By Jeff Myers, Senior Vice President, Reimbursement Strategy and Market Access, Catalyst.

On February 14th, CMS released its answer to President Biden’s Executive Order to “do something” to lower drug prices in the public payor programs.  CMS proposes two pilots for Medicare, one straightforward –a narrow, standardized list of common generics for which beneficiaries should only be charged $2 – and one definitely not – a “repricing” of payments for drugs approved under the accelerated approval pathway.  The latter deserves its own post, which will come later, but the third proposal, affecting Medicaid, merits further examination as it covers a far larger population and continues the expansion of the federal government’s direct involvement in access and pricing decisions for cutting edge therapeutics.

Via the Innovation Center, CMS proposes to create a voluntary program which would manage OBA (outcome based agreements) for selected cell and gene therapies.  Under this program, CMS would negotiate pricing, access, and outcome agreements with manufacturers for participating states. To be clear here: the states would continue to face significant financial participation to provide these products to their Medicaid beneficiaries and the rebate provisions mandated under the Medicaid Prescription Drug Act would continue to be in effect.

Sickle Cell Disease (SCD) is specifically discussed in the proposal, and addressing the restrictions and challenges of access for these new therapies for this disease would be very valuable for those who would benefit. In general, C&GT companies and trade associations have been supportive of OBA reimbursement designs, and the CMS proposed pilot does address some very real problems facing not just SCD products but C&GT therapies overall; it is demonstrable that market access for these products face strenuous utilization management and outright coverage restrictions as the states attempt to manage the budget impact of these products.

Furthermore, very few states have the staffing and other resources needed to manage OBA contracts which impact rare disease populations in the Medicaid program, as these contracts can be very complex with potentially multi-year measurements of outcomes.  This creates further challenges for the use of new reimbursement models.

Limitations such as these slow down uptake, which is a problem for manufacturers, and is particularly challenging when a high proportion of patients in need are in public payor programs like Medicaid.  The impacts on patients are real, as treatments are delayed or denied, which ends up causing unnecessary suffering.

So is this new approach a fix to all of the problems, or are there downstream consequences?  I would suggest C&GT companies carefully consider the downside risks of having CMS be the arbiter of market access, payment terms and outcomes for OBAs.

CMS itself notes that a majority of states already participate in multistate negotiating consortiums to manage high cost medications.  Under this model, states voluntarily come together to streamline and standardize access to a specific class of medications in exchange for additional rebates and/or price considerations for their Medicaid programs.  Why not use this design to fix the issues CMS identified in the proposal?

The short answer is the Biden Administration is far more supportive of centralized “negotatiations” which are nothing of the sort.  Anyone who doubts need only look to the passage and implementation of the IRA Medicare maximum fair price (MFP) program and the new inflation adjusted rebate requirements in Parts B and D.  Under a partisan reconciliation bill rammed through Congress without one vote from the minority, Democrats created a whole new “rebate” program which is generally not subject to judicial review and has incredibly high punitive penalties for those manufacturers that do not immediately fall in line.  In fact, last week’s release of the proposed rules to implement this statute is not “proposed” at all; the phrase that pays for almost all the important subsections is “CMS is issuing final guidance on this subsection” even though the public had not seen this before release.

This is not to say that steps to encourage OBAs should ignored – CMS should allow private organizations to work with states to address the issues that OBAs raise for state management of their Medicaid program.  Medicaid observers know that the federal/state partnership is no longer a partnership of equals; the program is now dictated by CMS, with acquiescence by the states, who are dependent on the cash flows the Medicaid program provides.

Developers of products targeted at small populations covered by the public payor programs should take heed; your market access and pricing models are now driven more than ever by the federal government.