In a highly anticipated action following President Biden’s executive order “Lowering Prescription Drug Costs for Americans,” the Center for Medicare & Medicaid Innovation (CMMI) released three new models to support the drug pricing provisions in the Inflation Reduction Act (IRA). The announcement marks the latest milestone in federal drug pricing regulation. The models, which will be used as the basis for pilot programs, highlight the need for urgency throughout the life sciences industry as the White House signaled intentions to allow Medicare to negotiate prices for more drugs, accelerate the timeline for drug negotiation and increase penalties for drug price increases in the commercial marketplace.
Manufacturers must: navigate the implications of the new models and the intensifying attention drug pricing will draw in the lead up to the 2024 elections.
Three models announced (so far):
Medicare High-Value Drug List Model: Known as the $2 Drug List, the model seeks to standardize how much Medicare patients pay for certain generic drugs, which particularly impacts Part D plans.
Cell & Gene Therapy (CGT) Access Model: Aimed for Medicaid beneficiaries, the model seeks new frameworks for Medicaid to pay for expensive FDA-approved CGTs. The pilot will include participating state Medicaid agencies and selected manufacturers to determine if a CMS-led approach for administering outcomes-based agreements (OBAs) for CGTs can improve access and reduce costs.
Accelerating Clinical Evidence Model: Allows CMS to develop payment methods for drugs approved under Accelerated Approval pathway, in consultation with the FDA, to test ways to pay for drugs approved without yet proving clinical benefit. The model seeks to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data.
The three models reveal unique implications for the life sciences industry and the timeline that manufacturers have to prepare for a new wave of public value discussions.
Potential concerns for manufacturers:
If successful, CMMI maintains the authority to broaden all three payment and delivery models into existing programs without Congressional approval.
While the CMMI roadmap will likely be followed by a public comment period, the details released thus far present manufacturers with significant considerations for both commercialized products and pipeline assets.
Manufacturers of drugs for common, chronic conditions will need to consider the implications of generic alternatives as Medicare prescription drug insurers grapple to meet a flat $2 copay.
As the list of approximately 150 medicines impacted is announced, the model presents similarities to a prior pilot test – that set a $35 copay for insulins – and the recent announcement by one insulin manufacturer to reduce the price for its most prescribed insulins by 70%.
CGT manufacturers will need to closely monitor the announcement of the CGT model details:
As CMS seeks to negotiate pricing, access, and outcome agreements (OBAs) with manufacturers for participating states for selected cell and gene therapies, developers will need to address new payer concerns with affordability, efficacy and durability.
With more cell, gene and tissue-engineered therapies set to enter the market in 2023, manufacturers must prepare to explain pricing and reimbursement strategies as barriers to patient access are increasingly debated across stakeholder groups.
Another layer of pressure comes as drug pricing watchdog groups plan to update cost-effectiveness models to account for expensive CGTs this year.
Manufacturers with therapies that have received or are preparing for Accelerated Approval immediately responded:
Trade associations cautioned against the potential negative impact to medical advancement and innovation as well as the use of surrogate or intermediate clinical endpoints.
Manufacturers are warning that drug pricing legislation will discourage new therapies coming to market, and these new models would further limit innovation.
With the announcement of the models, CMS also requested increased adoption of biosimilars, data access to support price transparency, and access to cell and gene therapies in the Medicare program.
What life sciences companies can do:
Manufacturers should communicate a comprehensive view on pricing – from CGT to generics – and how investigational medicines can be advanced or slowed based on any policy changes.
For cell and gene manufacturers, success will be determined by a manufacturer’s ability to efficiently identify risk and opportunity in the state and federal policy landscape and execute a coordinated value and access communications strategy that addresses the unintended consequences to reducing payment for CGTs.
Manufacturers with current or planned investigational medicines in the Accelerated Approval pathway should act quickly to demonstrate the value that these drugs deliver across the healthcare continuum and meet the same statutory standards of safety and substantial evidence of effectiveness as those granted traditional approval.