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Medicaid Chief Demands "Affordable Prices" From Major Drug Suppliers

In the next phase of the Obama administration's other war on drugs, The Centers for Medicare & Medicaid Services (CMS) has issued a letter to the CEOs of four large drug providers (AbbVie, Gilead, Johnson & Johnson, and Merck), warning that "manufacturers have a role to play in ensuring access and affordability to these medications," asking for "value-based purchasing arrangements."



The Centers for Medicare & Medicaid Services (CMS) remains committed to Medicaid beneficiaries continuing to have access to needed prescribed medications, a commitment we know that states share.  We have issued a letter to advise states on the coverage of drugs for Medicaid beneficiaries living with hepatitis C virus (HCV) infections.  Specifically, this letter addresses utilization of the direct-acting antiviral (DAA) drugs approved by the Food and Drug Administration (FDA) for the treatment of chronic HCV infected patients.


Manufacturers have a role to play in ensuring access and affordability to these medications.  CMS has sent a letter to the manufacturers of these HCV medications, asking them to provide information regarding any value-based purchasing arrangements they offer for these drugs so that states might be able to participate in such arrangements.

Individual letters to CEOs here...

The key questions CMS asks of each of the drug suppliers is:

Toward this end, CMS would like a better understanding of the types of value-based purchasing arrangements, if any, being offered to payers and to state Medicaid agencies, including the following:

  • What types of arrangements do you offer to commercial or other government-sponsored health insurance plans that are focused on patient outcomes and enhance access to HCV or other drugs?
  • Are these arrangements offered to state Medicaid programs? If so, how are these programs typically structured? If not, what are the challenges in offering these programs to states?
  • Can you estimate a monetary value of these arrangements to Medicaid, other government-sponsored or commercial health insurance plans? If so, how? If not, why not?
  • What other ideas do you have to assist states in the affordability of these new, unbudgeted pharmaceuticals?

CMS is committed to ensuring that pharmaceutical treatments are available to Medicaid beneficiaries, when medically necessary. As the agency works with states on these matters, now and in the future, we cannot do that without addressing affordability concerns.

And finally, as if to reinforce his point, Andy Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services, has written a detailed blog post on Prescription Drugs: Advancing Ideas to Improve Access, Affordability, and Innovation...

Recently, prescription drugs have been in the news a lot, particularly with respect to their cost. Millions of Americans rely on prescription medications to manage chronic illnesses or treat acute conditions, and drug innovation has resulted in better health outcomes for people across our nation. Because of this, finding ways to improve affordability and access for patients, supporting and increasing innovation in the industry, and – most importantly – making people healthier has become an area of significant interest to many.


As medicines become more precise and targeted, there is the potential to improve health outcomes for many diseases, such as cancer and Alzheimer’s, and help us better manage our chronic conditions like diabetes, heart disease and depression, providing significant benefits to patients across the country.


In order to have the maximum impact, medications must also be affordable and accessible.  This is an important issue for Americans and for patients, businesses, and governments. Surveys suggest that as many as 25 percent of Americans cannot afford and, therefore, do not fill the prescriptions on which they depend. And, spending on medicines increased 13 percent in 2014, compared to 5 percent for health care spending growth overall, the highest rate of drug spending growth since 2001. An important element of this increase in costs is due to new specialty drugs — drugs that account for nearly a third of overall costs, but represent less than 1 percent of prescriptions.


Cost concerns aren’t only limited to brand-name medicines.  In some instances, the prices of generics available for years have increased substantially without any additional health benefits for patients. This is a concern across the country, but particularly for consumers on fixed incomes. The Bipartisan Budget Act, just signed into law by President Obama, provides Medicaid with additional rebates if generic drug prices grow faster than inflation, which will discourage manufacturers from increasing prices for generic drugs.


The rhetoric around health care costs can become heated, particularly around the cost of prescription drugs. At times, it can appear as if some of those who produce the pharmaceuticals and those whose lives often depend on them have unaligned interests. But we will not make progress by polarizing this debate. Development of ground-breaking therapies requires significant investment and resources, and we all need to support that important work. We believe patients, manufacturers, providers, insurers and government all share a common goal to foster a health care system that leads in innovation, delivers affordable, high quality medicines, and results in healthier people with access to the care they need. We shouldn’t accept the notion that we as a society must choose between innovation and affordability. We deserve both.


A recent example of a much discussed, highly-effective drug is a therapy used by Hepatitis C patients. Hepatitis C, a debilitating and life threatening infection that leads to chronic conditions of the liver, has undergone a revolutionary improvement in cure rates with innovative new medicines. These medicines are changing the lives of many individuals, but they are also expensive, costing tens of thousands of dollars, sometimes even more than one hundred thousand dollars, per patient. These costs have strained personal as well as public budgets, particularly state health care budgets. Because state budgets generally need to be balanced every year, new drug treatments can surprise states with tens or hundreds of millions of dollars in new spending. As these costs often necessarily compete with other state programs like K-12 education, transportation, law enforcement, and public health programs, some states have made tough choices, including limiting access to these therapies.


Recognizing that we need both access and affordability, today we issued a notice to all 50 state Medicaid directors and sent letters to the CEOs of several drug manufacturers about providing access to therapy for Hepatitis C patients. Our notice to state Medicaid directors reminds states of their obligation to provide access to these promising therapies (consistent with section 1927 of the Social Security Act) based on the medical evidence, and that they have tools available to manage their costs. Our letter to manufacturers asks them to provide us with information on pricing arrangements and asks them for ideas to support the provision of these lifesaving medications to Medicaid programs at sustainable prices.


There are no easy answers to these multifaceted challenges, but there is a significant benefit – to all of us – of working together to find a solution. Earlier this week, Secretary of Health & Human Services Sylvia Burwell invited leaders in innovation, policy, care delivery, academia, manufacturing, purchasing, and patient advocacy to share information at a public meeting on how to achieve our common goals.


These are complex issues, and we recognize that the public is relying on our leadership.  We will work to ensure that all viewpoints are considered as we strive for solutions.  In the end, we share a common goal of supporting innovation and improving affordable access to medications that improve health outcomes for patients.

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While there is no "or else" in the letter, the focus on 'significance to many', 'costs', and 'accessible' suggest an overhang of government intervention as new specialty drugs account for nearly a third of overall costs, but represent less than 1% of prescriptions.