Bipartisan House bill aims to boost value-based purchasing drug agreements in Medicaid

New bipartisan legislation introduced in the House aims to reform Medicaid to enable the use of value-based purchasing agreements in Medicaid. 

The Medicaid VBP Act, released Tuesday, aims to ensure new treatments such as gene therapies would be administered under Medicaid via a value-based agreement that reimburses drug makers based on the outcomes the drug provides. 

“For too long, policy has not caught up with reality and it’s the patients who are suffering the consequences,” said Rep. Markwayne Mullin, R-Oklahoma, one of the chief sponsors of the legislation, in a statement. “Drug developers are taking extraordinary risks to invest in these groundbreaking therapies, which could easily cost millions of dollars per patient once they reach the market. Without an affordable way for payers to purchase these sometimes-curative drugs, it will be nearly impossible for patients to access them.”

Medicaid reimburses drugmakers based on the average manufacturing price for their products. However, the current scheme has made it difficult for payers and manufacturers to enter different payment arrangements for newer therapies. 

The legislation would clarify how the average manufacturer price should be calculated for drugs in a value-based purchasing agreement and establishes a safe harbor for anti-kickback protections for any spending resulting from a value-based deal.

It would also codify a rule finalized in December 2020 by the Centers for Medicare & Medicaid Services aims to boost such arrangements. The regulation, which took effect in January of this year, also allows drug makers to put multiple best prices as an incentive to enter value-based deals with Medicaid managed care organizations.

The legislation drew plaudits from payer groups who have claimed that regulatory barriers are hurting movement towards paying for drugs based on their outcomes. 

“VBPs are a critical tool to make sure we only pay for prescription drugs that work,” said Joel White, president of the advocacy group Coalition for Affordable Health Coverage, which aims to cut healthcare costs and counts several payers, drug manufacturers and pharmacy chains among its membership.