HHS Secretary Alex Azar said. "The Trump Administration is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs."

Almost every state Medicaid plan includes the authority of the state to negotiate supplemental rebate agreements with drug manufacturers that provide rebates at least as large as those set forth in the Medicaid national drug rebate agreement. 

Consistent with regulations, these supplemental rebate agreements are exempt from the Medicaid "best price" rule that requires drug manufacturers to extend the lowest price for a drug they negotiate with any other buyer to all states in the Medicaid program.

CMS approved a waiver for Massachusetts for a "MassHealth" demonstration amendment to help veterans and their families maintain access to insurance coverage.

The 1115(a) demonstration amendment provides the state with the authority to provide continuous access of coverage for a group of veterans, Gold Star spouses, and Gold Star family members, who would otherwise experience disruption in certain months due to the receipt of income through an annuity.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com