New Biden order wants CMMI to test payment models that tackle high drug prices

President Joe Biden is calling for new payment and delivery models that will lower drug prices in a new executive order. 

The order released Friday calls on the Department of Health and Human Services to craft a report outlining the payment models that will test how to improve access to innovative drugs and lower costs for those in Medicare and Medicaid. While the order doesn’t grant any new authorities to HHS, it underscores the administration’s next steps in lowering drug prices.

“Too many Americans face challenges paying for prescription drugs,” the order said. “On average, Americans pay two to three times as much as people in other countries for prescription drugs, and one in four Americans who take prescription drugs struggle to afford their medications.”

The order applies to models that can be tested under the Center for Medicare and Medicaid Innovation.

The center has been working to incorporate drug price reform in some of its models. For example, CMMI rolled out the Enhancing Oncology Model back in June, which seeks to steer oncology practices towards more high-value drugs and not necessarily the most expensive pharmaceuticals.

The push to consider drug prices at CMMI comes as the center is incorporating new provisions to address gaps in health equity, including a new requirement in the ACO REACH model for participants to craft an equity plan. Improving health equity is another major health priority for the Biden administration. 

The new order comes as the administration is implementing drug price reforms passed as part of the Inflation Reduction Act earlier this year. The law for the first time grants Medicare the power to negotiate prices on a small subset of Parts B and D drugs starting in 2026.

Starting this month, CMS also implemented a new cap on out-of-pocket monthly costs for drug prices that go beyond the rate of inflation. A report released last month by HHS showed that more than 1,200 products rose prices past inflation last year, underscoring the potential impact of the new inflationary cost cap. 

Another part of the Inflation Reduction Act is a $35 cap on monthly insulin costs for Medicare patients.