Insurers worry drug companies could game changes to Medicaid rebate program in new rule

Drugs and money
Insurers press the Centers for Medicare & Medicaid Services to change a Medicaid Drug Rebate Program rule that is intended to encourage states and drug companies to enter into value-based payment deals. (Getty/LIgorko)

Insurers are worried a raft of proposed changes to the Medicaid Drug Rebate Program could lead to drug manufacturers gaming the system to charge higher prices.

Several insurer groups commented on the proposed rule that the Centers for Medicare & Medicaid Services (CMS) released last month to get states and drugmakers to create more value-based payment arrangements.

If finalized, the rule would relax some of the requirements for the average manufacturer price and best price that manufacturers must provide for Medicaid. Under the new rule, a manufacturer could report multiple best prices for a therapy under the Medicaid Drug Rebate Program, but any best price has to be tied to a value-based purchasing agreement.

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A manufacturer could also use a “bundled sales” approach that allows a manufacturer to calculate a weighted average for discounts across a drug class. If there is a performance-based failure for the drug, it is allocated proportionally for all products sold in the bundle.

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But payers were concerned manufacturers could game the new multiple “best price” provision. For instance, the manufacturer could offer a variety of rebates based on a patient’s response to a drug, but questions remain on how states will track those outcomes.

“It is unclear how states and manufacturers will track and report patient outcomes to develop this distinct set of ‘best prices,’” according to comments from the Association for Community Affiliated Plans. “Patient-specific outcomes will also be extremely difficult to monitor for drugs with unclear measurable outcomes.”

The group, which represents safety-net insurance plan issuers, said the process to report a best price is already complicated and this provision will only add more complexity to the Medicaid Drug Rebate Program.

America’s Health Insurance Plans (AHIP), the top insurance lobbying group, said in comments it supports adding multiple best prices.

But AHIP said CMS must give more clarity about the proposal to ensure the rule does not “create a risk of abusive practices by pharmaceutical manufacturers.”

For instance, AHIP is concerned about the potential for a state to be inundated with multiple best prices.

“States and other payers might have to wade through mountains of data to decide which is the most appropriate best price for a given patient,” AHIP said.

AHIP added there should be criteria so “multiple best prices provide reasonable limits." Further, the regulatory requirements should “clearly specify that drug manufacturers have the responsibility and obligation to ensure that multiple best price data for their drugs are updated timely and accurately.”

The group was also concerned that manufacturers could use value-based payment arrangements to promote other drugs.

“We are concerned about manufacturers potentially using data gathered under [value-based payments] to identify patients (or prescribers) to whom they could promote other drugs for the same or other conditions,” the comments said.

CMS should require in the final rule that manufacturers refrain from using data gleaned from value-based payment deals to conduct direct marketing for other drugs that are not subject to such deals, AHIP added.

The bundled sale and new best price changes also concerned advocacy groups and experts.

“The rule does not set a time limit on when manufacturers have to revise their best price reporting under a [value-based payment] arrangement—the current time limit is three years—even though state Medicaid programs would be most in need of upfront rebates to offset the costs of a new expensive drug in the first years the drug enters the market,” according to comments from Georgetown University Health Policy Institute’s Center for Children and Families.

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