CMS approves Washington plan for hepatitis C drug subscription deals

Cropped shot of a female doctor talking to a patient in her office

Washington became the fourth state to win a Medicaid state plan amendment allowing it to negotiate value-based purchasing agreements with prescription drug manufacturers.

The CMS announced Wednesday that it approved Washington’s proposal to let the state negotiate under a subscription model with makers of costly hepatitis C drugs. Under that model, the state would pay a fixed annual amount to a manufacturer to buy an unrestricted supply of hepatitis C drugs.

Colorado, Michigan and Oklahoma previously received CMS approval to enter outcomes-based rebate agreements with drug manufacturers for their Medicaid programs, and other states are considering this model. Washington’s program is the first to focus primarily on hepatitis C products.

The policy goal is to reduce state and federal spending on prescription drugs by bringing prices into line with clinical effectiveness and cost savings.

“Under President (Donald) Trump’s leadership, CMS is strengthening the ability of states to negotiate with pharmaceutical companies to lower drug prices,” CMS Administrator Seema Verma said in a written statement.

CMS-approved supplemental rebates that drug companies pay to states are exempt from the Medicaid best-price rule. That means the outcomes-based price deals aren’t factored into the best-price discounts manufacturers must give to state Medicaid programs and aren’t considered violations of the federal anti-kickback statute.

The CMS has established a rebate agreement template for states that includes parameters such as the utilization period, outcomes-based benchmarks, the intervention population for which benchmarks will be measured, and an evaluation methodology.

Washington is focusing on hepatitis C drug spending because the statewide number of chronic hepatitis C cases rose by 60% from 2009 to 2017, while the number of acute cases more than tripled, according to the state health department.

Experts say outcomes-based drug contracting has made slow and uncertain progress since it was introduced in the past decade, with few if any published results. While it may help on the margins with some drugs, many observers doubt it offers a viable solution to the broad problem of prescription drug affordability.

That’s because these deals are difficult to negotiate and carry out, many drugs don’t have readily measurable outcomes through claims data, and patients may switch plans before longer-term results can be assessed. Some think the administrative costs could offset potential savings.

The biggest limitation, however, is that these deals don’t directly address the high prices set by drugmakers.

State officials are uncertain about the costs and benefits of these agreements.

Oklahoma, the first state to receive the CMS’ green light last year, recently signed performance-based rebate deals for two antipsychotic drugs, a drug for treating skin infections and a product for seizures. Outcomes will be evaluated either annually or semi-annually.

“We’ll have to figure out how much it’s costing us to do this,” Nancy Nesser, pharmacy director of the Oklahoma Health Care Authority, said in March. “We’ll see if the rebates will cover that.”