CMS approves value-based drug payments in Michigan's Medicaid program

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CMS approved an amendment to Michigan's Medicaid program that allows for outcome-based drug payments. (getty/benkrut)

The Centers for Medicare & Medicaid Services (CMS) will allow Michigan's Medicaid program to enter into outcomes-based drug payments with manufacturers.

CMS Administrator Seema Verma announced her agency had approved an amendment to the state's program on Wednesday during remarks at the Biopharma Congress in Washington, D.C.

It is the second state to gain approval from CMS for value-based Medicaid drug payments. The agency approved a similar waiver in Oklahoma over the summer. Verma said Michigan's waiver (PDF) would "empower the state to demand results from drug manufacturers in exchange for paying for medicines."

"I applaud Michigan’s proposal," she said. "As we see innovation in biomedicine, it is incumbent on us to also modernize payment policies."

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Verma added that the drug industry is interested in outcomes-based payments that could revolve around certain clinical outcomes, shared savings based on the patient's total cost of care, or an upfront fee in exchange for as many clinical doses as necessary. 

The pharmaceutical industry has blamed the lack of value-based drug arrangements on regulatory red tape

"Value-based payment is not a panacea, but it is an important part of our strategy to lower drug prices," she added.

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"I want Part D plans to have every tool that plans in the commercial market have to lower costs, increase quality, and promote transparencyincluding at the point of prescribing, and we have seen innovative approaches emerge in the private sector to provide real-time cost information to patients and providers," she said.