CMS Approves WA Value-Based Purchasing Plan for Hepatitis C Drugs

CMS recently approved Washington state’s value-based purchasing proposal to lower drug prices for Medicaid.

The approval will allow the state to implement a “subscription” model for hepatitis C drugs. Under this model, the state will pay drug manufacturers a fixed rate for an unlimited supply of prescription drugs.

Washington’s proposal is the first to address hepatitis C drugs. 

The state’s governor targeted hepatitis C treatment because of the disease' prevalence in Medicaid populations. Washington has 30,000 HCV patients covered by state healthcare insurance, the Washington State Health Care Authority revealed in April 2019.

Drug manufacturers have made large strides with developing new and more effectively hepatitis C drugs. However, a recent study found that one manufacturer charges as much as $1,000 a pill for a hepatitis C therapy, putting payers back almost $84,000 for a full round of treatment.

The new plan is a step toward Gov. Jay Inslee’s goal of eliminating the virus and its associated costs by 2030. 

Value-based purchasing relies on the drug’s effectiveness. The state and manufacturers are free to negotiate within the bounds outlined by the proposal’s value-based supplemental rebate agreement template. Such boundaries may include a utilization period, outcome-based benchmarks, intervention population for which benchmarks will be measured, and evaluation methodology, according to the CMS approval.

Traditionally, a couple of factors affect Medicaid drug pricing. Dispensing fees, ingredient prices, and the manufacturer’s rebate are all considerations subject to certain federal requirements, according to the Kaiser Family Foundation.

This plan, however, achieves price flexibility because it is not subject to the Medicaid “Best Price” rule, which states that pharmacies must price the drug lower than they would for any other company, organization, or individual in the market.

Oklahoma, Michigan, and Colorado preceded Washington with their CMS-approved Medicaid value-based purchasing plans.

Oklahoma’s plan was the first to pass. The plan was designed to increase patients’ adherence to an antipsychotic drug, according to the National Academy for State Health Policy (NASHP).

The state signed its first value-based purchasing contract with Alkermes for the antipsychotic drug Aristada. As the state Medicaid program continues to hit its adherence goals, the price of the drug will drop over time.

Oklahoma’s second contract with Melinta stipulates that if Orbativ, a drug used to fight bacterial skin infections, does not prove effective according to Melinta’s predicted success rate and if the costs of treatment rise, Melinta will be responsible for providing rebates to cover the additional fees.

Michigan’s value-based purchasing plan, went into effect in September 2018 and Colorado’s plan went into effect in October 2018, according to CMS’s approval letter. Neither state has initiated contracts yet.

The state plan established certain expectations and ground rules for future Medicaid value-based purchasing models like the one in Washington. With 47 states filing over 250 bills for lower drug pricing this legislative session according to the National Academy for State Health Policy (NASHP), the precedent appears to be needed.

The NASHP recently sought expert insight into the process from the states that passed value-based purchasing legislation.

Outcomes-based arrangements are "most effective when used in tandem with other strategies rather than in isolation,” NASHP stated, paraphrasing Cathy Traugott, pharmacy office director of the Colorado Department of Health Care Policy and Financing.

Assigning a project coordinator who is committed to the task of outcomes-based contracting is also useful, added Terry Cothran, director of the University of Oklahoma’s College of Pharmacy.

Rita Subhedar, the state Assistant Administrator for Michigan’s Department of Health and Human Services, also stressed the importance of broad engagement within a Medicaid department to effectively implement these arrangements, including pharmacy, medical, and behavioral health staff,” the NASHP stated.

The NASHP also reported on Oklahoma’s value-based purchasing plan more specifically when the second contract was approved. Small companies were more willing to be flexible and creative with their pricing agreement, the organization found.

In addition, researchers emphasized that the timeline for this type of a plan should not be underestimated. “Each contract requires extensive data analysis to explore the relevant patient population characteristics and potential, measurable outcomes in order to design a viable agreement,” NASHP explained.

Experts will soon have more data on the effectiveness of value-based purchasing models once Oklahoma’s first contract terminates in July 2019. Its three other contracts will end soon as well, providing further insight for future value-based purchasing contracts in Washington and other states.