ADVI Instant: HHS Releases CMMI Drug Pricing Models Testing Report

Executive Summary

On Feb. 14, 2023, the Department of Health & Human Services (HHS) released “A Report in Response to the Executive Order on Lowering Prescription Drug Costs for Americans”. The report describes three models the HHS Secretary has selected for testing by the CMS Center for Medicare and Medicaid Innovation (CMMI) and three areas for additional research. President Biden directed CMMI to issue this report in the “Executive Order on Lowering Prescription Drug Costs for Americans” that was released on Oct. 14, 2022, which directed HHS to consider testing “new healthcare payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.” Report highlights include:

  • CMMI will test the following models
    • The Medicare High-Value Drug List Model in Medicare Part D
    • The Cell & Gene Therapy Access Model in Medicaid
    • The Accelerating Clinical Evidence Model in Medicare Part B
  • The Secretary directs CMS to begin developing the Medicare Part B Accelerating Clinical Evidence Model and the Medicaid Cell & Gene Therapy Access Model in 2023 and gives further direction to launch the CGT Access Model as early as 2026
  • The Secretary directs CMMI to continue to evaluate potential models in
    • Accelerating Biosimilar Adoption
    • Data Access Changes to Support Price Transparency
    • Cell and Gene Therapy Access in Medicare Fee-for-Service (FFS)

ADVI Advisors’ initial reaction to the Cell & Gene Therapy Access Model was mixed. They highlighted that the approach CMS proposes is unprecedented and that states would have to trust CMS has the skills, knowledge, and expertise to perform the activities they outline. 

Please see below for a full summary of the report. ADVI will provide additional insights on the models from our Advisors.

The Secretary’s Selected Models

1. Affordable Drugs Made Simple – The Medicare High-Value Drug List Model (Medicare Part D)

  • CMMI will test a model in which Part D sponsors are allowed to offer approximately 150 “high-value generic drugs” with a maximum copayment of $2 for a month’s supply across all phases of coverage up to the out-of-pocket limit.
  • The report states that this model is designed to improve access, address affordability, and advance health equity and outcomes, and that it builds off the Part D Senior Savings model, noting that model’s significant uptake and anticipated improved adherence.
  • Medicare will define the standard set of drugs on the Medicare High-Value Drug List, which would include drugs that treat common chronic conditions such as hyperlipidemia and hypertension. These drugs would not be subject to utilization management, including step therapy, prior authorization, quantity limits, or pharmacy network restrictions.
  • This model will test whether providing access to high-value generic medications at stable, predictable copayments increases beneficiary adherence to chronic care medications, improves clinical outcomes, and reduces healthcare costs. The potential evaluation measures for this model may include expenditure and quality of care metrics.
  • This model would apply to beneficiaries enrolled in participating Medicare Advantage Prescription Drug plans (MA-PDs) or standalone prescription drug plans (PDPs).
  • The Secretary directs CMS to request input from stakeholders and announce model specifications as soon as operationally feasible.

2. The Cell & Gene Therapy Access Model (Medicaid)

  • CMMI will test a Medicaid-focused Cell & Gene Therapy (CGT) Access Model with outcomes-based agreements (OBA) aiming to expand access and improve outcomes for underserved populations who can benefit from high-cost therapies in areas like sickle cell disease and oncology while reducing healthcare costs. State Medicaid agencies would voluntarily opt-in to the CGT Access Model with participating/selected manufacturers.
  • The CGT Access model would allow CMS on behalf of state Medicaid agencies to:
    • (1) secure discounted pricing based on the pool of participating states
    • (2) condition the cost of CGT on patient outcomes
    • (3) enable CMS to administer OBAs for state Medicaid agencies
  • Although many state Medicaid agencies have experience in pooled purchasing agreements, rebate programs, and innovative models for financing high-cost drugs, the report notes that a federal model would build off these initiatives to deliver a more permanent framework, in place of states pursuing these agreements individually with CGT manufacturers.
  • The report states that executing multi-state OBAs through CMS may “simplify market access” for manufacturers.
  • Model evaluation may look at changes in access to therapies, patient outcomes, utilization, cost of care spend (drug, out-of-pocket, and total program) as well as drug discounts achieved.
  • CMS is considering three potential implementation options:
    • (1) outcomes-based payments with a portion paid upfront and the remainder paid based on clinical milestones
    • (2) outcomes-based rebates with a payment upfront and a rebate due if a clinical outcome is not met
    • (3) outcomes-based annuities with set payments released over time as patients achieve specified clinical outcomes
  • The model is expected to be developed in 2023 with details to be shared in 2024-2025 and a potential launch as early as 2026. CMS may implement the model with one therapeutic indication, potentially sickle cell disease, and could expand to other indications if the model is deemed successful.

3. Paying for Drugs that Work: The Accelerating Clinical Evidence Model (Medicare Part B)

  • CMS will test a model that will adjust Medicare Part B payment amounts for Accelerated Approval Program (AAP) drugs with the goal of incentivizing manufacturers to expedite and complete confirmatory clinical trials.
  • CMS will work with FDA to consider different approaches to adjust provider payments for AAP drugs. The report notes that these adjustments will be “structured in a manner that attempts to avoid penalizing physicians or beneficiaries for choosing (or avoiding) an accelerated approval treatment.”
  • When designing the model, CMS will consider recommendations from the Medicare Payment and Advisory Commission (MedPAC), the Medicaid and CHIP Payment and Access Commission (MACPAC), and others who are studying the AAP process.
  • The proposed model evaluation will consider metrics to assess quality and financial impacts. Example metrics include the following:
    • An assessment of the rate of study completion within the proposed study duration of confirmatory trials
    • Total costs to the Medicare program
    • Beneficiary-focused metrics around access, safety, health outcomes, and quality of care
    • Price trends of accelerated approval drugs and Part B drug spending
  • This model will test if targeted adjustments on payments for AAP drugs accelerate confirmatory trial completion, provide timely information on the safety and effectiveness of AAP drugs on the market, facilitate earlier withdrawals of AAP drugs when appropriate, and reduce Medicare spending on drugs that do not have confirmed clinical benefit.
  • The report notes that the Secretary will consider how to treat drugs with multiple indications.
  • This model would apply to Medicare FFS beneficiaries and participation would be mandatory for applicable Medicare Part B FFS providers.
  • The Secretary directs CMS to begin consultation with FDA to develop the model in 2023. If determined appropriate, CMS will request input from stakeholders with a targeted launch as soon as feasible.

Additional Areas of Research

The Secretary directed CMMI to continue to evaluate potential models in the following areas:

1. Accelerating Biosimilar Adoption

  • The report notes that even though the IRA increases the Part B add-on payment for certain biosimilars from 6% to 8% of the ASP of the reference biological product, “early feedback from provider groups and hospital systems have suggested that additional actions could be taken to encourage such adoption”.
  • The Secretary directs CMMI to continue to investigate the following areas of consideration for improving biosimilar adoption:
    • Aligning biosimilar cost-sharing and payment incentives for providers and beneficiaries
    • Creating shared savings arrangements and/or payment bundles for therapeutic classes
    • Adjusting payment methods to increase competition and promote investment in biosimilar development
  1. Data Access Changes to Support Price Transparency
  • The report notes that CMS is building on efforts made in the CMS Interoperability and Patient Access Final Rule (link) and Transparency in Coverage Final Rule (link).
  • The Secretary directs CMMI to explore models or other activities (such as proposals, algorithm improvements, personalized recommendations, etc.) that could allow beneficiaries and providers to “use prescription drug data to consider alternatives, assess utilization management review requirements, compare price by fulfillment locations, and shop plan options”.

3. Cell and Gene Therapy Access in Medicare FFS

  • The Secretary directs CMMI to consider potential FFS options that would complement the CGT Access Model.
  • The report notes that opportunities may exist to test bundled payments, that could replace FFS billing during extended care episodes associated with CGT.
    • Payment could be structured to include site neutrality, quality adjustment, and “better care coordination by incentivizing providers to optimize outcomes and manage side effects that result in additional acute care utilization.”
  • CMS would study the impact of this program on reducing beneficiary costs, improving beneficiary access and quality of care, and reducing overall Medicare spending.

Approach for Developing Models

As part of the model selection and development process, CMMI reviewed policy reports, prescription drug affordability studies, and previous model concepts and solicited ideas and input from internal and external stakeholders. CMMI solicited input from experts within CMS, other federal agencies, and more than 40 external stakeholders across the healthcare system to help further develop and refine the selected concepts.

CMMI’s goal is to preserve or enhance quality while decreasing or maintaining costs, and requiring evidence that a model addresses a defined population with care deficits leading to poor clinical outcomes. CMMI’s model development was established within the framework of these goals with criteria based on the Executive Order and their own strategic priorities. The following criteria were used to develop and prioritize model options:

  1. Affordability: Does the model have the potential to improve affordability of prescription drugs by either lowering overall drug prices or directly lowering out-of-pocket drug costs for Medicare and/or Medicaid beneficiaries?
  2. Accessibility: Does the model promote access to innovative drug therapies and high-value care, thereby enhancing the quality of care, beneficiary experience, and outcomes, while advancing health equity?
  3. Feasibility of Implementation: Does the model align with the goals of the IRA, and is it consistent with operational and regulatory limitations? For example, would the model be consistent with implementing the IRA without delay or interference and would the model have the potential to scale beyond the test’s initial scope and duration?
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Jared Samuels