State Medicaid Alternative Reimbursement and Purchasing Test for
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State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs [SMART-D] Project Prescription Drug Alternative Payment Models and Medicaid National Association of Medicaid Directors November 8, 2016 Jane Beyer, Program Officer Milbank Memorial Fund/OHSU Center for Evidence-based Policy
Today’s Objective Understand: • The SMART-D Project § Our research § Our work with states • The federal Medicaid Drug Rebate Program* • Alternative payment model (APM) opportunities and risks for state Medicaid programs * Section 1927 of the Social Security Act 2
SMART-D Project Scope
SMART-D Project Goals The Center for Evidence-based Policy at Oregon Health & Science University has undertaken a three-year, threephase pilot program funded by the Laura and John Arnold Foundation. The program has the following purposes: • To strengthen the ability of Medicaid programs to manage prescription drugs through alternative payment methodologies • To provide Medicaid leaders with opportunities to shape the national conversation on prescription drug innovation, access, and affordability 4
SMART-D Project Objectives: • Map the landscape of Medicaid drug purchasing • Identify alternative payment options for states • Work to increase patient access and improve health outcomes • Identify specific opportunities to collaborate with drug manufacturers • Provide technical assistance and support to states for implementation 5
Medicaid Prescription Drug APMs: Putting the Pieces Together Drugs in the Pipeline APMs Used in Other Markets/ Countries Prescription Drug Alternative Payment Mechanisms Current Medicaid Prescription Drug Practices Medicaid APM Legal Options 6 Align with Medicaid Delivery Systems Reform Initiatives
SMART-D Phases Phase III Phase I • February to July 2016 • Identify alternative payment options and legal pathways • Document the landscape 7 • August 2016 to April 2017 • State readiness assessment • Identify APMs and legal pathways • Stakeholder engagement • State technical assistance • Implementation plans • Starts May 2017 • Initial pilots commence • Ongoing technical assistance • Diffusion of best practices • Contingent on funding
SMART-D Website and Phase 1 Reports 8
Economic Analysis of High-Cost Drugs
SMART-D Definition of “High-Cost” • No common definition across federal and state agencies • SMART-D definition informed by Medicare, MACPAC, and GAO definitions • Adopted a two-part definition that could be aligned with the available Medicaid data: – Reimbursements of more than $600 per prescription – Total Medicaid reimbursements of $72 million per year
Threshold 1: Drugs reimbursement > $600 per prescription Threshold 2: Drugs with annual gross reimbursement > $72 million • 455 unique drugs • 152 unique drugs Threshold 1 & 2: Drugs meeting both thresholds • 64 unique drugs
64 High-Cost Drugs • In FY 2015, these 64 drugs accounted for: – 9. 3 million prescriptions or 1. 5% of prescriptions reimbursed by Medicaid – $16. 9 billion in Medicaid reimbursements before rebates, or 32. 6% of Medicaid drug reimbursement dollars • The estimated $16. 9 billion spent on these 64 high-cost drugs accounted for 3. 1% of the total national Medicaid spending for all services. – In FY 2015, the Medicaid program spent an estimated $538. 4 billion (Kaiser, 2015 b).
New high-cost drugs reimbursed by Medicaid (FY 2015) Brand Name Breakthrough Therapy? FY 2015 Total Reimbursement per FY 2015 Gross Prescription Cost to Medicaid Harvoni Yes 28, 300 1, 540, 228, 000 Sovaldi Yes 24, 400 643, 446, 000 Novoseven No 81, 500 219, 484, 000 Tecfidera No 5, 300 199, 262, 000 Tivicay No 1, 400 166, 653, 000 H. P. Acthar No 43, 700 138, 727, 000 Triumeq No 2, 400 127, 545, 000 Viekira Pak Yes 25, 400 111, 334, 000 Olysio No 19, 900 73, 568, 000 Source: Medicaid State Drug Utilization Data records, FY 2014 -2015
Alternative Payment Models
Alternative Payment Models • An APM is a contract between a payer and drug manufacturer that ties payment for a drug or drugs to an agreed-upon measure • Our research has highlighted two pathways of APMs in Europe and the U. S. : – Financial-based – Health outcome-based 15
Financial-Based APMs • Designed at either patient or population level • Rely on financial caps or discounts to provide predictability and limit financial risk • Financial targets tend to be easier to administer 16
Health Outcome-Based APMs • Payments tied to predetermined clinical outcomes or measurements • Sometimes conditional coverage while data is collected regarding clinical effectiveness • Can require significant data collection, but have potential to increase quality, value, and efficiency of treatment 17
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Type % APMs Description Price-Volume 39. 2% The price of a drug is tied to the volume of utilization. Thresholds could exist in which the price would gradually decrease. Data Collection 29. 2% Additional data collection is required for coverage so that either (a) more thorough analysis of a health intervention can be conducted at a later time or (b) claimed cost savings can be validated in the real world. Limited Access 13% Access to a drug is more restrictive than the regulatory label. This covered group might include special populations perceived to receive the highest value from a treatment, or certain health centers or specialists could be tasked with acting as “gatekeepers” for prudent use. Conditional Coverage 5. 6% Coverage is provided under pre-specified conditions such as the conduct of additional clinical trials or publication of outcomes studies. 19
Type % APMs Description Resultsbased 5. 4% Price corresponds to an economic, clinical, or humanistic outcome, for example, if the price is paid only for patients who achieve the agreed-upon outcome. Simple 4. 6% discounts A generally non-transparent price is provided to bring the affordability, cost-effectiveness, or value of a drug to an acceptable level. Typically used in markets that utilize costeffectiveness-based coverage decisions, such as in the UK. Price or dose cap 2. 2% The price can be capped per patient or dose. For instance, the payer would pay the same price for all patients, including those who remain on treatment for extremely long durations or who require significantly higher doses. Price match 0. 8% Price is tied to a benchmark for any given setting. Typically done when products are widely available but large variations exist in price depending on the technology used. 20
Legal Analysis
Legal and Compliance Analysis Framework Worked with Bill von Oehsen and his team at Powers Pyles Sutter & Verville PC to develop a detailed legal analysis to: • Understand the current federal and state legal framework for Medicaid prescription drug coverage and payment through the Medicaid Drug Rebate Program (MDRP). • Explore potential options within and outside MDRP to use APMs to drive the use of clinically valuable drugs and manage prescription drug costs. 22
Legal and Compliance Analysis Framework • Accommodate different state Medicaid delivery system models (fee-for-service or managed care contracting). • Support value-based payment approaches with pharmacies and other health care providers, in addition to agreements negotiated directly with prescription drug manufacturers. • Align with state Medicaid value-based payment and delivery system transformation efforts. 23
Federal and State Requirements • Medicaid Drug Rebate Program (MDRP) – Rebate calculation is statutorily fixed – Rebates are NDC-specific, not indication-specific – States cannot use closed formularies, although preferred drug lists are allowed – Prescription limits are regulated • Medicaid Non-MDRP – Fee-for-service reimbursement for retail drugs is set at actual acquisition cost – Patient cost-sharing is subject to limits 24
Federal and State Requirements (cont’d) • Other federal issues – Prohibition against off-label promotion by manufacturers – Anti-kickback statute – Overlapping discounts with 340 B prices, payer rebates, etc. • Relevant state law – Preferred drug list and prior authorization exclusions – “Any willing provider” laws – Regulation of MCOs and pharmacy benefit managers (PBMs) requiring transparency, etc. 25
State Opportunities Pathway One: Supplemental Rebate Arrangements Use of preferred drug lists, prior authorization, or other tools to negotiate supplemental rebates linked to financial- or outcomebased APMs with manufacturers for fee-for-service drugs Opportunities • Rebates can be adjustable/indication specific • Supplemental rebates are exempt from “best price” determinations • Infrastructure already in place • Multistate rebates permitted • Accepted and supported by Centers for Medicare & Medicaid Services (CMS) https: //www. medicaid. gov/Medicaid-CHIP-Program-Information/ By-Topics/Benefits/Prescription-Drugs/Downloads/Rx-Releases/ State-Releases/state-rel-176. pdf 26
State Opportunities Pathway One: Supplemental Rebate Arrangements Risks • Indication-specific rebates could be difficult to negotiate because MDRP rebates are NDC-specific • Preferred drug list is weaker than closed formulary • Still subject to Medicaid prescription limits and patient costsharing restrictions 27
State Opportunities Pathway Two: MCO Contracting State outsources to MCOs the task of negotiating supplemental rebates. MCOs have flexibility on dispensing-fee and drug ingredient payment methodologies Opportunities • Same as Pathway One • Takes advantage of MCO/PBM rebate negotiation experience • Can be used in conjunction with Pathway One to cover fee-for-service and MCO settings • Can be coupled with provider value-based purchasing initiatives for retail drugs and physician-administered drugs (PAD) 28
State Opportunities Pathway Two: MCO Contracting Risks • Could conflict with existing MCO/PBM rebate arrangements. Would need to address through MCO contracting • Uncertain whether MCOs can negotiate supplemental rebates “on behalf of” the state and thus retain “best price” determination exemption • Still subject to Medicaid prescription limits and patient cost-sharing restrictions. • Potential role of state regulation of MCOs/PBMs or preferred drug lists • More significant off-label promotion and anti-kickback statute risks 29
State Opportunities Pathway Three: MCO/340 B Covered Entity Partnerships Value-based purchasing arrangements with 340 B providers/pharmacies for 340 B drugs reimbursed by state’s MCOs, with or without accompanying APM arrangement with manufacturer Opportunities • Rebates can be adjustable/indication specific • 340 B drug prices are exempt from “best price” determination • 340 B price is below Medicaid net price, so less pressure to negotiate large rebates if covered entities share savings with MCOs • Can establish closed formulary • Exempt from MDRP prescription limits • Can establish “centers of excellence” and “whole person” care models with covered entities 30
State Opportunities Pathway Three: MCO/340 B Covered Entity Partnerships Risks • Need cooperation of 340 B covered entities • Need utilization, patient outcome, and other data from covered entities • Need to establish this arrangement through MCO contracting • More significant off-label promotion and anti-kickback statute risks • Potential role of state “any willing provider” and PBM/MCO laws 31
State Opportunities Pathway Four: Hospital-Dispensed Covered Outpatient Drugs Enter into manufacturer APM rebate and provider value-based purchasing arrangements for covered outpatient drugs dispensed by hospitals and billed at no more than their purchasing costs Opportunities • Adjustable/indication-specific rebates permitted • Closed formulary allowed • Exempt from MDRP prescription limits • Allows establishing “centers of excellence” and “whole person” care models with hospitals • Less pressure to negotiate large rebates because 340 B and non-340 B hospitals bill at no more than their “purchasing costs” • States can define “purchasing costs” in their state plan • Can be used in conjunction with Pathway Three with 340 B hospitals 32
State Opportunities Pathway Four: Hospital-Dispensed Covered Outpatient Drugs Risks • Need cooperation of hospitals to bill at no more than their “purchasing costs” • Need utilization, patient outcome, and other data from hospitals • Unclear whether rebates or pricing negotiated by non-340 B hospitals would qualify for “best price” exemption • • No flexibility on actual acquisition cost reimbursement for retail drugs No guidance from CMS on how to comply with applicable federal law 33
State Opportunities Pathway Five: PADs That Fall Outside “Covered Outpatient Drug” Definition Enter into manufacturer APM rebate and provider value-based purchasing arrangements for PADs that fall outside “covered outpatient drug” definition Opportunities • Adjustable/indication-specific rebates permitted • Closed formulary allowed • Exempt from MDRP prescription limits • Allows establishing provider payment models built around specific disease states or episodes of care that involve the administration of high-cost drugs • Provider payments would not be subject to actual acquisition cost reimbursement and could be structured to create incentives for favorable patient outcomes 34
State Opportunities Pathway Five: PADs That Fall Outside “Covered Outpatient Drug” Definition Risks • State would have to be willing to surrender MDRP rebates, which could be difficult to make up • No clear exemption from “best price” determination • Unclear how model would work in managed care environment • Need utilization, patient outcome, and other data from providers • Model is untested 35
State Opportunities Pathway Six: Alternative Benefit Plan Pathway Six: Section 1937 Alternative Benefit Plans Establish closed formulary for drugs provided to Medicaid expansion populations that receive essential health benefits under Affordable Care Act Opportunities • Closed formulary to focus on most clinically effective and cost-effective drugs 36
State Opportunities Pathway Six: Alternative Benefit Plan Risks • For states that have not implemented an alternative benefit plan, complexity of administering a separate benefit package • Complexity of administering option for medically frail enrollees to receive benefits through the traditional Medicaid benefit package 37
State Opportunities Pathway Seven: Section 1115 Waiver Seek to relax formulary restrictions and other MDRP requirements in order to test new value-based purchasing models for prescription drugs and related services Opportunities: • Align prescription drugs with states’ broader value-based purchasing initiatives, via waiver of MDRP limitations • Build prescription drugs into ACO-like payment models or directives to MCOs to increase use of APMs, allowing flexibility for drug utilization and cost management by ACOs and MCOs 38
State Opportunities Pathway Seven: Section 1115 Waiver Risks: • 1115 waiver or waiver amendment must be approved by CMS through an extensive process • Federal budget neutrality requirement must be met 39
Phase II Next Steps with SMART-D States • Work with participating SMART-D states, through technical assistance, to: – Develop potential APM designs – Assess information technology and data capabilities – Identify appropriate legal pathways – Develop implementation plans • Engage key stakeholders 40
Resources & Contact Information SMART-D website: www. smart-d. org Jane Beyer, Program Officer MMF/CEb. P Direct Dial: 503 -418 -2065 E-mail: beyerj@ohsu. edu Susan Stuard, Project Director CEb. P E-mail: stuard@ohsu. edu 41
Appendix: Laura and John Arnold Foundation Prescription Drug Portfolio Strategy Other grantees in the portfolio strategy: • Initiative for Medicines, Access, and Knowledge • Harvard Medical School • Memorial Sloan Kettering Cancer Institute • Johns Hopkins/Bloomberg School of Public Health • Institute of Medicine • Institute for Clinical and Economic Review • Kaiser Health News 42
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