Americans, on average, pay two to three times as much as people in other countries for the same prescription drug.  President Biden’s Executive Order 14087, directed the Secretary of the Department of Health and Human Services (“HHS”) to consider whether testing of new health care payment and delivery models by the Innovation Center would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs.  Recently, in response to the President’s Executive Order, the Centers for Medicare & Medicaid Services (“CMS”) announced that the Secretary of the HHS has selected three new models for testing by the CMS Innovation Center to help lower the high cost of drugs, promote accessibility to life-changing drug therapies, and improve quality of care.

The three models selected by the Secretary for testing by the CMS Innovation Center address the themes outlined in the executive order and meet the selection criteria thresholds of affordability, accessibility, and feasibility of implementation. The models include:

  • The Medicare $2 Drug List:

For chronic conditions like high blood pressure and high cholesterol, there are many relatively inexpensive generic medications that have significant clinical benefits, but cost-sharing can vary widely across insurance plans based on the specific formulation a doctor prescribes.  This means that providers face uncertainty when writing prescriptions with patient out-of-pocket costs in mind because of variations in formularies and plan designs and patients may experience unexpected changes in their cost-sharing and may pay more than they have to.  Under this model, Part D plans would be encouraged to offer a low, fixed co-payment across all cost-sharing phases of the Part D drug benefit for a standardized Medicare list of generic drugs that treat certain chronic conditions.  The model would give pricing certainty to beneficiaries and health care providers prescribing medications, by capping the cost at a maximum of $2 per month per drug.  This model will test whether a standard list of high-value drugs would improve adherence to medications and improve access to high-value prescription drugs.  Ultimately, this could lead to better health outcomes and lower spending for Medicare beneficiaries and, lower Medicare program costs.

  • The Cell and Gene Therapy Access Model:

Cell and Gene Therapies are an emerging area of new drug development that holds significant potential to treat or even cure previously intractable diseases, such as sickle cell disease, beta thalassemia, or cancer.  These drug therapies, however, can cost nearly $1 million per course of treatment.  This model would create a new financing approach for patients enrolled in Medicaid to receive potentially life-changing therapies to which they may not have had access.  Under this model, state Medicaid agencies would assign authority to CMS to coordinate and administer multi-state, outcomes-based agreements with manufacturers for certain cell and gene therapies.  The model would seek to expand access and reduce the cost of cell and gene therapies, while also reducing the administrative and financial burden on states to administer the outcomes-based payment arrangements on their own.  Medicaid beneficiaries, including those in underserved communities, could benefit from potential cures early in life or early in the course of the disease.  

  • The Accelerating Clinical Evidence Model:

The accelerated approval pathway expedites access to drugs that fill an unmet medical need and offer improvements.  Under this model, CMS would develop payment methods for drugs approved under accelerated approval, in consultation with the Food and Drug Administration, to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data.  Giving manufacturers an incentive to expedite and complete confirmatory clinical trials may reduce the time and delays in completing confirmatory clinical trials.  Faster trial completion may allow beneficiaries and prescribers to have more accurate and complete clinical information and, therefore may enable better treatment decisions. With greater confidence that drugs on the market are effective, this model would seek to improve quality of care and reduce cost, and it could help ensure patients continue to have access to the drugs they need.

In addition to the three selected models, the Secretary has identified additional areas for research with the potential to lower prescription drug costs, including: (1) accelerating biosimilar adoption, (2) data access changes to support price transparency and (3) cell and gene therapy access in Medicare Fee-For-Service.  The Innovation Center will further develop and test the three referenced models with the goal of increasing availability and affordability of prescription drugs in the United States and, ultimately, improving health outcomes for all beneficiaries.