Background:So what do we mean by value based purchasing arrangements? In this type of agreement, payment is linked to an outcome of a medication instead of another value such as a contract price based on volume or formulary. The better the outcome, the higher the price. Of course, in this type of agreement, there must be clearly defined standards regarding how the outcomes will be defined and measured. Products that are more likely to fall under this type of arrangement are those such as medications for high cholesterol, asthma, hypertension, or treatment of tumors – conditions that can be objectively measured.
In 2010, the Affordable Care Act established CMS’ Hospital VBP program, which rewards hospitals with incentive payments for the quality of care they provide to Medicare beneficiaries. On July 14, 2016, CMS issued Manufacturer Release No. 99 and State Technical Release No. 176, encouraging states “to consider entering into (VBP) arrangements as a means to address, as well as offset, Medicaid’s high cost drug treatments,” and reminding states “that they may extend their Medicaid supplemental rebate agreement to some or all of their managed care prescription claims.” These VBP arrangements are meant to reduce the government’s health spending, but it is unclear what impact they will have on pharmaceutical manufacturers.
Best Price Implications:On the commercial side, if a manufacturer enters into a VBP agreement and a drug is shown to be less effective than anticipated, there could be an impact to Best Price (BP). Manufacturer Release No. 99 and State Technical Release No. 176 also respond to questions pharmaceutical manufacturers have raised about this possibility. The releases note that “CMS has concluded that the impact on a manufacturer’s best price will differ depending on the structure of the VBP arrangement,” and “recommends that when manufacturers negotiate such arrangements with entities, they consult both the statute and implementing regulations regarding the determination of best price.” CMS specifically references Section 1927(c)(1)(C) of the Social Security Act, 42 CFR 447.505(a), and 42 CFR 447.510 for BP requirements.
The releases also encourage manufacturers to enter into VBP arrangements with state Medicaid programs, noting that supplemental rebates provided as a result of VBP would be excluded from BP.
Additional Guidance:Although CMS has not offered definitive guidance on VBP’s impact to BP, the agency did say it is available to address questions on specific arrangements, and encourages manufacturers to submit questions to the CMCS Division of Pharmacy at RxDRUGPolicy@cms.hhs.gov. CMS also indicated that additional guidance based on manufacturer feedback could be forthcoming in future releases.
If your company is exploring VBP arrangements, or you just want to network with you peers and to hear more on this and other hot topics, I strongly recommend you attend IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP) . This event is one of the best well-attended conferences each year and attracts top speakers from the industry. And if you register using code XP2158MISC, you get an additional $100 off of the current registration fee. GPS will be onsite and blogging for the 2nd year in a row, so we look forward to seeing you there!
About the Authors:
Katie Lapins & Dana Zelig Collins, Government Pricing Specialists, LLC, 303.993.6456, K.Lapins@GP-Specialists.com. ; D.Collins@gp-specialists.com