CMS Reminds State Medicaid Agencies: Accelerated Approval Is Still Full Approval

States are eager to try more aggressive methods to rein in prescription drug costs under Medicaid, and CMS is willing to be flexible in permitting innovative contracting. But the agency is also quietly but firmly making clear that all FDA-approved drugs have to be treated the same.  

The US Centers for Medicare and Medicaid Services made some important decisions about flexibility for state Medicaid agencies trying to manage drug costs in the last week of June.

First, it told Massachusetts it can’t run a closed formulary while still taking mandatory rebates – but made clear it is very open to states that want to opt out of the rebate program altogether to implement more restrictive coverage plans. (Also see "No Closed Formularies In Medicaid Without Forgoing Rebates, CMS Tells Massachusetts" - Pink Sheet, 27 Jun, 2018.)

Then it told Oklahoma that it is allowed to proceed with a plan to enter into outcomes-based supplemental rebate agreements that will mean the state pays less for drugs that fail to deliver a promised longer term benefit. (Also see "Oklahoma Medicaid Plan For Value-Based Contracts Cleared By CMS" - Pink Sheet, 27 Jun, 2018.)

But don’t overlook a different message sent to every state at the same time: drugs granted “Accelerated Approval” require coverage just like any other FDA-approved medicine.

The accelerated approval notice was not highlighted by CMS, but it was attached to the press release announcing the Oklahoma waiver.

The letter notes that FDA’s Accelerated Approval pathway results in a full approval under the same statute as for other drugs and biologics. “Therefore, as with any other drug, if the drug is labeled by a manufacturer that has signed a Medicaid National Drug Rebate Agreement, and the drug meets the definition of covered outpatient drug, then the drug is covered by the Medicaid Drug Rebate Program (MDRP) and is to be covered by state Medicaid programs,” CMS says. “If the FDA subsequently withdraws its approval, the drug would no longer meet the definition of a covered outpatient drug and would not be covered under the MDRP.”

As with any other drug, “states can use utilization management mechanisms such as prior authorization to assure appropriate use of these medications,” the notice adds.

In many respects, the notice should be unnecessary: FDA has always been clear that drugs granted Accelerated Approval are “fully” approved. In fact, the agency explicitly opted not to use the term “conditional approval” to describe the pathway when it was created in 1992 to avoid confusion at that point: the “approval” is no more (or less) conditional than any other approval.

However, there is an inherent difference in the proven level of efficacy in Accelerated Approval, where the endpoints for approval are something other than confirmed clinical benefit (either a surrogate marker “reasonably likely” to predict benefit, or early clinical benefit that still needs confirmation). And so payors have in some circumstances tried to treat AA therapies as still investigational.

The most prominent example involves Sarepta Therapeutics Inc.’s Duchenne Muscular Dystrophy therapy Exondys-51 (eteplirsen), where some commercial payors initially denied coverage on those grounds after the unusually contentious FDA approval. (Also see "Anthem Denies Coverage For Eteplirsen, Citing Lack Of Clinical Efficacy" - Pink Sheet, 7 Oct, 2016.)

Most payors appear to have backed off that position, but the threat of a coverage denial could still be powerful in extracting price concessions for AA therapies. With the letter, CMS has taken that lever away from states even as it says it is willing to support innovative contracting practices.

In some respects, CMS’ actions are similar to the steps taken in 2015 focused on hepatitis C therapies. The agency made headlines for announcing its interest in alternative pricing arrangements – communicated directly to manufacturers in a series of letters. But the agency simultaneously told the state Medicaid directors that they had no choice but to cover the therapies for the approved indications. (Also see "CMS Wants To Facilitate Value-Based Discounts For HCV Drugs In Medicaid" - Pink Sheet, 6 Nov, 2015.)

In this case, CMS is making headlines for allowing states to enter into outcomes-based pricing agreements for Medicaid. But at the same time it is explicitly removing one potential avenue for states to force manufacturers to come to the table. That likely means that outcomes-based pricing agreements will occur only in the context of therapies where manufacturers have already embraced the approach – unless or until a state is willing to take CMS up on the option of dropping out of the rebate program altogether.

From the editors of the RPM Report