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CMS Publishes Proposed Rule Supporting Innovative Value-Based Purchasing Agreements

June 22, 2020

By Melonie Warfel, General Manager, Model N Life Sciences

As part of the administration’s commitment toward lowering drug prices, on Friday, June 19th, CMS published a proposed rule supporting the following:

  • Flexibility to enter into innovative value-based purchasing arrangements (VBPs) with drug manufacturers for new expensive therapies
  • Provide manufacturers with regulatory flexibility to enter into VBPs with payers, including Medicaid
  • Create minimum standards in state Medicaid Drug Utilization Review (DUR) programs designed to reduce opioid-related fraud, misuse and abuse

This is the latest effort by the administration to move toward paying on the basis of value instead of volume while still ensuring that Medicaid continues to get the best price.

This proposed rule also outlines revisions to a number of regulations including but not limited to:

  • How manufacturers should calculate the average manufacturer price (AMP) for a brand name drug when there is an authorized generic available.
  • How manufacturers determine whether to include the value of their patient assistance programs when calculating “best price” including when they are impacted by pharmacy benefit managers (PBM) accumulator programs.
  • State reporting requirements to the Medicaid Drug Rebate Program (MDRP).
  • The definitions of CMS-authorized supplemental rebate agreements in relation to Medicaid Managed Care Organizations (MCOs) and when those sales are exempt from AMP and “best price”.
  • The definition of line extension, new formulation, oral solid dosage form, single source drug, multiple source drug, and innovator multiple source drug for purposes of the MDRP.
  • And it would revise coordination of benefit and third-party liability rules for certain care and payment in Medicaid and the Children’s Health Insurance Program.

As the pace of innovation accelerates, and the desire to increase transparency, flexibility, and innovation around drug pricing evolves, this proposed rule could be a positive outcome for everyone involved.

You can find the full text of the rule here. The deadline for submitting comments is July 20, 2020 and based on the short comment period, we  believe the timeframe for a final rule will be in the fall prior to the upcoming election.

Whatever the final rule contains, Model N is committed to supporting our biopharma customers. We are committed to building solutions for our customers that will allow them to comply and succeed with the new CMS Rule. For more information about the new rule, please join myself and Jesse Mendelsohn from Model N, John O’Brien, former Senior Advisor to the Secretary of Health and Human Services, and Brian McCartney, Senior Director Market Access Policy & Government Reporting from AstraZeneca on July 9, 2020 at 11am PT/2pm ET for a webinar to learn more about the proposed rule changes and how it will impact your ability to comply and succeed. To register, click here.

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