CMMI releases three new models aimed at lower generic, novel drug costs

The Biden administration rolled out three new payment models intended to lower drug costs, including new Medicare coverage options for drugs cleared under accelerated approval.

The release of the three models on Tuesday is in response to an executive order President Biden delivered last year calling for the federal government to search for ways to lower prices. 

“These selected models will test strategies to make it easier for Medicare patients to afford and access needed prescriptions at $2 or less, help expand access to cutting-edge cell and gene therapies for people with Medicaid, and help ensure drugs already on the market are safe and effective,” said Center for Medicare and Medicaid Innovation Director Liz Fowler in a statement. 

The three models initially chosen will test:

  • Creating new payment methods for drugs put on the market via accelerated approval, a pathway that lets the Food and Drug Administration (FDA) clear drugs which address unmet medical needs. The agency would create new methods that would encourage drugmakers to complete confirmatory trials as well as boost “access to post-market safety and efficacy data. This would reduce Medicare spending on drugs that have no confirmed clinical benefit,” according to a release. CMS decided to narrowly cover a new class of Alzheimer’s disease drugs for Medicare beneficiaries in a confirmatory clinical trial.
  • A list of generic drugs for which the out-of-pocket Part D costs will be capped at $2 a month per drug. The goal of the model is to encourage Part D plans to lower cost-sharing on “relatively inexpensive generic medications that have significant clinical benefits, but cost-sharing can vary widely across insurance plans based on the specific formulation a doctor prescribes,” a release said.
  • A model to address the skyward cost of gene and cell therapies for diseases like sickle cell and cancer that can come with a price tag of up to $1 million. The goal is for state Medicaid agencies to assign CMS to “coordinate and administer multi-state, outcomes-based agreements with manufacturers for certain cell and gene therapies,” CMS said. 

CMMI did not give a timeline for when the models will start soliciting applications or launch, but Fowler conceded the model for generic drugs won’t be in place for the 2023 Medicare open enrollment or the 2024 period as well.

The center is also firming up which models will be voluntary and mandatory. Fowler said that it is likely the gene and cell therapy model as well as generic drug model will be voluntary, with the verdict still out for accelerated approval. 

Regarding the model on accelerated approval, CMMI is still figuring out the incentives to drugmakers to finish confirmatory clinical trials to ensure the product is safe and effective. When asked by reporters whether Medicare Part B payments for such drugs in the model would go up or down, Fowler responded by noting that is a “design question we will have to explore.”

CMS has weighed in on reimbursement for accelerated approval drugs before. The agency narrowly covered a class of Alzheimer’s disease drugs for Medicare reimbursement, but only for beneficiaries in a qualifying clinical trial. 

But CMS Administrator Chiquita Brooks-LaSure said that the decision was unique and doesn’t refer to the agency’s thinking overall on accelerated approval.

It remains unclear of any of the models will face political pushback from Capitol Hill. In 2022, a group of House Republicans pushed back on CMS’ decision to narrowly cover the class of Alzheimer’s drugs.