HHS Introduces Models for Lowering Prescription Drug Spending

The Department of Health and Human Services (HHS) has released three models intended to bring down prescription drug spending for consumers in Medicare and Medicaid.

“These selected models will test strategies to make it easier for Medicare patients to afford and access needed prescriptions at $2 or less, help expand access to cutting-edge cell and gene therapies for people with Medicaid, and help ensure drugs already on the market are safe and effective,” Liz Fowler, PhD, JD, CMS Deputy Administrator and director of the CMS Innovation Center, said in the press release.

“We look forward to working on these models and helping to lower drug costs for Americans with Medicare and Medicaid.”

The first model is the Medicare $2 Drug List or the Medicare High-Value Drug List model. This model tests standardizing the Part D benefit for high-value generic drugs. It evaluates the impact that this approach would have on three measures: healthcare spending, patient outcomes, and medication adherence.

HHS argued that the low-cost, consistent copayment would make healthcare spending more predictable for beneficiaries. Additionally, the model is compatible with the Inflation Reduction Act’s $2,000 Part D out-of-pocket spending limit which goes into effect in 2025.

The concept has already been tested in some capacity: large retail pharmacy chains often offer standardized drug lists. The Part D Senior Savings (PDSS) model which established voluntary co-payment limits for insulin drugs set the groundwork for this new model.

The second model is the Cell and Gene Therapy Access model or CGT Access model. The target population for this model is Medicaid beneficiaries. The model allows for multi-state agreements with cell and gene therapy manufacturers using outcomes-based payment models.

The CGT Access model would be budget neutral. It would allow pooled bargaining power which could lead to lower price tags and it would relieve states of the responsibility for overseeing outcomes-based agreements during the test.

Like the Medicare $2 Drug List, elements of this model have been tested already. Previous drug spending models implemented pooled purchasing agreements between states, state drug price transparency processes, and similar outcomes-based payment models, such as the Louisiana and Washington models.

CMS will develop the CGT Access model in 2023 with a test launch in 2026.

The final model is the Accelerating Clinical Evidence Model. This model targets drug spending for fee-for-service Medicare beneficiaries. Qualifying fee-for-service Medicare Part B providers would be required to participate.

“The Model would adjust Medicare Part B payment amounts for Accelerated Approval Program (AAP) drugs to give manufacturers an incentive to expedite and complete confirmatory clinical trials,” the report explained.

HHS posited that this model would lessen payer concerns about covering drugs with delayed confirmatory trials or inadequate efficacy data. It would also align manufacturer incentives, pushing them to release drugs faster.

HHS directed CMS to launch this model as soon as possible with the involvement of the FDA.

Federal entities have pursued various solutions for improving drug pricing. For example, the Inflation Reduction Act permitted Medicare to handle drug price negotiations, among other prescription drug spending reduction measures. Payers have expressed concerns that there were no penalties in place for pharmaceutical companies that shifted costs to private health plan members and called for further action.