Seeking to address ways to lower the cost of prescription drugs in the US, the Secretary of the US Department of Health and Human Services (HHS) has selected three drug-pricing models for testing by the US Centers for Medicare and Medicaid Services’ (CMS) Innovation Center. The move is a follow-up to an executive order issued by President Joe Biden last year (2022) to develop and test new healthcare payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and that support value-based payment. Medicare is the US government’s healthcare program for individuals 65 years of age and older, and Medicaid is the US government program for lower-income individuals.   

“We are full steam ahead in delivering the cost savings from the President’s Inflation Reduction Act of 2022, and people on Medicare are already feeling the benefits,” said HHS Secretary Xavier Becerra in a February 14, 2023 HHS press release. “But as President Biden has made clear, we must build on the new prescription drug law with further action that is why HHS is implementing these new projects to bring down prescription drug costs.” The Inflation Reduction Act of 2022, which was signed into law in August 2022 was a major climate, tax, and healthcare bill, which included measures to address the cost of , prescription drugs in the US. A key part of the new law was to authorize the US government to negotiate the price of select drugs under Medicare in a phased implementation plan, the first time that the US government was provided with such authority.  

The three models selected by the HHS Secretary for testing by the CMS Innovation Center address the policy goals under the executive order to meet selection criteria thresholds of affordability, accessibility, and feasibility of implementation. 

The first model, the “Medicare $2 Drug List” seeks to reduce out-of-pocket costs for certain generic drugs that treat chronic conditions to $2 per month per drug. The second model, the “The Cell and Gene Therapy Access Model” aims to coordinate agreements with manufacturers for cell and gene therapies. The third model, “The Accelerating Clinical Evidence Model” is designed to reduce Medicare spending on drugs with no confirmed clinical benefit by accelerating trial data.  

The Medicare $2 Drug List 
This model seeks to address differences in cost-sharing for drugs that address chronic conditions, such as  high blood pressure and high cholesterol, for which the HHS says there are many relatively inexpensive generic medications that have significant clinical benefits, but that cost-sharing can vary widely across insurance plans based on the specific formulation a doctor prescribes. Under this model (the Medicare High-Value Drug List Model), Medicare Part D plans (the prescription drug benefit under Medicare), would be encouraged to offer a low, fixed co-payment across all cost-sharing phases of the Medicare Part D drug benefit for a standardized Medicare list of generic drugs that treat chronic conditions. Patients picking plans that participate in this model will have more certainty for their out-of-pocket costs as these generic drugs will be capped at a maximum of $2 per month per drug. 

The Cell and Gene Therapy Access Model 
This model covers cell and gene therapies, which the HHS said are an emerging area of new drug development that hold significant potential but can cost upwards of $1 million. Under this model, state Medicaid agencies would assign CMS to coordinate and administer multi-state, outcomes-based agreements with manufacturers for certain cell and gene therapies. “As new therapies come to market, this will help Medicaid beneficiaries gain access to potentially life-changing, high-cost specialty drugs for illnesses like sickle-cell disease and cancer,” said the HHS in its February 14, 2023 press release.  

The Accelerating Clinical Evidence Model 
Under this model, drugs that have received accelerated approval, meaning they are approved before they have established evidence of improvement in a clinical endpoint, would receive payment methods developed by CMS, in consultation with the Food and Drug Administration, to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data. This would reduce Medicare spending on drugs that have no confirmed clinical benefit. 

To help identify model options, the CMS Innovation Center solicited input from a variety of sources, including beneficiary advocates, healthcare providers, prescription drug manufacturers, and other stakeholders. The CMS Innovation Center says it looks forward to additional input as these models are further developed. 

In addition to the three selected models, the HHS Secretary has identified additional areas for research with the potential to lower prescription drug costs. The CMS Innovation Center also says it looks forward to feedback on these ideas and will continue research into the design and feasibility of these ideas. 

Source: US Department of Health and Human Services and US Centers for Medicare and Medicaid Services