Value-Based Purchasing Rule For Medicaid Rx Drugs

Writing in Health Affairs, outgoing CMS Administrator Seema Verma touts how the Trump Administration helped paved the way for more outcomes-based contracts on prescription drugs by clarifying that these contracts won’t run afoul of the Medicaid “best price” provision — provided that Medicaid programs are also offered the same outcomes-based contracts or at least a “bundled” price that approximates the effective result of those arrangements. As ICER has noted before, these outcomes-based contracts can be quite helpful, particularly for one-time cell and gene therapies for which the long-term durability of effect is not yet fully known.

Administrator Verma repeatedly refers to these types of contracts as “value-based arrangements,” and the single word “value” appears 57 times throughout the article. But at the risk of being overly semantic, I’d argue that this type of contract — where the payer receives a partial refund if the desired clinical outcome isn’t achieved — doesn’t necessarily represent good “value” unless the underlying price is scaled to how well the drug is expected to improve patients’ lives. Read more here.

(Source: Seema Veema; Health Affairs; 1/22/21)