The Medicaid and CHIP Payment and Access Commission is poised to recommend changes to how Medicaid pays for high-cost specialty drugs.
At MACPAC’s April meeting on Thursday, commissioners signaled they would recommend Congress increase the minimum rebate percentage and additional inflationary rebate on drugs approved by the Food and Drug Administration through the accelerated approval program. According to the draft recommendations, the increased minimum rebate percentage and additional inflationary rebate would apply to a drug until the drugmaker completes the confirmatory trial and gets full FDA approval.
The commissioners didn’t create a carve-out for cell and gene therapies. MACPAC commissioner Thomas Barker said it’s up to Congress and the FDA to fix issues related to the accelerated approval process, not the Medicaid program.
“If the Congress believes that, for example, manufacturers are not doing controlled trials when a drug gets approved under the accelerated pathway, then that’s something that something could be changed in the Food Drug and Cosmetic Act. We shouldn’t be using the drug rebate program as a surrogate to solve that problem,” he said.
The FDA’s accelerated approval program allows for the early approval of drugs that treat serious conditions and fill an unmet need. The agency bases those approvals on lab measurements, radiographic images, physical signs or other markers that predict a clinical benefit. But drug companies must carry out studies to confirm the expected clinical benefit. If they don’t, the FDA can pull the drug from the market.
According to the commission, drugs that go through the accelerated approval process often take longer to complete their clinical trials than drugs that go through the standard approval process, forcing state Medicaid programs to pay high prices for unproven medicines.
While the policy changes wouldn’t affect the FDA’s approval processes, they would probably lower Medicaid spending and encourage drugmakers to speed up their confirmatory trials, said Chris Park, a MACPAC principal analyst and data analytics advisor. The higher inflationary rebate should help offset any increases in list prices before the end of a drug’s clinical trials.
Drugmakers and some beneficiaries argue that higher Medicaid rebates could discourage pharmaceutical companies from investing in the research and development of new therapies or delay their availability. But many experts say those claims are overstated, as there was no apparent decrease in drug development after Congress increased the Medicaid minimum rebate under the Affordable Care Act. Drugmakers’ decisions about a product’s launch and development are affected by a range of factors, not just Medicaid rebates, according to MACPAC.
The commission’s staff said the recommendations might increase access to high-cost specialty drugs if states are willing to lower coverage and prior authorization restrictions as costs drop.
Pharma could boost launch prices or try to raise costs for other payers because of additional Medicaid rebates. But it’s unclear how that might play out since drugmakers already have financial incentives to do both.
“Accelerated approval pathway still has benefits as it would provide earlier access to the market and allow the drug to generate revenue and establish market share while the confirmatory trial is underway,” MACPAC said.
The Congressional Budget Office found the policy changes would reduce federal spending by up to $50 million in the first year and $1 billion over five years. CBO assumed a 10% increase in the minimum rebate and a 20% rise in the inflationary rebate if the drugmaker doesn’t wrap up its clinical trial after five years.
Before accounting for rebates, Medicaid spent about $1 billion on drugs approved through the accelerated pathway in 2019.