CMS approves Michigan Medicaid drug value-based payment plan

By | November 15, 2018

Dive Brief:

  • CMS Administrator Seema Verma announced Wednesday the agency has approved a Michigan plan allowing its state Medicaid program to work with drugmakers to allow value-based payment arrangements in an effort to “modernize payment policies.” The proposal is the second to receive a green light, following approval of a similar Oklahoma plan in June.  
  • Verma also previewed forthcoming agency action on protected classes of drugs in Medicare Part D, hinting that CMS plans to further open the space to private negotiation.
  • Specifically, Verma said the Michigan proposal could lead to arrangements such as spreading drug payments over time contingent on patients meeting defined clinical outcomes, drug subscription programs or sharing savings based on a drug’s success in reducing a patient’s healthcare costs.

Dive Insight:

Verma indicated that the Michigan plan closely mirrors Oklahoma’s first-of-its-kind proposal, which allowed the Sooner State to negotiate supplemental rebate agreements for certain drugs in value-based purchasing arrangements.

However, when releasing the Oklahoma approval, CMS emphasized that the program only allows the state to enter into value-based purchasing agreements with manufacturers on a voluntary basis. Some analysts have questioned how quickly such arrangements will come into fruition.

Under the Michigan plan, formally approved Nov. 14, new value-based contracts will be submitted to CMS for prior approval.

Verma strongly criticized what she characterized as artificial constraints on Medicare Part D plans’ ability to negotiate for drugs in protected classes. Currently Part D plans have to cover “essentially all available products” in the six protected classes of drugs: antiretrovirals, immunosuppressants, antidepressants, antipsychotics, anticonvulsant agents and antineoplastics.

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“Typical private market discounts for these drugs are in the 20-30% range, but the average discount across all protected classes in Medicare Part D is just 6%. It is important to lower costs for all patients, including patients who need drugs in the protected classes,” Verma said.

Cowen Washington Research Group’s Rick Weissenstein wrote in August he does not believe CMS will fully eliminate the six protected classes of drugs, but suggested the agency will instead perhaps allow Medicare Part D plans to use step therapy or tiering.

Verma noted that there are now more competitor drugs in the protected classes than when they were created, claiming that private plans are able to maintain access to protected classes of drugs while at the same time negotiating with drugmakers to clamp down on costs.

The CMS head pointed to President Trump’s drug pricing blueprint’s emphasis on lowering drug pricing in her speech before drugmaker executives at The Ritz-Carlton in the District of Columbia, saying more actions are on the way.

“These initiatives are ambitious, but we are not stopping here.  Expect more from us in the coming weeks and months,” Verma said.

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