AcademyHealth National Health Policy Conference January 30, 2017 Rhonda Driver, Pharmacy Program Director OHSU Center for Evidence-based Policy
Items to Cover 1. SMART-D Project Overview 2. Medicaid Drug Rebate Program: Overview and Dynamics 3. SMART-D Phase 1 Research: • Financial Analysis • Alternative Payment Models • Legal Analysis State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 2
SMART-D Project Goals The Center for Evidence-based Policy (CEbP) at Oregon Health & Science University has undertaken a three-year, three-phase 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, and • to provide Medicaid leaders with opportunities to shape the national conversation on prescription drug innovation, access and affordability State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 3
Summary of Project Phases State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 4
Medicaid Prescription Drug APMs: Putting the Pieces Together APM’S USED IN DRUGS IN OTHER MARKETS/ THE COUNTRIES PIPELINE PRESCRIPTION DRUG CURRENT ALTERNATIVE MEDICAID PAYMENT PRESCRIPTION MECHANISMS DRUG PRACTICES ALIGN WITH MEDICAID MEDICAID APM DELIVERY LEGAL OPTIONS SYSTEMS REFORM INITIATIVES State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 5
SMART-D Website and Phase 1 Reports • See www.smart-d.org • Research and reports tab: 1. Summary Report 2. Legal Brief 3. Economic Analysis 4. APM Brief 5. MED Policy Report State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 6
Medicaid Drug Rebate Program: Overview and Dynamics 7
Overview: Medicaid Drug Rebate Program • Congress enacted MDRP in 1990 • MDRP created the construct of a voluntary rebate agreement between the drug manufacturer and HHS – If manufacturer enters into a rebate agreement, they are assured coverage of their drugs by Medicaid and Medicare • Rebate agreement also ensures that CMS and the states: – Receive a rebate on a drug’s price – set in statute – Do not pay more than a brand name drug’s “Best Price” in the U.S. market • State Medicaid programs are required to collect statutory rebates from manufacturers -- both Federal and state portion State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 8
MDRP Overview: Rebates • Feds and states split rebates according to the state’s federal medical assistance percentage (FMAP), with one exception: – Congress increased the statutory rebate in the ACA and those increases go entirely to federal government – Under the ACA, brand name rebate ↑ 15.1% to 23.1% • CPI penalty - manufacturers owe additional rebates if the average manufacturer price increases faster than CPI State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 9
Medicaid Drug Rebate Program Rebate Formulas Drug Type Rebate Formula Greater of: (adjusted by CPI-U) Innovator drugs 23.1% of AMP/unit (brand name) Diff between AMP and best price/unit Greater of: (adjusted by CPI-U) Blood clotting factors 17.1% of AMP/unit Diff between AMP and best price/unit Drugs approved Greater of: (adjusted by CPI-U) exclusively for pediatric 17.1% of AMP/unit indications Diff between AMP and best price/unit Abbreviations: add’l is additional; AMP is average manufacturer price; CPI-U is consumer price index-urban; diff is difference. Adapted from Medicaid.gov (2016) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 10
MDRP Dynamics • Medicaid “Best Price” provisions do not necessarily apply to Medicaid – Supplemental rebate negotiated by state Medicaid agencies will not trigger “Best Price” • “Best Price” is a lever in commercial negotiations State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 11
Financial Analysis 12
Financial Analysis of “High Cost” Drugs • No common definition of “high - cost” drugs across federal and state agencies • SMART-D informed by Medicare, MACPAC, and GAO definitions • Adopted a two-part definition that could be aligned with the available Medicaid data: A. Reimbursements of more than $600 per prescription; and B. Total Medicaid reimbursements of $72 million per year State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D)
Threshold 1 : Drugs reimbursement > • 455 unique drugs $600 per prescription Threshold 2 : Drugs with annual gross • 152 unique drugs reimbursement > $72 million Threshold 1 & 2: • 64 unique drugs Drugs meeting both thresholds
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) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D)
Alternative Payment Models 16
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 State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 17
APMs 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 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 State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 18
Legal Analysis 19
Legal and Compliance Analysis Framework The Center worked with Powers Pyles Sutter & Verville PC to develop a detailed legal analysis for: 1. Understanding the current federal and state legal framework for Medicaid prescription drug coverage and payment through the Medicaid Drug Rebate Program (MDRP) 2. Exploring potential options within and outside MDRP to use APMs to drive the use of clinically valuable drugs and manage prescription drug costs State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 20
Legal and Compliance Analysis Framework • Accommodate different state Medicaid delivery system models (fee-for-service or managed care contracting) State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 21
State Opportunities: Pathways • Pathway One: Supplemental Rebate Arrangements • Pathway Two: Managed Care Organization (MCO) Contracting • Pathway Three: MCO/340B Covered Entity Partnerships • Pathway Four: Hospital-Dispensed Covered Outpatient Drugs • Pathway Five: Physician-Administered Drugs That Fall Outside “Covered Outpatient Drug Definition • Pathway Six: Alternative Benefit Plan • Pathway Seven: Section 1115 Waiver State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 22
Phase 2: APM Planning and Technical Assistance • Center’s goal is to support states with technical assistance resources for development of APM implementation plans • SMART-D team has identified technical assistance needs and opportunities in four areas: 1. Legal 2. Economic Analysis 3. APM Development 4. Communication and Engagement State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 23
Resources & Contact Information SMART-D website: www.smart-d.org Rhonda Driver, Pharmacy Policy Director CEbP E-mail: driverr@ohsu.edu State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D) 24
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