CMS’ plan to help create value-based arrangements for prescription drugs in Medicaid programs was rejected or criticized by a range of stakeholders, including hospitals, insurers, drug companies, medical schools and Medicaid directors.
According to comments on the proposed rule, they argue that CMS is rushing its plan to help state Medicaid programs, health plans and drugmakers create value-based arrangements for prescription drugs and it could cause severe problems for states and the healthcare industry.
After the agency announced its proposed changes last month, it gave the public 30 days to comment on them. But providers, insurers, state Medicaid directors and prescription drug manufacturers say they need more time to understand CMS’ plan and it’s far-reaching effects, warning the agency that it’s challenging to know the impacts of the proposed rule because CMS didn’t study them. “We are concerned that CMS packaged these issues into one proposed rule with a 30-day comment period, which denies commenters adequate time and opportunity to prepare comments on these issues,” the Pharmaceutical Research and Manufacturers of America said.
Stakeholders also criticized CMS for loosely defining critical terms, which could lead to damaging unintended consequences, and not explaining how it will make sure the rule is working as intended. “We are concerned that the proposed rule offers few details on how these (value-based payment) arrangements would be structured without imposing financial and reporting burdens on states and providers,” the Association of American Medical Colleges said. “Given the lack of understanding about the potential impact, it is premature to finalize this rule.”
Drugmakers and private insurers want to create value-based arrangements for increasingly specialized and expensive treatments like gene therapies, which often have high upfront costs. Those pay-for-performance contracts would connect drug payments to clinical outcomes, allowing drugmakers to get paid based on how much their therapies improve care instead of the number of drugs or treatments sold.
But pharmaceutical companies have avoided value-based arrangements with commercial payers because they’re concerned about the best price guarantee in Medicaid’s drug rebate program. Under the current rules, Medicaid pays the lowest price offered to a private insurer. Drugmakers worry that if they fully refund a failed course of treatment under a value-based arrangement, the Medicaid price would fall dramatically, perhaps to zero.
The proposed rule would allow private insurers to create value-based arrangements with pharmaceutical companies but allow drugmakers to report multiple best prices for specific value-based arrangements. Insurers and drugmakers could also create bundled contracts, among other changes.
CMS’ plan mostly addresses therapy manufacturers’ concerns, but it could cause massive problems for states, Medicaid beneficiaries, providers and health plans.
The Medicaid and CHIP Payment and Access Commission said that state Medicaid programs could receive lower prescription drug rebates because of how CMS defines value-based payments and calculates best price in the proposed rule. That might increase federal and state Medicaid spending without significantly increasing value-based arrangements in the Medicaid program, MACPAC said.
“Manufacturers can already enter into (value-based payment) arrangements with state Medicaid agencies and Medicare Part D plans without triggering best price and adoption of (value-based payment) arrangements remains limited in these markets,” MACPAC said.
The economic fallout of the COVID-19 pandemic is wreaking havoc on state budgets. But CMS’ plan doesn’t give states the ability to create new payment or rebate models to recover revenue lost from lower rebates, even though the rule would probably increase states’ administrative costs, according to Medicaid directors. “Contrary to the positive impacts for manufacturers and commercial payers, multiple best prices conditioned on specific (value-based payment) parameters create significant risks for states,” the National Association of Medicaid Directors said.
Commenters said it’s not clear if states would automatically have the same contracting options as commercial payers or if manufacturers could share details of those arrangements with states since that information is usually proprietary. It’s also unclear whether contracts with state Medicaid agencies would have to use the same measures as private payers. Medicaid beneficiaries differ significantly from people with private coverage, so it might not make sense to structure the contracts the same way.
MACPAC said it’s “concerned that while these changes could incentivize the use of (value-based payment) in the commercial market, they would also negatively affect the Medicaid program and do little to address concerns about the impact of high-cost specialty drugs on Medicaid program spending.”
On top of that, the proposed rule could create mind-boggling administrative problems for providers, states and insurers. States would need to develop and build new systems to keep track of all the rebate amounts calculated from multiple best prices, which could add up over time. Providers would also have to collect and report enormous amounts of clinical information to figure out if drugmakers should pay a rebate, even as patients move in and out of the Medicaid system.
“CMS notes that the proposal will present ‘operational challenges’ to the Medicaid Drug Rebate Program (MDRP) systems and that ‘it will take us time to make such system changes,'” AAMC said. “CMS should not finalize this proposed rule without fully vetting what the operational challenges are and the impact on states.”
America’s Health Insurance Plans generally supports the rule but said it needs significant changes since “there could be literally thousands of best prices in play. States and other payers might have to wade through mountains of data to decide which is the most appropriate best price for a given patient.”
Drugmakers might even rush drugs to market based on their potential effects since providers, not drug companies, would have to track clinical outcomes, the American Hospital Association said. “This model raises significant patient safety concerns by basing payment on prospective drug outcomes, not proven ones, with the potential for drug manufacturers to short-circuit the full review process,” AHA said.
Commenters also criticized CMS’ plan because the agency claims the proposed rule will make sure payments are based on clinical value, but CMS doesn’t describe how it will judge clinical effectiveness.
“For some breakthrough therapies, comprehensive data collection on outcomes could take years because of the limited number of treatments currently on the market and the small patient populations these drugs target,” AAMC said.
With November’s election approaching quickly, the Trump administration is pushing to advance its regulatory agenda and bolster the president’s healthcare record. CMS Administrator Seema Verma and other political appointees will likely exit the administration by next year, no matter the election outcome, so they’re running out of time to carry out their healthcare agenda. The proposed rule would advance two of their favorite causes—value-based payment and private coverage—and potentially undercut the Medicaid program, a political hobbyhorse for conservative policymakers.