CMS proposes rule that supports value-based drug pricing

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule late Wednesday that would make value-based purchasing agreements between private insurers, state Medicaid programs, and drug manufacturers easier.

The new rule would tie payment for drugs to patient outcomes, a change from the current “best price” model, which forces drug manufacturers by law give to Medicaid the lowest negotiated price.  

“CMS’s rules for ensuring that Medicaid receives the lowest price available for prescription drugs have not been updated in thirty years and are blocking the opportunity for markets to create innovative payment models,” said CMS Administrator Seema Verma in a press release. “By modernizing our rules, we are creating opportunities for drug manufacturers to have skin in the game through payment arrangement that challenge them to put their money where their mouth is.”

Part of the motivation for the change was adapting to new treatment methods coming to market, including gene therapies, which often come with huge price tags.

“While the impact of these therapies can be transformative, their costs are unprecedented,” the statement said. “New approaches to payment are needed to allow the market room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable.”

Read the full press release here.