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CMS announces plans to pursue new Medicare and Medicaid drug payment models

This week our In Focus section reviews the Centers for Medicare and Medicaid Services’ (CMS) announcement that the agency will explore three new prescription drug payment models in the Medicare and Medicaid programs:

  • Medicare High-Value Drug List Model
  • Cell and Gene Therapy (CGT) Access Model
  • Accelerating Clinical Evidence Model

The announcement – and accompanying report – responds to President Biden’s October 2022 Executive Order directing CMS’ Center for Medicare and Medicaid Innovation (the Innovation Center) to identify models that could lower cost sharing for commonly used drugs and include value-based payment for drugs.

Notably, the Innovation Center offered varying levels of specificity about the models, leaving unanswered many questions about the structures and timelines for the potential models. The Innovation Center will need to conduct more robust analysis to determine the design specifications for each model, stakeholder interest, and practical and political feasibility for each. In addition, each model will need to have its own application or rulemaking process to identify participants and other key model parameters. While this makes it difficult for the Innovation Center to specify timelines, it provides stakeholders some flexibility to analyze and develop recommendations for the potential models over the next several months.

HMA’s experts are also closely tracking CMS’ work on additional areas identified for the agency to research. For example, CMS could consider other regulatory pathways, partnerships, or campaigns to promote the following changes:

  • Opportunities to encourage price transparency for prescription drugs
  • Options to improve biosimilar adoption
  • Medicare fee-for-service options to support CGT access and affordability

The drug payment models build on other federal and state-level efforts to address prescription drug costs and total cost of care initiatives. For example, CMS’ drug payment model announcement comes just a week after the agency released its implementation approach for the drug payment policies approved as part of the inflation Reduction Act of 2022 (IRA) (P.L. 117-169). CMS is balancing the extensive implementation needs for the IRA while also acknowledging the new law may not directly address other value-based considerations impacting cost and access for certain prescription medications.

Below are some of the highlights of the Innovation Center’s drug payment models.

Medicare High Value Drug List Model

The Medicare High Value Drug List model would provide standardized approach to cost sharing for specified Part D medications. CMS suggests a standardized list with consistent cost-sharing to allow providers to easily identify and prescribe appropriate medications. Part D Sponsors could offer a Medicare-defined standard set of approximately 150 high-value generic drugs with a maximum co-payment of $2 for a month’s supply. Under this model, generic drugs included in the standardized list would not be subject to step therapy, prior authorization, quantity limits, or pharmacy network restrictions.

According to the report, CMS could explore leveraging existing systems, which would allow for a streamlined implementation. CMS also plans to seek input from beneficiaries, Part D Sponsors, manufacturers, and providers, but the agency did not provide a more specific timeline for announcing the Model specifications and start date.

Cell and Gene Therapy (CGT) Access

The Cell and Gene Therapy (CGT) Access model would be a voluntary opportunity for states and manufacturers. The model builds on existing state Medicaid initiatives to develop outcomes-based agreements (OBAs) with certain manufacturers of high-cost and breakthrough medications. CMS suggests the multistate test could inform a more permanent framework for evaluating, financing, and delivering CGTs on a broader scale. This model may also help address complexities with the federal drug rebate requirements in states that wish to pursue value-based contracting arrangements. Under this model a state Medicaid agency could choose to adopt the CMS structure for multi-state OBAs with participating manufacturers. CMS would be responsible for implementing, monitoring, reconciling, and evaluating financial and clinical outcomes. Initially the model would focus on CGTs for illnesses like sickle cell disease and cancer.  This approach could remove some of the barriers that have slowed state uptake of OBAs.

CMS plans to begin model development in 2023, announce the model sometime in 2024-25, and test it as early as 2026.

Accelerating Clinical Evidence Model

The Innovation Center is considering mandatory participation for Medicare Part B providers in the Accelerating Clinical Evidence Model. Under this potential model, the agency would adjust Medicare Part B payment amounts for Accelerated Approval Program (AAP) drugs to determine if adjustments incentivize manufacturers to timely complete trials, which in turn may facilitate earlier availability of clinical evidence.

The Innovation Center identified some challenging aspects for this model and stated the agency will need to consult with the U.S. Food and Drug Administration (FDA) in 2023 to consider approaches for this model. Statements from agency officials about the model also indicate the need for consultation with the Medicare Payment Advisory Commission (MedPAC) and other stakeholders, including through an Advance Notice of Proposed Rulemaking.

If the Innovation Center determines this model is feasible, the agency will provide more details about a targeted launch. The Innovation Center has previously attempted to implement mandatory Part B drug payment models but never implemented them due to legal challenges and stakeholder opposition.

HMA and HMA companies will continue to analyze these potential models and initiatives developing in parallel with the Innovation Center’s work. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts of the potential models, and to support the drafting of feedback to CMS as it considers these options.

If you have questions about the Innovation Center’s proposed models and how it will affect manufacturers, Medicare providers, Medicaid programs and patients, contact Amy Bassano ([email protected]), Kevin Kirby ([email protected]) or Andrea Maresca ([email protected]).

Meet the HMA blog contributors

Amy Bassano

Amy Bassano

Managing Director, Medicare
Washington, DC
Kevin Kirby

Kevin Kirby

Managing Director
Washington, DC
Andrea Maresca

Andrea Maresca, MPH

Managing Director, Information Services
Washington, DC

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