Proposal Allows for Increased Value-based Payment Arrangements for Rx

CMS proposed changes to Medicaid Best Price regulations in order to remove contracting barriers for value-based payment arrangements.

June 25, 2020

On June 17, 2020, the Centers for Medicare & Medicaid Services (CMS) proposed changes to Medicaid Best Price rules that are intended to increase value-based payment arrangements for prescription drugs. Value-based payment arrangements could allow better price links to outcomes or even allow manufacturers to provide expensive one-time therapies at no cost if the therapies do not work as intended. This change is in contrast to current Best Price rules, where any rebates that manufacturers offer if a drug fails for certain patients – whether in a commercial plan or in another public program – could determine the Best Price and that rebate amount would be required for all dosages of any drug covered under state Medicaid programs, even when the drug actually works. This structure has limited the ability of value-based payment arrangements to be robustly executed.

The three key reform proposals would:

  • 1 | Define value-based purchasing. The proposed definition is “an arrangement or agreement intended to align pricing and/or payments to an observed or expected therapeutic or clinical value in a population (that is, outcomes relative to costs).
  • 2 | Allow for long-term measurement of outcomes. Long-term measurement of outcomes can guarantee a plan sponsor’s durability of effect when covering a high-cost product.
  • 3 | Allow for a bundled sales approach. This would expand the definition of Best Price for a given product beyond a single price to permit manufacturers to report varying Best Price points for a drug under a value-based purchasing arrangement.

If implemented, the proposal would:

  • Allow all plans to require that improvements in health (such as remission from cancer, improvements in vision or muscle strength, or even an outcome as straightforward as a patient remaining alive) have to be sustained for 4 or more years in order for manufacturers to be paid.
  • Enhance more widespread collection of real-world outcomes data, since patient outcomes over time would serve as the basis for payment.
  • Better inform medical decision-making and ensure better precision when prescribing, which could lower plan and member costs and improve outcomes for patients.
  • Accelerate transition away from rebate-driven prescription drug contracts to ones based on value.

The proposal is open for comment for 30 days, and the Business Group will be drafting comments. If you would like to discuss the proposal or submit suggestions for comment inclusion, please contact Tiffany McCaslin at

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