CMS approves Washington request for 'Netflix' model to pay for hepatitis C drugs

Drug prices
The Centers for Medicare & Medicaid Services approved a drug pricing Medicaid demonstration in Washington state. (Getty/Tero Vesalainen)

The Centers for Medicare & Medicaid Services (CMS) approved a request on Wednesday from Washington state to negotiate value-based drug rebate agreements with pharmaceutical manufacturers in its Medicaid program. 

The approval makes Washington the fourth state to test such an arrangement; similar policies have already been given the OK in Oklahoma, Michigan and Colorado, according to an announcement from CMS.

Washington officials are aiming to test a “subscription” model for hepatitis C drugs, according to CMS. In this model, Medicaid would pay a fixed annual sum to a drug company for the hepatitis C medication, purchasing an unrestricted supply of the drug.

“High and rising prescription drug prices create major challenges, including for Medicaid agencies,” CMS Administrator Seema Verma said in a statement. “Washington state’s innovative proposal will demand value from pharmaceutical companies and take steps to eradicate the hepatitis C virus in their state."

RELATED: CMS gives the OK to Maryland Medicaid waiver, allowing diabetes management, dental care demonstrations 

Supplemental rebate arrangements like the one approved in Washington are exempt from Medicaid’s “best price” rule, allowing states to test more individualized payment arrangements. CMS offers a template for these supplemental agreements, ensuring key parameters like utilization period, evaluation benchmarks and target population are considered. 

CMS said in the announcement that it welcomes additional requests for similar arrangements—and said that at least one other state has expressed interest in testing a value-based payment in Medicaid for hepatitis C drugs. 

“CMS is committed to increasing states’ flexibility to develop policies that lower costs, increase the predictability of expenses and improve access for patients,” Verma said. 

CMS has put a focus on allowing states to test new approaches in their Medicaid programs—notably, approving work requirements for eligibility in several states. These policies have been challenged in court, and a federal judge rejected them in Kentucky and Arkansas earlier this year.