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 to date:
- 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: The model seeks new frameworks for Medicaid to pay for 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: Under this model, CMS may develop payment methods for drugs approved under the Accelerated Approval pathway, in consultation with the FDA, to test ways to pay for drugs approved prior to proving clinical benefit. The model seeks to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data.
These three models reveal unique implications for the life sciences industry and the timeline that manufacturers must prepare for a new wave of public value discussions.
Moving forward, life sciences companies should communicate a comprehensive view of pricing – from CGTs to generics – and how investigational medicines can be advanced or slowed based on policy changes.
For CGT manufacturers, success will be determined first by their ability to efficiently identify risk and opportunity in the state and federal policy landscape. Subsequently, they will need to 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.
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Senior Vice President, Reputation and Risk Management | Syneos Health