CMS finalizes rule that aims to boost value-based drug pricing arrangements in Medicaid

The Centers for Medicare & Medicaid Services (CMS) has finalized a rule that aims to foster value-based purchasing arrangements with drugmakers in Medicaid.

Medicaid's traditional "best price" model, in which pharmaceutical companies report their best price to the Center for Medicare and Medicaid Innovation, has not been overhauled to match the changing face of products coming down the drug development pipeline.

However, drug companies may not be able to easily account for value-based arrangements in calculating the best price for their products, CMS said in an announcement.

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CMS Administrator Seema Verma said in a statement that as the model hasn't been updated in nearly 30 years, it is "thwarting innovative payment models in the private sector."

“Medicaid’s outdated rules have consistently stymied the ability of payers and manufacturers to negotiate drug reimbursement methods based on the actual outcome of the treatment," Verma said. "A new generation of approaches to payment methods is needed to allow the market the room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable and continue to receive their statutorily required discounts."

CMS said in the release that it sees particular promise in allowing for more value-based arrangements as the number of high-cost genetic therapies increases. These products have a significant upfront cost that may translate to lower costs for a plan overall as they're designed to be curative treatments.

CMS will also allow drug companies to issue multiple best prices under the rule as an incentive for them to enter value-based arrangements with states and Medicaid managed care organizations.

The rule will take effect in January 2022, CMS said.