CMMI’s Adam Boehler: Why CMS is taking a ‘practical approach’ to drug pricing

Calculator that says "Medicare" on it on top of money, next to bottle of pills
CMMI Director Adam Boehler spoke at the CMS Quality Conference on Tuesday morning. (Getty Images/liveslow)

CMS’ innovation center has unveiled several new payment models in recent months, but none has sparked quite the reaction of one of the center’s latest models for drugs, the International Pricing Index.

Medicare beneficiaries may not understand the finer points of financial risk or population health management, said Adam Boehler, deputy administrator at the Centers for Medicare & Medicaid Services and director of the Center for Medicare & Medicaid Innovation.

But they sure understand when they hear that prices for drugs in the U.S. can be as much as four or five or six times higher than those in developed countries, Boehler said. 

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Boehler even got a call from his own mother about it. 

“Right away, it got a massive inflow of feedback from patients that feel very emotional on this issue,” Boehler said on the first day of the CMS Quality Conference in Baltimore. “People feel the impact of paying four or five times [more], it doesn’t feel right.” 

RELATED: The ‘vendors’ in HHS’ new drug pricing plan sound an awful lot like PBMs, experts say 

As healthcare moves like "molasses" toward new initiatives, as Boehler has put it, CMMI's goal in new payment models like the International Pricing Index is to take a digestible, "practical approach" to some of the industry's biggest issues. That mindset, he said, has been behind the development of other recently announced models, like one recently unveiled in Medicare Part D.

Boehler said that model, which aims to significantly cut down on costs in the catastrophic phase of the benefit, was devised as the catastrophic phase hasn’t been modified since Part D was launched in 2006, even as it ballooned to nearly half (about 40%) of Part D drug spend. 

In the catastrophic phase, CMS bears 80% of the cost of drugs and beneficiaries pay 5% out of pocket, which incentivizes plan sponsors to push them into catastrophic coverage. 

“What that means is Part D plans don’t care that much about Part D cost because they don’t bear it—we do,” Boehler said, “and so the model really says, ‘Hey, if we’re going to give folks risk let’s make the catastrophic layer an actual catastrophic layer.’” 

RELATED: CMS’ new part D model may be slow to get off the ground, Bernstein says 

CMS under the Trump Administration has made flexibility a priority in many of its initiatives, including its approach to Medicaid, and Boehler said that same mindset is behind the expansion and development of its Value-Based Insurance Design (VBID) model, which was announced alongside the new payment demonstration in Part D. 

Boehler said VBID offers Medicare Advantage plan sponsors greater leeway to invest in the needs of beneficiaries, especially those addressing the social determinants of health that may be outside of the traditional health system. VBID is expanding to all 50 states and allows insurers to try different approaches to award and incentivize good health behaviors. 

“We’re going to get out of the way,” Boehler said. “They’re taking risk for this population; we don’t want to put limits in places where plans invest.”

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