On February 14, the U.S. Department of Health and Human Services (HHS) announced that the HHS Secretary had selected three new payment and service delivery models for testing by the Center for Medicare & Medicaid Innovation (CMS Innovation Center). HHS has directed the CMS Innovation Center to test whether these new models result in lower prescription drug costs, promote accessibility to therapies, and/or improve quality of care. This announcement is in response to President Joe Biden’s October 2022 Executive Order 14087, “Lowering Prescription Drug Costs for Americans,” which directs the Secretary of HHS to consider testing new health care payment and delivery models “that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.”
The selected models, which incorporate input from experts within CMS, other federal agencies, and over 40 external stakeholders, target outcomes-based arrangements for cell and gene therapies under state Medicaid programs, payment policies for accelerated approval drugs under Medicare Part B, and possible offerings for low, fixed copayments across all cost-sharing phases of the Part D drug benefit for a standardized Medicare list of generic drugs.
The Secretary outlined these models in a Report, as described below. Details on each model are limited at this time. Interested stakeholders should monitor for additional guidance and any comment opportunities.
The Cell and Gene Therapy Access Model
Under this model, state Medicaid agencies would have the option to direct CMS to coordinate and administer multistate, outcomes-based agreements (OBAs) with manufacturers for certain cell and gene therapies. CMS would also have responsibility for implementing, monitoring, reconciling, and evaluating the financial and clinical outcomes outlined in the OBAs. The model would be voluntary for both states and manufacturers. CMS states that the cell and gene therapy model would allow CMS, on behalf of the states, to pool bargaining power to obtain discounted pricing, condition the cost of cell and gene therapies on outcomes, and shift the burden of administering complex outcomes-based agreements from state Medicaid agencies to CMS.
The Secretary has directed the CMS Innovation Center to begin model development in 2023 and launch the model test as early as 2026. The Secretary also has directed the CMS Innovation Center to consider starting the model with a single therapeutic indication and has suggested sickle cell disease.
The Report also highlights recent regulatory changes permitting manufacturers to report multiple best prices for value-based arrangements in certain situations under the Medicaid Drug Rebate Program. However, such changes have important limitations that can affect willingness of manufacturers to enter into such arrangements. The Report notes that to date, no manufacturers have used the option of reporting multiple best prices.
The Accelerating Clinical Evidence Model
This model would adjust Medicare Part B payment amounts for Accelerated Approval Program (AAP) drugs. A drug may be approved under the AAP if the Food and Drug Administration (FDA) determines that the drug provides a meaningful therapeutic benefit to patients over existing treatments and has an effect on a surrogate or intermediate clinical endpoint that is reasonably likely to predict clinical benefit (e.g., a laboratory measurement or radiographic image). This is typically accompanied by a requirement that the applicant conduct, with due diligence, a post-market study to verify clinical benefit. Congress recently enacted various changes to the AAP in order to expedite the completion of such confirmatory studies.
Under the new proposed model, CMS, in consultation with the FDA, would also develop payment methods for drugs approved under AAP to encourage evidence development via timely completion of confirmatory studies. The Report notes concerns surrounding the timely completion of confirmatory studies under the AAP and acknowledges recent CMS actions to narrow Medicare coverage through its coverage with evidence development process. The Report states that the model will seek to incentivize manufacturers to expedite and complete confirmatory studies and improve access to post-market safety and efficacy data.
CMS states that this model would be mandatory for all Part B fee-for-service providers, but notes that it could expand to other programs as well.
The Report, however, provides little detail on what changes CMS would make to the Part B payment amounts for these AAP drugs. CMS is directed to begin discussions with FDA regarding this model in 2023 but does not propose a timeline for implementation. The Report states that CMS may publish an Advance Notice of Proposed Rulemaking after model development and before engaging in rulemaking.
Stakeholders have previously raised significant concerns regarding prior CMS proposals to implement mandatory prescription drug payment policy changes under Medicare Part B through Innovation Center models due to concerns that such policies potentially adversely affect beneficiaries’ access to therapies. This model, if implemented, likely may raise similar concerns, as well as concerns regarding CMS policies that may undermine the AAP and its goals to address unmet medical needs for patients with serious conditions.
The Medicare High-Value Generic Drug List Model
This model would permit Medicare Advantage and standalone Medicare Part D plans to offer a low, fixed copayment of $2 for a month’s supply of drug across all cost-sharing phases of the Part D drug benefit for a standardized list of approximately 150 “high-value” generic drugs. CMS states that the standardized drug list would target common chronic conditions among Medicare beneficiaries, such as hyperlipidemia and hypertension, and would not be subject to step therapy, prior authorization, quantity limits, or pharmacy network restrictions.
The Report also states that CMS “will explore flexibilities to encourage plans to participate in this model” but does not state what those flexibilities or incentives may be. The Report does not specify a start date for this model, but HHS “directs CMS to request input from stakeholders” and announce program details “as soon as operationally feasible.”
Additional Areas of Research
In addition to the three models described, the Secretary has directed the CMS Innovation Center to continue to evaluate potential models to improve biosimilar adoption, to consider potential Medicare fee-for-service options to support cell and gene therapy, and to consider allowing Medicare beneficiaries and providers to use prescription drug data to evaluate drug alternatives, assess utilization management review requirements, compare price by fulfillment locations, and shop plan options.
For more on other breaking drug pricing related news, visit Sidley’s Global Drug Pricing page.
Attorney Advertising—Sidley Austin LLP is a global law firm. Our addresses and contact information can be found at www.sidley.com/en/locations/offices.
Sidley provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers. Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer.
© Sidley Austin LLP
