Value-Based Pricing Bill with New Protections for Medicare and Medicaid Clears House Panel
Executive Summary
Energy and Commerce Committee made some changes to a Trump-era regulation designed to make it easier for manufacturers to enter into value-based drug pricing contracts with commercial payers to limit unintended consequences for Medicaid and Medicare, but most Democrats say the tweaks don’t outweigh the harms of codifying the regulation.
The House Energy and Commerce Committee cleared a Medicaid "best price" bill on 24 May that offers greater protections to Medicaid and Medicare from the impact of pharmaceutical value-based pricing arrangements than were contained in the regulation the bill attempts to codify, but that wasn’t enough to get most Democrats on board with a plan they worry could hurt state and federal budgets.
The Medicaid VBPs for Patients Act (H. 2666 or the MVP Act) cleared the committee on a 31-19 vote. Co-sponsor Rep. Anna Eshoo, D-Calif., was one of three Democrats who joined Republicans in advancing the measure. Other Democratic supporters were Reps. Tony Cárdenas and Scott Peters also of California.
The bill would codify the US Centers for Medicare and Medicaid Services rule that was designed to remove regulatory obstacles to value-based contracting in commercial health plans by allowing more flexibility in Medicaid rules around reporting “best price.”
The pharmaceutical industry has argued the best price rule has limited its experiments with value-based agreements that tie drug rebates to patient outcomes because if they heavily discount or even fully refund a drug for just one patient who does not perform well in the commercial market, this would set a new best price for Medicaid. (Also see "Value-Based Contracting: CMS Final Rule Leaves ‘Multiple Best Price’ Questions Unresolved" - Pink Sheet, 4 Jan, 2021.)
The rule has drawn concerns from Medicaid supporters who worry it will raise drug costs for state Medicaid programs. If codified into law it would become harder to tweak the policy.
To try and attempt to address these concerns the House legislation implemented a few modifications, including a last-minute amendment from Eshoo.
For example, it changes the calculation of average manufacturer price reporting for Medicaid so that it no longer includes payments related to a value-based purchasing agreement for a patient that fails to achieve the target outcome.
Manufacturers of branded drugs are required to offer Medicaid a 23.1% rebate off the manufacturer price or the lowest price available to any payer, whichever results in the better deal for Medicaid.
Including the payments for patients who failed drug treatment in a value-purchased purchasing agreement into the AMP calculation would have the effect of lowering the rebate owed to Medicaid since it would bring down the AMP.
Inflation-based rebates manufacturers owe to Medicaid when they raise their prices above the rate of inflation also rely on AMP calculations.
Edwin Park of Georgetown University’s Health Policy Institute, told the Pink Sheet that the changes in legislation “will be somewhat beneficial, but I don’t think it offsets the risks that I believe the bill still poses by making variable best price reporting a permanent option for manufacturers.”
The bill also tweaks average sales price calculations that determine Medicare Part B drug reimbursement for physician-administered drugs, a factor that wasn’t addressed at all in the Trump-era rule which was focused only on Medicaid.
Originally, the House lawmakers plan was to exclude all value-based arrangement pricing from average sale price calculations, which could have elevated ASP and increased Medicare’s costs. Now, the only value-based sales prices that won’t be included in ASP calculations are those that are exempted from the AMP calculation in Medicaid.
The current version of the bill also gives CMS more flexibility than original House drafts to issue additional guidance and regulations regarding how it implements variable best price reporting – but it can’t revoke the variable best price reporting rule entirely.
Despite the changes to “strip out things that made the process more vulnerable to manufacturer gaming,” Park – along with Democrats who opposed the bill – still felt the measure gives the upper hand to drug companies over Medicaid.
“I feel this bill will not lower the cost of prescription drugs and could in fact increase drug costs to state Medicaid programs and the federal government and for these reasons I can't support the bill,” said Rep. Frank Pallone, the ranking Democrat on the Energy and Commerce Committee, who argued in favor of waiting to see how the rule plays out before codifying it permanently in statue.
Supporters of the bill argued it will help Medicaid programs afford very high cost treatments like cell and gene-based therapies.
“This bill is about access. And it would ensure that Medicaid patients have the same access to game-changing novel gene therapies and the long-term benefits and improved quality of life that they provide as those patients with private insurance,” said Rep. John Joyce, R-Pa. “It is important to remember that two administrations from different parties agree on this rule. And I hope that members on both sides of the aisle can come together on this today.”
"If this were all the awful things that our ranking member has described, the [Biden] administration would be opposed to it. They're not. The administration has kept the policy and continued implementing it....Under these arrangements, if a promised cure doesn't work for a particular patient, then drug companies have to pay a refund. Boy is that menacing? Ah, that's really deeply disturbing. On the Democratic side, that's disturbing to you?" Eshoo said to her fellow party members.
But Pallone countered that while Biden’s CMS has kept the rule, they have said they don’t think its ready to codify. And he pushed back on the notion that it was written to help Medicaid.
“I want to be clear about one thing, state Medicaid programs do not need this bill to enter into value-based payment arrangements, state Medicaid programs, can already do this under current law and some states have. This bill is also not about expanding access to drugs in Medicaid…. Instead what this bill does is blow a hole, a giant hole in Medicaid best price and raises drug costs to the Medicaid program,” said Pallone citing concerns from the National Association of Medicaid Directors and the Medicaid and CHIP Payment Commission (MACPAC).
“This legislation claims the states will be able to benefit from these arrangements, because drug companies will have to offer them to Medicaid. In theory that may sound good on paper, but the reality is the state Medicaid programs do not have the resources to implement or administer these payment models,” Pallone added.
“As far as I can tell from my conversations states aren't that interested in VBP themselves,” Park told the Pink Sheet.
“And I think it's because they think that they are at a big disadvantage in negotiating VBP arrangements with manufacturers, because manufacturers have public data, but they also have a ton of other data. And so they are skeptical that they're going to do better than what they can negotiate anyway, with a sort of traditional supplemental rebate, because the manufacturer knows where they're going to end up anyway. And again, this is mostly about facilitating the adoption in the commercial market. And so, the markup discussions were about helping Medicaid. But this is not, so this is not something that states are clamoring for.”