New CMS Rule Brings Value-Based Purchasing Arrangements to State Medicaid Pharmacy Programs

A new Centers for Medicare & Medicaid Services (CMS) rule, effective July 1, 2022, will offer Medicaid patients access to needed therapies while providing options to engage in payment arrangements – value-based purchasing (VBP) – that allow flexibility for states, including the potential to only pay when a therapy actually works.^1,2

With the advent of the rule – Establishing Minimum Standards in Medicaid State Drug Utilization Review and Supporting Value-Based Purchasing for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability Requirements – CMS has defined VBP as arrangements that align the cost of a drug to an observed or expected therapeutic or clinical value in a population.²

Currently, manufacturers are required to report to CMS the lowest price per dosage form and strength of a drug that is available from the manufacturer to any wholesaler, retailer, provider, health maintenance organization, non-profit entity, or a governmental entity within the United States. However, due to the unique circumstances of VBP arrangements, this interpretation may result in setting a best price that is $0.²

The new rule provides drug manufacturers with two options for reporting best prices, depending on whether the manufacturer offers VBP to all states:

• Manufacturers that offer a VBP arrangement to all states will report a best price that includes varying best price points for a single dosage form and strength based on that VBP arrangement in addition to a non-VBP best price.
• Manufacturers that do not offer VBP arrangements to all states will be required to report a single best price (which would include all prices, including applicable discounts, rebates, or other transactions that adjust prices to the best price eligible entities, including such transactions from VBP arrangements not offered to states).²

Similarly, states will have the option of participating in VBP arrangements that manufacturers offer to all states or receiving rebates based on the manufacturer’s non-VBP best price.²

Expert input needed when implementing VBP arrangements

The new CMS rule – aka the Multiple Best Prices Rule – broadly defines measures of drug value to permit flexibility by Medicaid programs to negotiate the specific terms of each VBP arrangement.² Pharmacoeconomists, clinical pharmacists, data analysts, and a variety of other experts may play critical roles in ensuring that programs engage in the best VBP arrangement for their needs.

CMS notes that manufacturers and payers may consider evidence-based or outcomes-based measures in VBP arrangements. Evidence-based measures link the cost of a drug to existing evidence of effectiveness and potential value for specific uses. Outcomes-based measures link the cost of a drug to that drug’s actual performance in a patient or a population or a reduction in other medical expenses.²  

Measures utilized in VBP arrangements can present operational challenges and often require the following:

• A feasibility assessment for tracking the measure
• Implementation of clinical monitoring programs to manage VBP contract terms
• Data-driven platforms to aggregate data and monitor outcomes³

Due to the administrative burden associated with implementing VBPs, Medicaid programs should strategically assess VBP arrangements before entering into such contracts. This may include conducting a feasibility assessment to identify appropriate therapeutics to pursue VBP and an assessment of potential savings impact.³

For example, to address this challenge, Clinical Pharmacy Services has developed scoring tools to select appropriate medications for a VBP arrangement, in addition to developing methodologies for determining appropriate value-based prices for therapeutics. These scoring tools and methodologies will be of particular importance to stakeholders to systematically evaluate multiple proposed VBP arrangements.

Number of VBP arrangements available to states may increase

Given that the CMS Multiple Best Prices Rule will be implemented to assist manufacturers and states to participate in VBP arrangements in a manner that is consistent with the law, the number of VBP arrangements available to state Medicaid programs may increase.

CMS recommends that each state should consider the potential value and consequences of entering into VBP arrangements.²

References

1. Centers for Medicare & Medicaid Services. Medicaid Program: Delay of Effective Date for Provision Relating to Manufacturer Reporting of Multiple Best Prices Connected to a Value Based Purchasing Arrangement; Delay of Inclusion of Territories in Definition of States and United States; Correction [webpage on the internet].  Baltimore (MD): Centers for Medicare & Medicaid Services; 2021 Dec 17 [cited 2022 Jun 2]. Available from: https://www.regulations.gov/document/CMS-2020-0072-30255.
2. Centers for Medicare & Medicaid Services. Medicaid Program: Establishing Minimum Standards in Medicaid State Drug Utilization Review and Supporting Value-Based Purchasing for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability Requirements [webpage on the internet].  Baltimore (MD): Centers for Medicare & Medicaid Services; 2020 Dec 31 [cited 2022 Jun 2]. Available from: https://www.regulations.gov/document/CMS-2020-0072-30223.
3. AMCP Partnership Forum: Advancing Value-Based Contracting. J Manag Care Spec Pharm. 2017;23(11):1096-1102. doi:10.18553/jmcp.2017.17342