'Medicaid best price' changes aimed at value-based gene therapy contracts: U.S. agency

FILE PHOTO: Seema Verma, Administrator of Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, speaks at the 2019 Milken Institute Global Conference in Beverly Hills, California, U.S., April 29, 2019. REUTERS/Lucy Nicholson/File Photo

(Reuters) - Proposed changes to requirements that state-run Medicaid programs are given the best drug prices would clear the way for commercial health insurers to enter into “value-based” payment schemes, the U.S. Centers for Medicare & Medicaid Services said on Wednesday.

Drug manufacturers by law must give Medicaid their “best price,” meaning the lowest price they negotiate with any other buyer. But health plans have expressed concerns that the requirement prevents them from linking drug prices to patient outcomes - a practice known as “value-based” pricing.

“The problem has been that the Medicaid best price regulations are a barrier. ... Today we are announcing that we are updating them to allow for more value-based pricing,” CMS Administrator Seema Verma told Reuters in a telephone interview.

The proposed changes are being driven by the increasing availability of very expensive, potentially curative, gene therapy treatments, she said.

Spark Therapeutics Inc, now owned by Roche Holding AG, in 2018 launched its Luxturna treatment for an inherited genetic mutation that causes blindness at a price of $850,000. Novartis AG last year won U.S. approval for its gene therapy Zolgensma for spinal muscular atrophy, pricing the one-time treatment at a record $2.125 million.

Commercial health insurers have considered linking reimbursement of such drugs to health outcomes, but have been stymied by the Medicaid best price rules, Verma said. “If a drug didn’t work in 20% of cases, in those cases the payment might be zero, which could completely alter the Medicaid best price,” she explained.

The changes proposed include calculating the best price based not just on one discount, but as a comprehensive blend of prices. They would also allow for price calculations outside of the current three-year window.

CMS said the aim is to provide greater flexibility for payers and manufacturers to enter into value-based agreements while ensuring Medicaid always gets the best deal.

The proposed changes will be open for a 30-day comment period.

Reporting by Deena Beasley; Editing by Leslie Adler