CMS Rules Are Receiving a Change Involving Drug Agreements

CMS rules are receiving a change that gives states more flexibility to enter into value-based purchasing agreements with drugmakers for new and pricey products. This proposed change in rule by the Trump administration will remove current barriers that allow each state to develop these agreements with current drug companies. CMS also plans to revise how a drug maker has to calculate the average manufacturer price of a drug that is a brand name that also has an authorized generic version.

State & Drug Manufacturers Flexibility

CMS rules are receiving a change that will not only create state drug company relationships but also a minimum standard for Medicaid drug utilization programs intended to combat opioid fraud and misuse. “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 statement.

New Payment Arrangements

According to CMS, the current regulations hinder the payers and manufacturers from designing arrangements of payment based on the quality of drugs. “These proposals would support the healthcare system’s move to paying on the basis of value instead of volume and increasing accountability for outcomes, as insurers would be able to better negotiate discounts based on a drug’s effectiveness,” CMS said in a release. “In addition, more widespread adoption of payment arrangements based on value could lead to the collection of more evidence on clinical outcomes for a given therapy.”

Pricing Best Practices

The new rules proposed also gives manufacturers some room on their reporting obligations around the average manufacturer price as well as being able to offer the best price through the creation of value-based purchasing arrangements. “It will also clarify that [value-based purchasing] arrangements can be defined as ‘performance requirements’ under the definition of ‘bundled sale’ which will also facilitate [value-based purchasing] arrangements, especially for small population drugs,” CMS said in a fact sheet.

“Prior to this statutory change, manufacturers included the sales of the authorized generic in the [average manufacturer price] of the brand name drug which resulted in lower AMPs and reduced rebates paid for the brand name drug.”

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