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A Letter to CMS on the Proposed Medicaid Rule

In a comment letter to the Centers for Medicare and Medicaid Services, we urged the agency to protect and strengthen the statutory discounts drug manufacturers pay to Medicaid as it considers program changes with respect to Value-Based Purchasing arrangements.

Seema Verma
Seema Verma, administrator of the Centers for Medicare and Medicaid Services. (Tasos Katopodis/Stringer/GettyImages)

Recently the Centers for Medicare and Medicaid Services (CMS) published a proposed regulation seeking public comment on changes to the Medicaid Drug Rebate Program. In responding to the solicitation, Arnold Ventures submitted comments that urged the administration to consider carefully potential impacts on Medicaid spending before making changes to the program to accommodate flexibilities for Value-Based Purchasing (VBP) arrangements. We are concerned the changes proposed by CMS would significantly increase the prices Medicaid pays for drugs.

With the increasing numbers of very high-cost gene therapies and specialty drugs launching, affordability and access are key concerns for policymakers, payers, and patients. The balance between affordability and access is ever-present for state Medicaid programs, in particular, balancing their state budgets and providing access to vulnerable patients. With the recent economic downturn, this is an even more difficult balance to strike. Drug manufacturers are aggressively promoting VBP arrangements as a better way to pay for new prescription drugs with very high launch prices and the uncertainty of a new drug’s effect. Experience to date has not shown that VBP arrangements are easily­­­ defined and measured, and we believe in many instances these arrangements could facilitate high prices and increase drug spending. Increases in drug spending could be costly to states and could lead to harmful Medicaid cuts that reduce access to needed care for the tens of millions of low-income people who rely on Medicaid. And, the proposed regulatory changes from CMS could make this outcome more likely.

As we noted in a blog on Health Affairs earlier this year with Edwin Park at Georgetown University, the Medicaid Drug Rebate Program has been and continues to be highly effective — rebates paid by drug manufacturers to Medicaid are more than twice the discounts received by Medicare Part D. The Medicaid program is offered, as part of its rebate program, the best price available to the commercial market. Drug manufacturers have claimed that the current Medicaid best price” provision impedes their ability to enter into VBP arrangement. However, CMS has worked with states under the current rules to approve VBP arrangements as permanent changes to their Medicaid programs. 

We support CMS establishing a regulatory framework to improve transparency and oversight of these arrangements but as proposed, the rule undercuts the best price discount for Medicaid. The Medicaid best price discount is critical to ensuring the affordability of drugs to the Medicaid program, and the proposed rule, as written, may create loopholes that would incentivize manufacturers to raise the true best price and cost Medicaid money.

Read the full letter below: