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CMS proposes value-based payment rule to lower drug prices and increase availability

It will be up to health plans and manufacturers to create the VBP arrangements.

The Centers for Medicare and Medicaid Services yesterday issued a proposed rule to begin removing barriers to the development of value-based payment agreements between drug manufacturers and payers, including Medicaid.

The rule would also propose changes to current regulations dealing with how manufacturers determine the price of brand-name drugs when there is an authorized generic version also on the market.

In addition, it proposes minimum standards in state Medicaid Drug Utilization Review programs designed to reduce opioid-related fraud, misuse and abuse.


Under current regulations, payers and manufacturers typically base their price negotiations on the number of drugs sold instead of the quality of the treatment.

This rule will provide flexibility to how manufacturers report and calculate the best price in order to encourage them to enter into VBP arrangements with states.

This is accomplished by providing clarity to the current regulations so that manufacturers can no longer include the sales of generic drug treatments into their calculation of the brand-name price.

The rule would also allow manufacturers to report multiple best prices for a therapy and permits revisions to the best price reporting beyond the current 36 month time limit to allow for changes to pricing metrics if there is a VBP agreement in place.

With this proposed rule, CMS hopes that states will be encouraged to enter into VBP arrangements with drug manufacturers that will ultimately provide strategies for managing drug costs and increasing beneficiary access to needed medications.

"Therapies are coming to market today that fight disease in an entirely new way, including at the genetic level," the CMS said in a statement. "While the impact of these therapies can be transformative, their costs are unprecedented. New approaches to payment are needed to allow the market room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable."

The rule would also implement new opioid-related drug utilization review standards under the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act.

The changes would promote the safe prescribing of opioids in order to reduce misuse and abuse. They would also enhance a states' ability to identify or limit inappropriate prescribing of opioids if a beneficiary is already receiving medication-assisted treatment for substance use disorder.


This new proposal is a long-awaited update to current payment models.

With these changes, conversations could be shifted away from prices and towards health outcomes.

CMS Administrator Seema Verma said that CMS hopes to get this finalized as soon as possible, but that it will be up to health plans and manufacturers to create the VBP arrangements for themselves.


"It increases competition for manufacturers to develop drugs that are not only cost-effective but have a definitive clinical outcome," Verma said. "CMS's rules for ensuring that Medicaid receives the lowest price available for prescription drugs have not been updated in 30 and are blocking the opportunity for markets to create innovative payment models."

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