By Surabhi Dangi-Garimella, Ph.D.
President Biden signed an Executive Order on October 14, 2022, that tasks the HHS Secretary to engage the Innovation Center (Center for Medicare and Medicaid Innovation, CMMI) with testing healthcare payment and delivery models to help lower drug prices for individuals covered under Medicare and Medicaid. The Secretary is required to report on the chosen models and implementation timelines by January 2023.
The administration expects CMMI to choose models that will complement the provisions within the Inflation Reduction Act to ensure that prescription drugs remain affordable. The cost of drugs in the U.S. has been, and will remain, a crucial issue for our health system. While a singular solution is impossible, a multi-pronged approach could work.
CMMI could potentially consider the following strategies:
Test new payment models
- Common billing codes for biologics and biosimilars, which have similar efficacy and safety. This can level the playing field and reduce the costs for Medicare beneficiaries and for Medicare. Currently, reference biologics cost a lot more than biosimilars. CMMI could test the impact of reimbursing the reference and the biosimilar at the same rate, similar to how Medicare reimburses brand-name and generic drugs.
- A reference pricing approach for drugs that have limited clinical evidence (accelerated approvals)—a fully approved drug for the same indication would be the reference.
- Bonus payments for health care plans and providers that encourage use of biosimilars and generic products.
Revitalize previously proposed models
- Reference-based pricing for therapeutically similar drugs: Reimbursing Part B drugs with similar clinical benefit at the same amount. This was a recommendation by MedPAC to Congress to promote manufacturer competition and lower drug prices.
- Most favored nation (MFN) model: The average price paid by countries within the Organisation for Economic Co-operation and Development could be used as a reference for pricing those drugs within Medicare Part B. The administration could implement the MFN model for certain drugs or classes of drugs.
Amend current models
- Part D Senior Savings Model: Test the impact of a cap on copayments for drugs that have a high out-of-pocket cost for patients, similar to what was done with insulin.
- Value-based models: Include additional incentives in existing value-based models, such as incentives to meet a spending limit in Medicare Part D. CMMI could also update the existing episode-based bundled payment models such that episodes where drugs and biologics are used are included in the bundle.
A part of the multi-pronged approach to curb rising drug prices is Medicare’s ability to negotiate drug prices on certain Part B and D drugs. The first 10 drugs in this list are slated to be be announced in 2023, with the prices to be implemented starting 2026. The next batch of 15 drugs will be available at the negotiated price in 2027. Starting January 1, 2023, Medicare patients will also see a $35 cap on their monthly insulin with no deductible for their covered insulin.
Along with this price negotiation provision, the Inflation Reduction Act is also ensuring free preventive care for Medicare and Medicaid enrollees—adult vaccines recommended by the Advisory Committee on Immunization Practices will be available without cost sharing for Medicare enrollees from 2023. Adults enrolled in Medicaid or the Children’s Health Insurance Program will see their preventive vaccine-related cost sharing disappear from October 2023.
Surabhi Dangi-Garimella, Ph.D. is a biologist with academic research experience, who brings her skills and knowledge to the health care communications world. She provides writing and strategic support to non-profit groups via her consultancy, SDG AdvoHealth, LLC.
