On February 14, 2023, the Center for Medicare & Medicaid Innovation (CMMI) announced several models under consideration, in response to President Biden’s executive order “Lowering Prescription Drug Costs for Americans” from October 2022. The innovation center had been given 90 days to develop demonstrations that would complement the drug pricing provisions in the Inflation Reduction Act (IRA) with the goal of further lowering drug costs and improving affordability.

Model Details

The report directs CMMI to develop three models:

• Medicare High-Value Drug List Model: Under this voluntary model, Part D plan sponsors could offer a standard list of approximately 150 generic drugs at a maximum copayment of $2 for a 30-day supply. The drug list would include generics targeting chronic conditions common among Medicare beneficiaries (e.g., hyperlipidemia, hypertension). Plans would not be able to impose utilization management requirements on listed drugs.
• Cell & Gene Therapy (CGT) Access Model: This voluntary model would allow states to assign the CMS to negotiate multi-state, outcomes-based agreements for selected CGTs with participating pharmaceutical manufacturers. CMS would implement, monitor, and reconcile outcomes and associated financing as outlined in the agreements.
• Accelerating Clinical Evidence Model: Under this mandatory model, CMS would adjust payments to providers for drugs approved under the Accelerated Approval Program (AAP) to incentivize manufacturers to complete confirmatory trials of their drugs.

The CMMI also identified three additional areas for further research and future models:

• Accelerating biosimilar adoption
• Data access changes to support price transparency
• Cell and gene therapy access in Medicare Fee-for-Service

According to Kelsey Lang, principal at Avalere, “The IRA focused largely on pricing and affordability for branded medicines in Part D, and the models outlined in this report seek to fill the gaps by tackling generic affordability, access to cell and gene therapies, and Part B drug payment.  The report is not a final policy action, and CMMI’s model development and specification process could extend beyond the 2024 election cycle for several models.”

Commentary: Medicare High-Value Drug List Model

“As expected, CMS seeks to build on the progress of the Senior Savings Model to improve prescription drug affordability for seniors with the new Part D High-Value Drug List proposal. However, the focus on generic drugs could raise questions from stakeholders about the scale of the potential impact and whether the model should also accommodate predictable copays for certain brand treatments in Part D,” commented Ryan Urgo, managing director.

Massey Whorley, principal, added, “With the High-Value Drug List Model, CMMI is building on its experience with the Senior Savings Model to include more drugs and promote reliable access to low-cost generics. The details still need to be worked out, as this is a voluntary model with an undefined timeline and a yet-to-be announced list of approximately 150 drugs. Depending on structure and adoption, this model could have significant implications for beneficiaries, plan sponsors, and drug manufacturers.”

Commentary: CGT Access Model

“CMMI’s proposed Cell & Gene Therapy Access Model reflects state and manufacturer interest in novel ways to finance the coming wave of innovative therapies, while accounting for unique challenges of operationalizing these arrangements in the Medicaid program,” said Megan West, principal. “The above-state approach would enable CMS to negotiate with manufacturers and administer outcomes-based agreements on behalf of participating states, a shift from today’s state-driven coverage and access environment.”

Michael Ciarametaro, principal, added, “Outcomes-based agreements are increasingly important for CGT market access, yet many states cannot execute these agreements. The proposed model seeks to address this concern, but also presents potential risks for life sciences companies as negotiating authority becomes more centralized.”

Kolton Gustafson, associate principal, also pointed out some unanswered questions regarding the CGT access model: “As we await further details, some key considerations that CMMI will need to address in the model design include the impact on variable state coverage and reimbursement policies, the targeted therapeutic areas, and applicability to Medicaid managed care. These factors are likely to influence interest in the Cell & Gene Therapy Access model among both states and CGT manufacturers.”

Commentary: Accelerating Clinical Evidence Model

“The nature of the Accelerating Clinical Evidence model will require inter-agency collaboration between the Food & Drug Administration (FDA) and CMS to evaluate the balance of value, price, and patient access,” explained Kelly George, principal. “Historically, the FDA and CMS have served complementary roles in supporting the health of patients with access to safe and effective medicines. We are now seeing increasing interest in a more aligned process between the agencies. Yet it will take time for CMS, FDA, and stakeholders to narrow down the best approach to balance value, price, and patient access and to create a framework for assessing payment for these products in a more coordinated manner based on evidence generation and value.’

Lilian Buch, principal, said, “The current Part B payment methodologies are based on drug-level reimbursement and generally do not account for differences in a drug’s indication or FDA approval pathway. Therefore, CMS will have to consider varying payment adjustments for drugs approved under the AAP but also at the indication level while ensuring equitable patient access and without adding administrative burden on providers. CMS will also have to consider the complexity of how coverage and payment are operationalized, especially for drugs currently under the Coverage with Evidence Development pathway and the impact that payment adjustments would have on Medicare beneficiary access to AAP therapies in areas of unmet need.”

Milena Sullivan, managing director, stated, “Given the nature of the Part B benefit and buy-and-bill, the new mandatory model that CMMI is considering may once again put the onus on providers to shoulder the burden of drug pricing reform at a time when they will already be dealing with reimbursement cuts stemming from the IRA. CMMI should carefully consider alternative approaches to adjust payments for AAP drugs to avoid downstream implications for access to care.”

 “While New Drug Applications and Biologic License Applications have remained steady between 2015 and 2021 and priority reviews nearly doubled across that same time, the percentage reviewed and approved under orphan designation has declined. The AAP provides an incentive for manufacturers to expedite clinical trials using surrogate or intermediary clinical endpoints,” said Laura Housman, managing director. “Further, the AAP can help close the gap between evidence generation frameworks and therapeutic time to market, providing needed clinical options to Medicare beneficiaries sooner.”

What Comes Next?

This report indicates the Biden administration’s continued focus on reducing Medicare and Medicaid drug prices alongside the IRA’s implementation. Each model will need to undergo further development to determine payment methodology, program waivers, exceptions, and other details. The CMS Office of the Actuary may also review model specifications as part of the model development process to understand program spending implications. As CMS moves forward with the development of the three identified models, stakeholders will have opportunities to engage and offer feedback. Stakeholders may also consider engaging CMMI regarding the three additional opportunities for models that were identified in the report.

Avalere experts in drug pricing and payment models can help you understand the new models, their potential impact on your business, and opportunities for involvement. To learn more about the CMMI report and how Avalere can help, connect with us.