CMS Clears Oklahoma VBP Plan, but Rejects Massachusetts Formulary Request

Oklahoma’s Medicaid program is the first to win approval from CMS to negotiate supplemental rebate agreements (SRAs) involving value-based purchasing (VBP) arrangements with drug manufacturers, with the aim of producing extra rebates for the state if clinical outcomes are not achieved.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” HHS Secretary Alex Azar said in a statement. Azar, who appeared before the Senate Committee on Finance this week to talk about lowering pharmaceutical prices, said the Trump administration “is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs.”

Oklahoma's Medicaid program is called SoonerCare and covers roughly 800,000 people.

VBP can link the payment of a drug to its effectiveness and the outcomes it achieves. CMS has been experimenting with VBP agreements and has an outcomes-based agreement with Novartis for its chimeric antigen receptor (CAR)-T treatment tisagenlecleucel (Kymriah), which is approved to treat pediatric and young adults with acute lymphoblastic leukemia.

CMS said almost every state Medicaid plan includes the authority of the state to negotiate SRAs with drug manufacturers that provide rebates at least as large as those set forth in the Medicaid national drug rebate agreement.

Medicaid is paid for with both federal and state funds, so CMS said it reviews all state plan amendments, including SRAs, which are exempt from the Medicaid “best price” rule that requires drug manufacturers to extend the lowest price for a drug they negotiate with any other buyer to all states in the Medicaid program.

Separately, CMS denied an application from Massachusetts requesting the ability to exclude certain Medicaid-covered outpatient drugs through a closed formulary. In its letter to Massachusetts, CMS said the waiver request did not meet the approval requirements.

Massachusetts could not continue to keep collecting drug manufacturer rebates under Section 1927 of the Social Security Act while excluding certain drugs from coverage, CMS said.

If a closed formulary was approved, Massachusetts also wanted to obtain a selective network for specialty pharmacy for members in its Primary Care Clinician (PCC) Plan, Primary Care accountable care organization models, and fee-for-service network. CMS would have allowed that, but Massachusetts was only interested in it if the closed formulary was also approved, the CMS letter indicated.