Verma: CMS mulling outcomes-based ways to address expensive specialty drugs

Drug prices
CMS Administrator Seema Verma said the agency is weighing outcomes-based strategies to mitigate high specialty drug costs. (Getty/Charles Wollertz)

As the Trump administration continues to spotlight drug price reform, Centers for Medicare & Medicaid Services Administrator Seema Verma said it will be crucial to have more conversations on how to address emerging—and expensive—therapies.

The CMS head met with reporters Wednesday afternoon and said that because the innovation pipeline is full of new, curative therapies with hefty price tags, it will be key for officials to bring that into their ongoing drug price efforts.

Current payment structures were not designed for multimillion-dollar gene therapies, she said.

“I think we need to have a serious discussion about how we’ve going to pay for these treatments,” Verma said. “They’re one-time, curative treatments, and so these are very different from what we’ve dealt with in the past.”

“The payment systems that we’ve had in place really not set up to deal with that,” Verma said.

RELATED: Costly specialty drugs drive higher spending on provider-administered treatments, study finds 

The Medicare Payment Advisory Commission has also been weighing this issue.  

Medicare Part D, for example, was designed before the rise of new and expensive drugs, so the commissioners have discussed ways to address the problem such as restructuring the coverage gap and pushing for more development of biosimilars to increase competition. 

Verma did not endorse specific policy plans at the briefing Wednesday—though she did give Medicare negotiating drug prices directly a thumbs-down. Pharmacy benefit managers in Part D are more effective negotiators because they want the biggest piece of the membership pie. 

“They’re competing for patients’ business,” she said. 

CMS is mulling value-based contracting, she said,but there are some serious concerns. For example, patients rarely stick with one insurer indefinitely, which could make it hard to track mortality or other outcomes to establish payment. 

RELATED: Health insurers go all-in on value-based drug pricing 

In addition, outcomes-based pricing could lead to higher list prices at launch, as pharmaceutical companies would be expected to pay rebates or discounts if the drug is less effective. 

Verma also said that CMS is working to integrate Medicaid into these discussions, both for drug prices and on value-based care at large. Much of the agency’s work has focused on Medicare payment models, but having splintered payments for Medicare, Medicaid and commercial insurance can make participation less attractive. 

“We’re going back and looking at all of the models that we have,” she said. “How can we involve Medicaid?”