Value-Based Performance Arrangements for Chronic Conditions: An Economic Simulation of Medicaid Drug Rebate Program Reforms

Expert Review

Authors

Quinn C, Ciarametaro M, Sils B, Phares S, Trusheim M. 

Publication

Expert Review of Pharmacoeconomics & Outcomes Research. Published online ahead of print March 29, 2023.

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Objective

Changes to the Medicaid Drug Rebate Program (MDRP) determination of Medicaid Best Price (MBP) enables value-based purchasing arrangements (VBPAs) to address financial uncertainty. This study estimates the likely effectiveness of MDRP-enabled VBPAs for medicines that treat chronic conditions.

Methodology

Monte Carlo simulations were used to examine three approaches to expanding use of VBPAs, including two authorized under MDRP – Multiple Best Prices (MBP) and Bundled Sales – and a third, National Pooling. Each approach was assessed for payment misalignment, needed payer size for practical participation, and the resulting potential number of covered lives under a VBPA as evaluation metrics. The study evaluated both retail drugs and so-called “5i” therapies, which are infused, injected, implanted, inhaled, or instilled drugs not generally dispensed in retail pharmacies. 

Results

Simulations demonstrated that both MBP and National Pooling enable VBPAs for 95% of scenarios (including all 5i chronic therapies with ≥1,000 treated patients per year), with 75% of those with payment misalignment ≤9%. National pooling for retail drugs results in lower participation and worse misalignment (5i: 95% contracted, 75% ≤9% misalignment; retail: 71%, 66%). Bundled Sales performed worst (5i: 40%, 75% ≤9%; retail: 31%, 88%) due to rebate volatility risk of breaking best price and Average Manufacturer Price impact. Medicaid sees worse misalignment for the 60% drug performance scenarios because of comparison to the statutory rebate (23.1%).

This article builds on previous NPC research on Medicaid Best Price reforms and highlights persistent regulatory barriers and challenges to innovative payment models that can expand patient access to novel therapies.

Like the previous work on curative and durable therapies, this study demonstrates that proposed reforms would increase the ability of payers to cover chronic therapies through VBPAs, increasing patient access to treatments. The impact of reforms would be greatest among larger payers and for treatments related to conditions with larger patient populations. Further reforms may be needed to extend VBPAs to ultra-orphan conditions.

Key Takeaways

  • The proposed reform approaches perform similarly between durable and chronically dosed therapies, despite key differences including the size of patient  populations, the introduction of retail drugs as well as 5i products, expanded AMP considerations, and the obvious difference between ongoing dosing versus one-time administration.
  • Bundled Sales performed poorly at most treated patient population sizes, making it an unattractive approach.
  • Simulations suggest that the MBP is the best solution for all stakeholders, based on both availability and payment misalignment performance. However, certain limitations must be considered:
    • To achieve lower payment misalignment, MBP requires developers to offer large rebates (larger than current statutory rebates and as much as 100%) for those instances when their products do not provide expected patient benefits.
    • For MBP, without significant personnel and data collection infrastructure development, many Medicaid plans will likely not be capable of directly participating in VBPAs.
    • Multiple Best Prices may also impede VBPA customization for commercial plans by adding administrative complexity, implicitly disclosing competitive information, and in the view of some developers, requiring them not merely to offer the VBPA but to overcome whatever VBPA implementation challenges any individual state plan encounters.
  • Further CMS reforms may be needed to extend VBPAs to ultra-orphan conditions.