We unpack the CMS proposed rule that supports manufacturers to enter value-based purchasing (VBP) agreements with payers, including Medicaid.

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June 19, 2020


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Finding Value in Unexpected Places:
Happiness in a Late-Day Rule Drop

On Wednesday, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would, among other efforts, provide manufacturers with regulatory support to enter value-based purchasing (VBP) with payers, including Medicaid. The proposed rule would also change several Medicaid-related provisions, as highlighted below.

Supporting VBP Agreements
Many pharmaceutical manufacturers have been clamoring for the ability to enter value-based contracts, most prominently during a February 2019 hearing on drug pricing before the Senate Finance Committee. Manufacturers’ consider the legal requirement to give Medicaid their “best price” (BP) to be one of the largest impediments to entering value-based contracts.

The proposed rule would allow manufacturers to report multiple “best prices” for a therapy under the Medicaid Drug Rebate Program (MDRP) if the prices are tied to a VBP arrangement. It would also allow VBP arrangements to be defined as “performance requirements” under the definition of a “bundled sale.” CMS believes this would facilitate VBP arrangements, especially for small-population drugs. The proposed rule would also permit revisions to average manufacture price (AMP) and BP reporting beyond the current 36-month time limit to allow revising pricing metrics as a result of VBP arrangements.

The proposed rule would establish a definition for VBP:

VBP is an arrangement or agreement intended to align pricing and/or payments to an observed or expected therapeutic or clinical value in a population (that is, outcomes relative to costs) and includes (but is not limited to):

  • Evidence-based measures that substantially link the cost of a drug to existing evidence of the effectiveness or potential value for specific uses of that product, and/or
  • Outcomes-based measures that substantially link payment for the drug to that of the drug’s actual performance in a patient or a population or a reduction in other medical expenses

Exclusion of Certain Copay-Assistance Programs From Best Price and AMP
The rule didn’t stop at VBP. In the proposed rule, CMS acknowledges that copay accumulator programs accrue the benefits of manufacturer-sponsored copay-assistance programs to the health plan and not to the patient’s deductible. Under those scenarios, the program is not eligible for BP exclusion, as federal regulations require that the “full value of the discount must be passed on to the consumer and the pharmacy, agent, or other entity does not receive any price concession.”

Therefore, the proposed rule would require that manufacturers ensure the full value of their program is provided entirely to the consumer or patient when excluding it from BP. CMS indicated that it believes “manufacturers have the ability to establish coverage criteria around their … assistance programs” to ensure that is the case. As patient access champions, we’ll be digging into this one more.

Reducing Opioid-Related Fraud, Misuse, and Abuse
The proposed rule would also implement new opioid-related drug utilization review (DUR) standards required under the Substance Use-Disorder Prevention That Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, as well as additional opioid-related DUR standards. CMS believes these changes reflect its efforts to reduce prescription-related fraud, abuse, and misuse and ensure that opioid prescriptions are appropriate, medically necessary, and not likely to result in adverse medical results.

Authorized Generic Sales When Manufacturers Calculate AMP
CMS is also proposing to clarify statutory changes to ensure sales of authorized generics are kept out of the calculation of the brand name AMP, regardless of the relationship between the brand name manufacturer and the authorized generic manufacturer.

The proposed rule was accompanied by a press release, fact sheet, and a Health Affairs blog post by CMS Administrator Seema Verma.

This proposed rule, if finalized, could ignite innovation in how manufacturers and payers contract for expensive therapies—cell and gene therapies, especially, come to mind. Manufacturers have been insisting that VBCs have great potential to lower drug costs while still maintaining patient access. Now they may have the opportunity.

Live Webinar
Rebate Walls and Step Therapy: The Risk to Patients and Providers and What Policymakers Can Do to Address These Harmful Practices

Wednesday, June 24, 2020 | 12:00 PM EDT

Xcenda's Jennifer Snow, MPH, Vice President, Reimbursement & Policy Insights, will join a live webinar on Wednesday, June 24, to discuss how rebate walls and step therapy harm patients and providers.

Ms. Snow will join an expert panel that will provide insights on the antitrust and health policy interventions that can help combat these problematic practices.

Register today >


The Heart of the Value Story

Who wouldn’t want to save $12 billion? A recent study added evidence to a similar study 13 years ago that medication therapy and lifestyle changes may be as effective as surgical interventions (percutaneous coronary intervention [PCI] or coronary artery bypass graft [CABG] surgery) for treating patients with stable coronary artery disease (CAD). 

An Xcenda analysis showed that, had we practiced the lessons of the studies over the last 13 years, our health system could have saved approximately $21,400 on a per-patient basis, for a total savings of $12.3 billion. You can access the full issue brief below.


COVID-19 Resources

Coronavirus Task Force Resources and Updates

Centers for Disease Control and Prevention (CDC) Information for Healthcare Professionals

Centers for Medicare & Medicaid Services (CMS) Current Emergencies (Coronavirus)

Food and Drug Administration (FDA) COVID-19 Information

Medicaid and Children’s Health Insurance Program (CHIP) Resources

American Medical Association (AMA) Physician’s Guide to COVID-19

Health Affairs COVID-19 Resource Center

National Foundation for Cancer Research (NFCR) Coronavirus Resource Center for Cancer Patients and Caregivers

COVID-19 Bulletin

The Association of American Medical Colleges highlighted efforts on COVID health disparities.


Don’t Call Me Shirley: ICER/VA Defend Relationship

On Monday, Health Affairs published an article describing the 3-year partnership between the Department of Veterans Affairs (VA) and the Institute for Clinical and Economic Review (ICER). The collaboration began in July 2017 to enhance the VA’s ability to integrate ICER reports into the internal evidence review processes and ultimately leverage ICER’s price recommendations in negotiations with industry. While the collaboration sparked some initial controversy among stakeholders who were concerned that the partnership would lead to a more limited formulary, the authors believe the relationship has been beneficial to the VA by helping the agency better understand the relative value of new drugs and providing more concrete pricing benchmarks for costly medications. ICER has also benefited from the relationship by gaining a better understanding of the unique VA population. The authors agree that the partnership between ICER and the VA is a key example of how a health system can utilize independent cost-effectiveness analyses as a resource for decision making. 

Last Friday, ICER announced plans to assess the comparative clinical effectiveness and value of inclisiran and NEXLETOL (bempedoic acid) for the treatment of high cholesterol in the setting of heterozygous familial hypercholesterolemia or secondary prevention of atherosclerotic cardiovascular disease. Inclisiran is currently under review by the Food and Drug Administration (FDA), with an anticipated decision expected by the end of this year, and bempedoic acid was approved in February 2020. ICER is accepting public feedback from interested stakeholders through June 30. 

Earlier this month, the American Journal of Managed Care published an article highlighting the importance of accounting for patient differences in value assessment. The authors note that current methods do not appropriately account for patient heterogeneity, specifically differences in age, gender, race, or ethnicity. In response, the Society for Women’s Health Research developed a set of principles to help ensure value assessments consider women’s unique needs and provide them with access to innovative therapies. The authors agree that further research in this space is critical to ensure value assessment methods consider patient preferences and account for diversity among patients in the healthcare system. 

Also this month, the Partnership to Improve Patient Care shared a blog post encouraging value assessment organizations to engage with advocacy groups as they develop their own patient engagement frameworks. The authors noted concerns with recent statements made by Dr. Steven Pearson, ICER’s founder and president, which acknowledged that patient engagement is an important component of medical research but failed to recognize existing rigorous patient-centered outcomes research and evolving evidence-based frameworks for patient engagement. The authors encourage value assessment organizations to learn from the experiences of organizations, such as the Patient-Centered Outcomes Institute, the Patient-Driven Values in Healthcare Evaluation Center, and the Innovation and Value Initiative, to incorporate key findings and recommendations into future models for patient-centered value assessment.

If you need assistance with all things ICER or value-related, please contact Linnea Tennant.

Xcenda Research Featured in Managed Healthcare Executive

Managed Healthcare Executive recently featured a study from Xcenda about ICER's influence on healthcare delivery and managed care organizations.

The article, ICER reports play significant role in managed care decision-making study finds, is an in-depth look at the data based on the FormularyDecisions platform. Study authors Linnea Tennant, PharmD, MBA, MS, Assistant Director of Global Health Economics and Outcomes Research, and Anne Loos, MA, a Global Health Economics and Outcomes Research Analyst, provide perspective about their findings.

Read article >


Mikey Doesn’t Like It: Court Keep Drugs Prices Out of TV Commercials

On Tuesday, a federal appellate court affirmed an earlier district court decision forbidding the Trump administration from requiring that pharmaceutical manufacturers include product list prices in television advertisements.

To lower drug prices and improve price transparency, Health and Human Services Secretary (HHS) Alex Azar finalized a rule in May 2019 requiring that product list prices be included in television ads. Manufacturers immediately pushed back, with Merck, Eli Lilly, Amgen, and the Association of National Advertisers (a marketing trade association) filing suit, claiming HHS overstepped its authority to regulate commercial free speech and drug marketing. The inclusion of a product’s list price, they argued, would purposely mislead customers, who rarely pay full price for their drugs due to insurance coverage or product discounts.  

The 3-judge panel of the district court determined that HHS does not have the authority to compel drug manufacturers to list prices in advertisements, agreeing that customers, including public programs like Medicare and Medicaid, rarely pay the list price or wholesale acquisition cost for the product. 

The Administration’s attempt to expand its authority—even after admitting in the proposed rule that Congress had never granted it the authority to regulate the advertising of drugs subject to Medicare or Medicaid reimbursement—stands in stark contrast to its other efforts to reduce regulations elsewhere. That being said, manufacturers have made voluntary efforts to make list prices public on websites, etc, thus helping with the administration’s goal of additional transparency. 

Competing With the Big Boys: Community Pharmacies Are Reinventing Themselves

The Journal of Managed Care & Specialty Pharmacy published an article in its June issue written by Brian Nightengale, President of AmerisourceBergen’s Good Neighbor Pharmacy, regarding the current state of community-pharmacy economics. Dr. Nightengale states that independent community pharmacies are reaching their tipping point of profitability and, to remain viable and provide invaluable care to residents, a new payment model is necessary.

With the massive expansion of chain stores in the 1980s and 1990s resulting in nearly 19,000 new stores in the year 2000, local independent pharmacies declined from 40,000+ stores to under 21,000 in the same time span. As prescriptions account for 93% of independent pharmacy revenue, the devastating effects of the expansions are easy to understand. 

Due to increased national chain competition, over 80% of independent pharmacies today have opted into advertising co-ops and wholesaler programs, such as Good Neighbor Pharmacy. These programs enable independent pharmacies to increase scale, thereby leveraging purchasing power while driving down costs. In doing so, while simultaneously differentiating themselves by providing tailored, localized care, community pharmacies stabilized over the last 20 years. 

The pressure is still on pharmacies, regardless of size, as reimbursement rates shrink and the pharmacy payment model remains reliant on filling prescriptions. Additionally, as the industry continues to redefine itself, reimbursement has become unstable, with payment models such as direct and indirect renumeration (DIR) and generic effective rate fees. DIR fees are costly, sometimes in excess of $12 per prescription, and the sluggish nature of reimbursement itself makes profitability hard to predict and may result in losses to the pharmacy.

The abstract illustrates a need to address 2 key barriers: provider status and reimbursement. Regulations limiting the ability of the pharmacist in scope and practice should be eased, given pharmacists’ considerable education, and reimbursement must be updated to reflect the level of care given to patients beyond just filling a prescription. Community pharmacies will enjoy higher reimbursements via full participation in value-based payments centered around improved patient outcomes. 

Independent pharmacies, through tenacity and innovation, have come a long way to compete with national chains and will need to continue to reinvent themselves, along with a reimbursement overhaul, to secure recognition and compensation and remain viable.

Information Buffet (AKA, Other Stuff That Caught Our Attention)

We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

  • The Supreme Court ruled that LGBTQ discrimination is prohibited in the workplace and LGBTQ employees are entitled to federal employment discrimination protections. This decision may have direct implications for the Trump administration’s new rule rolling back Obama-era protections for transgender patients and women who had sought abortions.
  • CMS released 2018 Medicaid Managed Care enrollment data, including information on national-level summary tables relating to trends, breakout of managed care entities, managed care enrollment by state, regional breakout, and states with comprehensive healthcare reform demonstrations.
  • The Center for Medicare and Medicaid Innovation announced the opportunity to submit a Letter of Intent for the Direct Contracting Model for participation beginning in the first Performance Year.
  • The CDC released guidance on telehealth benefits, strategies, and safeguards.

“Part of this explosion in remote meetings between patients and physicians has been made possible by temporary changes in federal and state policies. The private sector, too, has made important changes. One purpose of this hearing is to find out which of these temporary changes in federal policy should be maintained, modified, or reversed—and also to find out if there are any additional federal policies that would help patients and healthcare providers take advantage of delivering medical services using telehealth.

“Last week, I released a white paper on steps that Congress should take before the end of the year in order to get ready for the next pandemic. One of those recommendations was to make sure that patients do not lose the benefits that they have gained from using telehealth during the COVID-19 pandemic.”

– Senate health committee Chairman Lamar Alexander (R-TN), issuing remarks during the Wednesday hearing, Telehealth: Lessons From the COVID-19 Pandemic 

Source: “Alexander: Make the Two Most Important COVID-19 Telehealth Policy Changes Permanent,” Lamar Alexander, June 17


521,000 | 245,000

Of the 1.5 million healthcare jobs lost from February through April, 521,000 (35%) were among staff in dental offices. Only half of those jobs (245,000) recovered in May. Nevertheless, it is the healthcare sector that is recovering most quickly.

Source: “What impact has the coronavirus pandemic had on healthcare employment?” Peterson-KFF Health System Tracker, June 16


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Vice President,
Reimbursement and
Policy Insights,

Scott Shields
Associate Director,
Health Policy


Doug Cook
President | Commercialization Services & Animal Health

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Commercial Consulting | Xcenda


Rachel Besse | Jason Eaton | Scott Shields | Ryan Sullivan


Kylie Matthews | Ellen Olson

June 19, 2020


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