The Biden administration proposed three pilot programs aimed at lowering costs and improving access to drugs under Medicare and Medicaid, including gene therapies and medicines cleared via accelerated approval. The release of the three models is in response to an executive order President Biden delivered last year calling for the federal government to search for ways to lower prices.
“These selected models will test strategies to make it easier for Medicare patients to afford and access needed prescriptions at $2 or less, help expand access to cutting-edge cell and gene therapies for people with Medicaid, and help ensure drugs already on the market are safe and effective,” said Center for Medicare and Medicaid Innovation Director Liz Fowler in a statement.
Medical Cell and Gene Therapy Model
The model will allow states, on a voluntary basis, to allow CMS to negotiate and enter into outcomes-based agreements with cell and gene therapy manufacturers on the states’ behalf. The model recognizes the minimal uptake to date in states entering into value-based purchasing arrangements for such therapies and seeks to have CMS take on key functions for the states, including developing the outcomes that payment would be based upon, and would create a larger patient pool than any single state. HHS believes therapy manufacturers would be interested in participating because the model would facilitate their market expansion efforts by reaching pricing agreements that cover multiple states rather than having to negotiate with each individual state.
A number of questions and considerations going forward include what the specific payment models will be, including the possibility of an upfront payment with additional payments paid out based on clinical outcomes, a rebate approach that would refund a portion of the payment if outcomes are not met, and an annuity-like model paid out over time and tied to outcomes. The timeline calls for CMS to announce specifics of the model between 2024 and 2025 and to begin testing in 2026.
Accelerated Approval Model
The Accelerated Approval Model requires CMS to develop payment models for drugs receiving accelerated approval from the FDA. This model would be mandatory for Part B providers and is intended to incentivize drug sponsors to complete post-approval trials that confirm the clinical benefits of their products. HHS recognizes the tensions between products receiving accelerated approval and payer access policies and notes in particular the concerns about product sponsors not completing confirmatory studies to confirm the efficacy of a product. At the same time, HHS also recognizes the desire patients and providers have for therapies, particularly where there is an unmet medical need.
Although there is no stated implementation timeline, the administration directed CMS to work with FDA to determine whether this kind of payment model would be appropriate and, if so, enact it as soon as is feasible. The announcement states that CMS may use rulemaking to gather stakeholder input to inform model development.
Part D Generics Model
The Part D model would work with plan sponsors to establish a standardized list of approximately 150 generic medications that would be offered for a maximum copay of $2 per month. Drugs included in the model would be those to treat common, chronic conditions, such as high blood pressure and high cholesterol. This would build on provisions from the IRA that will cap annual Part D out-of-pocket costs at $2,000. CMMI would evaluate the impact this model on overall healthcare quality and cost for enrollees, including costs associated with preventing or reducing costs associated with hospitalizations and emergency department visits. The administration has not announced a specific timeline for this model but has directed CMS to begin it as soon as is feasible.