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AAMC Submits Comments on Medicaid Prescription Drug VBP Proposed Rule

July 24, 2020

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CONTACTS
Mary Mullaney, Director, Hospital Payment Policies

The AAMC submitted comments on July 20 to CMS’ proposed rule that would allow drug manufacturers and states to enter into prescription drug value-based purchasing (VBP) arrangements.  The proposed rule also proposes changes to patient assistance programs and the definition of line extension prescription drugs.

Under the proposed VBP arrangement, reimbursement for new drugs would be based on health outcomes or evidence-based measures.  CMS is proposing to “align pricing and/or payment to an observed or expected therapeutic or clinical value in a population” but does not describe how it will evaluate these outcomes or what information will be used to determine whether a drug meets “an observed or expected therapeutic or clinical outcome.”

The AAMC expressed concern that the proposed rule offers few details on how these VBP arrangements would be structured without imposing financial and reporting burdens on states and providers. It is unclear if savings would be shared with providers through higher reimbursement for items and services furnished to Medicaid beneficiaries. Furthermore, the proposed rule does not specifically address provider engagement in these VBP arrangements. 

The AAMC is also concerned about the potential impact of the VBP arrangements on the Medicaid Drug Rebate Program (MDRP) and the calculation of best price.  CMS is proposing changes to the MDRP to provide increased flexibilities for manufacturers and states to enter into VBP arrangements. However, the proposed rule is silent on how these changes will impact the MDRP and the calculation of best price. The AAMC, in its comments, urged CMS to not finalize the proposed rule until the full impact of the proposals on the MDRP is understood and offered to meet with CMS to discuss how to structure VBP arrangements that will not only benefit Medicaid but also patients and the entire health care system. 

Additionally, CMS is proposing changes to the calculation of best price or to the average manufacture price (AMP) for drugs for which manufacturers provide financial assistance to patients who receive them. Currently, amounts paid by manufacturers under the assistance programs are ignored when determining a drug’s best price or AMP. CMS is proposing that drugs will only be excluded from the best price calculation if the manufacturer ensures that the full value of the assistance is passed on to the consumers. The AAMC said in its comments that it supports the proposal that financial assistance programs benefit the patient.

Finally, CMS is proposing a new definition for line extension drugs under the MDRP. A line extension drug is a new formulation of an existing drug, such as an extended release formula. Under the MDRP, a line extension may be subject to a higher rate. CMS is concerned that some manufacturers may underreport line extensions to avoid paying the higher rebate.  The AAMC appreciates CMS’ acknowledgement of the issue and supports finalizing this proposal.

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