Recently, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would materially modify current Medicaid Drug Rebate Program (MDRP) regulations. The proposed rule among other things, suggests updates to Medicaid policies and practices related to drug pricing and value-based purchasing (VBP), clarifies the treatment of manufacturer coupons or co-pay cards in the Average Manufacturer Price (AMP) calculation and Best Price determination, and proposes changes to Medicaid drug utilization reviews (DUR) related to opioids.
“The problem has been that the Medicaid best price regulations are a barrier. … Today we are announcing that we are updating them to allow for more value-based pricing,” CMS Administrator Seema Verma told Reuters in a telephone interview.
Proposed Rule
The proposed rule recognizes that in the decades since the beginning of the Medicaid Drug Rebate Program and adoption of related price reporting rules, “CMS has not addressed the possible impact of offering VBP arrangements on manufacturer compliance with applicable MDRP price reporting obligations, including best price and AMP [average manufacturer price] reporting.” By addressing price reporting issues that are unique to VBP arrangements, CMS hopes that manufacturers will be more willing to enter into unique arrangements that determine price on clinical evidence and/or outcomes-based measures.
The proposed rule would expand the interpretation of the Medicaid best price regulation to recognize the reality that “because VBP and other innovative payment arrangements sometimes result in various price points for a dosage form and strength of a single drug or therapy being available in a quarter … a single drug may be available at multiple price points, each of which may establish a ‘best price’ based on the relevant or applicable VBP arrangement and patient evidence-based or outcome-based measures.” CMS seems to be suggesting some sort of allocation and/or averaging to arrive at best price when a VBP arrangement might result in the lowest price of a drug.
The Proposed Rule would add a new definition of “value based purchasing”: “an arrangement or agreement intended to align pricing and/or payments to an observed or expected therapeutic or clinical value in a population and includes: (1) Evidence-based measures, which substantially link the cost of a drug product to existing evidence of effectiveness and potential value for specific uses of that product; or (2) Outcomes-based measures, which substantially link payment for the drug to that of the drug’s actual performance in a patient or a population, or a reduction in other medical expenses.” When determining a drug’s best price, CMS would revise the regulation to include a statement that, “the lowest price available from a manufacturer may include varying best price points for a single dosage form and strength as a result of a value based purchasing arrangement.”
Additionally, the proposed rule also addresses the impact of co-pay accumulator programs on a manufacturer’s responsibilities in determining best price. Generally, manufacturer-sponsored coupons and co-pay cards, which cover all or part of the cost-sharing that would otherwise be the patient’s responsibility, are excluded from best price to the extent the full value of manufacturer financial assistance under such programs are to the patient, with no other party receiving a price concession. However, it is the current practice of some pharmacy benefit managers on behalf of the insurance plans with whom they contract to utilize “copay accumulators” to ensure that any copay assistance programs ultimately benefit the plan, rather than the patient. Under a “copay accumulator,” the value of any copay assistance that a patient may receive directly from a drug manufacturer does not count toward the patient’s deductible or maximum out of pocket payment limit under their health plan.
The proposed rule would put direct responsibility on the manufacturer to ensure that the exclusions from best price only apply “to the extent the manufacturer ensures the full value of the assistance or benefit is passed on to the consumer or patient [since CMS] believe[s] manufacturers have the ability to establish coverage criteria around their manufacturer assistance programs to ensure the benefit goes exclusively to the consumer or patient.”
Essentially, manufacturers would be required to include the value of co-pay cards and coupons in best price if the card or coupon was utilized by a patient covered under a health plan with a copay accumulator program. Since drug manufacturers do not know if a given patient’s plan has a copay accumulator, manufacturers likely would just assume at least one patient that used the co-pay card/coupon was enrolled in a plan with a co-pay accumulator and consider the co-pay card/coupon value in best price. Given the potential financial impact to manufacturers related to setting new, lower best prices, if the rule is finalized we may see co-pay card availability vanishing or at least diminishing.