On February 14, 2023, and in response to Executive Order 14087 (“Lowering Prescription Drug Costs for Americans”), the Secretary of Health and Human Services (HHS) issued a report announcing the selection of three models that the Centers for Medicare & Medicaid Services’ (CMS) Center for Medicare and Medicaid Innovation (CMMI) will test to complement the prescription drug provisions contained in the Inflation Reduction Act (IRA). 

The three models include: the Medicare High-Value Drug List Model; the Cell & Gene Therapy Access Model; and the Accelerating Clinical Evidence Model. These models cut across drug types and the Medicare and Medicaid pharmacy benefit designs and are intended to “test important policy questions and may inform policymakers’ decision-making when developing future legislation or regulatory guidance.”  

The report also identified three areas for additional research: Accelerating Biosimilar Adoption; Data Access Changes to Support Price Transparency; and Cell and Gene Therapy Access in Medicare Fee-for-Service.

The Medicare High-Value Drug List Model 

Summary: In this model, Part D sponsors would be encouraged to offer a low, fixed co-payment across all cost-sharing phases of the Part D drug benefit for a standardized list of about 150 high-value generic drugs. Specifically, Part D Sponsors would offer these prescription drugs such that they have a maximum copayment of $2 for a month’s supply without any step therapy, prior authorization, quantity limits, or pharmacy network restrictions. According to HHS, the model would complement the Part D out-of-pocket (OOP) limit of $2,000, established by the Inflation Reduction Act of 2022, which takes effect in 2025.  

Program: Medicare Part D.

Participant Type: Voluntary participation by Part D plan sponsors.

Drugs Affected: 150 generic drugs that target common chronic conditions among Medicare beneficiaries (e.g., hyperlipidemia, hypertension).

Test Question: Does providing access to a standard list of high-value generic medications, at stable, predictable co-payments, increase beneficiary adherence to chronic care medications, improve clinical outcomes, and reduce health care costs?

Implementation and Timeline: While the report did not include a specific implementation timeline, HHS states that CMS could leverage existing systems to streamline implementation, and directs CMS to request input from stakeholders (including prescription drug manufacturers)  and announce the model’s specifications as soon as operationally feasible. However, while CMS can leverage existing systems and learnings from the existing Part D Senior Savings Model to implement this model, implementation for 2024 would be aggressive given that the model would need to be incorporated into the plan designs for participating Part D plan sponsors for purposes of the mid-2023 bid submission.

The Cell & Gene Therapy Access Model

Summary: In this model, participating State Medicaid agencies would assign CMS to coordinate and administer multi-state outcomes-based agreements (OBAs) with manufacturers for certain cell and gene therapies to be made available to Medicaid beneficiaries in a budget-neutral manner. Notably, the model does not appear to involve any additional waivers or flexibilities beyond the existing Multiple Best Price final rule and the best price exclusion for supplemental rebates; rather, HHS expects CMS to pool bargaining power to obtain discounted pricing, condition the cost of CGTs on outcomes, and shift the administrative burden of administering OBAs from states to CMS. Specifically, CMS would be responsible for implementing, monitoring, reconciling, and evaluating the financial and clinical outcomes outlined in the OBAs. 

HHS stated several payment options for the OBAs, including:

• Outcomes-based payments with initial payment upfront and at certain clinical milestones,
• Outcomes-based rebates with full payment upfront and rebate if a clinical outcome is not achieved, and
• Outcomes-based annuities, with fixed payments over time so long as treatment continues and clinical outcomes are achieved.

Program: Medicaid.

Participant Type: Voluntary participation by manufacturers and state Medicaid programs.

Drugs Affected: Cell and gene therapies; HHS directs CMS to consider starting the model with a single therapeutic indication, such as sickle cell disease.

Test Question: Does a CMS-led approach to administering OBAs for certain cell and gene therapies improve beneficiary access and equity and reduce health care costs?

Implementation and Timeline: In considering approaches to implement the model, HHS states that CMS will likely need to consult with stakeholders (including prescription drug manufacturers). HHS also directs CMS to begin model development in 2023, consider announcing the model specifications between 2024 to 2025, and launch the model test as early as 2026.

The Accelerating Clinical Evidence Model

Summary: In this model, CMS would develop payment methods for drugs approved under an accelerated approval pathway (AAP), in consultation with the FDA, to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data. HHS will explore options to address cases where an AAP drug has multiple confirmatory trials in progress for multiple indications, as Medicare Part B FFS payments are not tied to a specific indication. While the report provided very few details regarding the model design, CMS may be planning to incorporate similar proposals previously made by the Medicare Payment Advisory Committee (MedPAC) and the Medicaid and CHIP Payment and Access Commission (MACPAC). 

Program: Medicare Part B.

Participants: Mandatory participation by Part B providers and suppliers.

Test Question: Do targeted adjustments in Medicare Part B fee-for-service (FFS) payments for drugs approved by the FDA under the accelerated approval pathway improve timely confirmatory trial completion and reduce Medicare spending while maintaining or improving quality of care?

Rationale: HHS expects that adjusting Medicare FFS payments to incentivize completion of confirmatory trials on a more timely basis could provide earlier confirmation of benefit for AAP drugs that succeed in their trials or support earlier withdrawal of AAP drugs that are unable to confirm clinical benefit, contributing to improved clinical care for Medicare beneficiaries and a reduction in costs for CMS. 

Implementation and Timeline: HHS directs CMS to consult with the FDA in 2023 and target the model's launch as soon as feasible, although CMS will almost certainly need to go through notice-and-comment rulemaking to implement this model, which requires several months to complete. Additionally, HHS may direct CMS to publish an Advanced Notice of Proposed Rulemaking after model development and before engaging in rulemaking, which will lengthen the timeline. 

HHS directs CMS to investigate options to improve biosimilar adoption, including:

• Aligning biosimilar cost-sharing and payment incentives for providers and beneficiaries,
• Creating shared savings arrangements and payment bundles for therapeutic classes, and
• Adjusting payment methods to increase competition and promote investment in biosimilar development.

These options are intended to address the limited number of commercially launched biosimilars, the limited reduction of market share of biosimilars by reference products, and potential savings for the federal government with increased competition from biosimilars.

HHS directs CMS to explore models and other activities (e.g., challenge.gov proposals, algorithm improvements, personalized recommendations) that allow beneficiaries and providers to use prescription drug data to consider alternatives, assess utilization management review requirements, compare price by fulfillment locations, and shop plan options.

According to HHS, this is intended to strengthen patient access to health information, reduce administrative burdens for clinicians, and support interoperability across the healthcare landscape.

HHS directs CMS to consider potential Medicare FFS payment options to support cell and gene therapy access and affordability (e.g., bundled payments during extended care episodes, site-neutral payments to incentivize care in the appropriate setting, enhanced patient-centered care through a quality adjustment, and reducing acute care utilization by incentivizing care coordination amongst providers). HHS states that these options could serve as a model for other payers of cell and gene therapies in the future.