Accelerated approval drugs account for less than 1% of Medicaid spending, but states seek CMS approval to avoid coverage of these drugs and cut costs.
Am J Manag Care. 2021;27(6):In Press
States seek to limit coverage of drugs approved through the FDA’s accelerated approval pathway, which is designed to accelerate availability of medications that treat serious or life-threatening conditions. Analysis of Medicaid spending from 2007 to 2018 shows:
State budget shortfalls resulting from the COVID-19 pandemic will likely amplify efforts to cut Medicaid spending. In advising on targets for Medicaid cuts, the National Governors Association1 has identified Medicaid coverage of “selected fast-tracked, first-in-class drugs,” such as those approved through the FDA’s accelerated approval pathway, as ripe targets. Two states, Massachusetts2 and Tennessee,3 have sought federal waivers from Medicaid coverage requirements to limit patient access to these medicines. The efforts raise serious patient and provider concerns about access to medicines for a Medicaid population living with serious or life-threatening, often rare, conditions without treatment options—individuals for whom the accelerated approval pathway was developed.
By pursuing access limitations in Medicaid, states presume that any savings to be had are worth restricting access for these patients. An analysis of Medicaid spending on accelerated approval drugs between 2007 and 2018 and their impact on the growth in Medicaid spending shows that accelerated approval drugs accounted for less than 1% of annual Medicaid spending consistently year over year. These data support preserving Medicaid access to accelerated approval drugs for the seriously ill.
New medicines approved through FDA’s accelerated approval pathway4 have made novel therapeutics for serious or life-threatening conditions available more quickly to the benefit of patients, particularly those battling cancers or rare diseases with limited to no treatment options.5 Congress first codified the accelerated approval pathway in 1997.6 Accelerated approval drugs changed the course of disease for individuals with HIV/AIDS and many cancers by driving innovation for these previously underserved populations.5 Congress modernized and enhanced the pathway in 2012 to expand its use for rare diseases.7
For accelerated approval applications, the FDA must also consider the severity, rarity, or prevalence of the condition treated and the availability or lack of existing treatments.7 FDA approval is contingent on the sponsor’s completion of a longer-term, confirmatory study. A streamlined withdrawal process exists for drugs that are found to be unsafe, or for which benefit is not confirmed, or for which no confirmatory trials are conducted by their sponsor.
Increasingly, Medicaid and other payers are implementing significant coverage barriers or refusing to cover these medicines outright, arguing that accelerated approval drugs have insufficient or limited evidence despite these drugs meeting the FDA’s safety and efficacy standards. A recent Kaiser Family Foundation study8 indicates that a majority of states are developing strategies related to new high-cost therapies, particularly those approved on an accelerated pathway. Notably, the National Governors Association has called for federal action “[a]llowing state Medicaid programs to exclude…select fast-tracked, first-in-class drugs that lack sufficient data on safety and efficacy, until such evidence is produced.”1
Delaying Medicaid coverage of FDA-approved treatment options undermines the intent and urgency of the accelerated approval pathway, as access delays can mean irreversible harm. Because expressed reluctance to cover these medicines includes financial concerns about costs of accelerated approval drugs, understanding the extent to which accelerated approval drugs affect Medicaid spending overall and spending growth is important to these deliberations.
Estimating Impact on Medicaid Spending
To estimate the impact of accelerated approval drugs on overall Medicaid spending and spending growth, data on Medicaid spending for each year from 2007 to 2018 were collected from the National Health Accounts tabulated by CMS.9 These data also include Medicaid-specific spending on hospital care, physician and clinic services, nursing homes, home health, and prescription drugs, among other covered services. Spending includes Medicaid managed care and fee-for-service spending. Accelerated approval drugs were identified from the FDA Center for Drug Evaluation and Research drug and biologic accelerated approvals document as of December 31, 2019.10 These data informed calculations of the Medicaid amount reimbursed for each year. Total Medicaid drug reimbursements for the year were also tabulated.11
Between 2007 and 2018, total Medicaid spending increased from $326 billion to more than $597 billion, an average increase of 5.7% per year. As shown in Figure 1, hospital spending consumed the largest share of Medicaid spending year over year, followed by physician and clinical services and prescription drugs. Accelerated approval drugs accounted for a small percentage of overall Medicaid spending between 2007 and 2018. In 2007, these drugs accounted for 0.3% of Medicaid spending, rising to 0.7% by 2012 and remaining relatively constant through 2018. Notably, the portion of Medicaid spending for accelerated approval drugs did not increase and remained steady at 0.6% to 0.8% a year after the 2012 passage of the Food and Drug Safety and Innovation Act,7 which codified the pathway and encouraged its use for rare diseases.
Similarly, as Figure 2 illustrates, hospital spending contributed the most to Medicaid spending growth. Over the 2007-2018 period, hospital spending accounted for nearly 30% of the growth in Medicaid spending. During the same period, increased spending on prescription drugs accounted for 16.7% of the growth in Medicaid spending. Between 2007 and 2018, increased spending on accelerated approval medications accounted for only 1.3% of the overall growth in Medicaid spending.
It is important to note that the analysis does not take into account any prescription drug rebates, which in 2017 accounted for 55% of state Medicaid drug spending.12 The lack of available detailed information on Medicaid rebates obscures information about rebates specific to accelerated approval drugs and other on-patent medicines. That limits the analysis and ability to quantify how rebates relating to both accelerated approval and other on-patent medicines affect net drug spending, although spending net of rebates would decrease the total spent on prescription drugs, as well as the percentage of Medicaid spending growth attributable to prescription drugs overall.
During the study period, Medicaid also underwent significant changes largely driven by Medicaid expansion as a part of the Affordable Care Act. Most notably, after 2010, enrollment in the program increased by an average of 3.9% per year.13 Although spending on all categories of care increased during Medicaid expansion, the percentage of total Medicaid spending attributable to accelerated approval drugs remained stable between 2010 and 2018.
Drugs approved via accelerated approval are novel treatments that address urgent and unmet medical needs involving serious and life-threatening diseases. Since inception, the accelerated approval pathway has resulted in tremendous advances, most notably for HIV/AIDS and many cancers. Despite cost concerns, the analysis on drivers of Medicaid spending shows that accelerated approval drugs have a de minimis impact on spending while addressing significant unmet medical needs. The potential human costs far outweigh potential savings from coverage restrictions.
Relatedly, the Congressional Budget Office (CBO) recently evaluated the savings potential of a proposal by the Medicaid and CHIP Payment and Access Commission to “give states a set period of time to evaluate the clinical evidence for new drugs and determine appropriate coverage criteria.”14 CBO estimated that proposal would decrease federal spending by less than $25 million over 10 years, with savings primarily resulting from delaying the start of the coverage period and shifting some spending to another budget window. In fiscal year 2018, federal spending on Medicaid amounted to 62% of total Medicaid spending,15 so the state share of savings estimated by the CBO would be less overall and then divided among the states. In contrast, given that accelerated approval drugs must address serious or life-threatening conditions with significant unmet medical needs, a 6-month delay in access to treatment could have a profound, irreversible impact on patients.
States seeking to limit access to accelerated approval drugs must obtain approval from CMS to waive drug coverage requirements that enable states to collect substantial rebates under the Medicaid Drug Rebate Program (MDRP). The MDRP generates rebates that reduce Medicaid drug costs by more than half.13 Allowing such exceptions to the MDRP could open it up to further changes that weaken Medicaid’s ability to provide affordable access to therapeutics for serious unmet medical needs that FDA’s accelerated approval pathway was designed to address. CMS has declined Massachusetts’ Medicaid waiver request2 for drug coverage exceptions, noting that accelerated approval drugs “must be covered by State Medicaid programs” if the manufacturer participates in the MDRP.16 States can use utilization management mechanisms to ensure appropriate use, and they have greater coverage discretion for drugs from manufacturers not participating in the MDRP. Tennessee’s Medicaid waiver request3 that could include coverage restrictions for accelerated approval medicines was approved by the Trump administration in January 2021.17 Its future, given the change in administration, is uncertain.
Medicaid programs seeking ways to meaningfully mitigate budgetary impacts from rising health care costs will not find success in restricting or eliminating coverage of accelerated approval drugs. This analysis of Medicaid claims data from 2007 to 2018 shows that such efforts are misguided. Accelerated approval drugs account for less than 1% of overall Medicaid spending while often representing the only treatment options available for beneficiaries. During the COVID-19 pandemic, in particular, individuals living with serious conditions face increased vulnerability. This reality places paramount importance on facilitating access to treatments for patients with serious or life-threatening conditions. Limiting Medicaid coverage for accelerated approval drugs would have a devastating impact on patients benefiting from these treatments while having a de minimis impact on spending.
Author Affiliations: Department of Health Policy & Management, Rollins School of Public Health, Emory University (KET), Atlanta, GA; Partnership to Fight Chronic Disease (KET), Washington, DC; American Action Forum (DH-E), Washington, DC.
Source of Funding: The Partnership to Fight Chronic Disease provided funding for this research.
Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.
Authorship Information: Concept and design (KET); acquisition of data (KET); analysis and interpretation of data (KET, DH-E); drafting of the manuscript (KET, DH-E); critical revision of the manuscript for important intellectual content (KET, DH-E); and statistical analysis (KET).
Address Correspondence to: Kenneth E. Thorpe, PhD, Department of Health Policy & Management, Rollins School of Public Health, Emory University, 1518 Clifton Rd, Atlanta, GA 30322. Email: email@example.com.
1. 2019 principles for federal action to address health care costs. National Governors Association. Accessed January 26, 2021. https://www.nga.org/wp-content/uploads/dlm_uploads/2019/05/NGA-Health-Care-Costs-Principles-FINAL.pdf
2. MassHealth Section 1115 demonstration amendment request. Medicaid.gov. September 8, 2017. Accessed January 26, 2021. https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ma/ma-masshealth-pa3.pdf
3. TennCare II Demonstration: amendment 42 modified block grant and accountability. Tennessee State Government. November 20, 2019. Accessed January 26, 2021. https://www.tn.gov/content/dam/tn/tenncare/documents2/Amendment42FinalVersion.pdf
4. Delivering promising new medicines without sacrificing safety and efficacy. FDA. August 27, 2019. Accessed January 26, 2021. https://www.fda.gov/news-events/fda-voices/delivering-promising-new-medicines-without-sacrificing-safety-and-efficacy
5. Sasinowski FJ. Quantum of effectiveness evidence in FDA’s approval of orphan drugs: cataloguing FDA’s flexibility in regulating therapies for persons with rare disorders. FDA News. 2011. Accessed January 26, 2021. https://www.fdanews.com/ext/resources/files/archives/n/NORDstudyofFDAapprovaloforphandrugs111611.pdf
6. Food and Drug Administration Regulatory Modernization Act of 1997, Pub L No. 105-115, 111 Stat 2296 (1997).
7. Food and Drug Administration Safety and Innovation Act of 2012, Pub L No. 112-144, 126 Stat 993-1132 (2012).
8. Gifford K, Winter A, Wiant L, Dolan R, Tian M, Garfield R. How state Medicaid programs are managing prescription drug costs: results from a state Medicaid pharmacy survey for state fiscal years 2019 and 2020. Kaiser Family Foundation. April 29, 2020. Accessed January 26, 2021. https://www.kff.org/medicaid/report/how-state-medicaid-programs-are-managing-prescription-drug-costs-results-from-a-state-medicaid-pharmacy-survey-for-state-fiscal-years-2019-and-2020/
9. National health expenditure data: historical. CMS. Updated December 16, 2020. Accessed November 15, 2020. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical
10. CDER drug and biologic accelerated approvals based on a surrogate endpoint. FDA. Accessed November 15, 2020. https://www.fda.gov/media/88907/download
11. State drug utilization data. Medicaid.gov. Updated January 4, 2021. Accessed January 26, 2021. https://www.medicaid.gov/medicaid/prescription-drugs/state-drug-utilization-data/index.html
12. Dolan R. Understanding the Medicaid prescription drug rebate program. Kaiser Family Foundation. November 12, 2019. Accessed January 26, 2021. https://www.kff.org/medicaid/issue-brief/understanding-the-medicaid-prescription-drug-rebate-program/
13. MACStats: Medicaid and CHIP Data Book: exhibit 28. Medicaid and CHIP Payment and Access Commission. December 2019. Accessed January 26, 2021. https://www.macpac.gov/wp-content/uploads/2020/01/MACStats-Medicaid-and-CHIP-Data-Book-December-2019.pdf
14. Medicaid and CHIP Payment and Access Commission. Next steps in improving Medicaid prescription drug policy. In: Report to Congress on Medicaid and CHIP. Medicaid and CHIP Payment and Access Commission; 2019:1-15. Accessed January 26, 2021. https://www.macpac.gov/wp-content/uploads/2019/06/Next-Steps-in-Improving-Medicaid-Prescription-Drug-Policy.pdf
15. Federal and state share of Medicaid spending: FY 2018. Kaiser Family Foundation. Accessed January 26, 2021. https://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
16. Medicaid drug rebate program notice: release No. 185. Medicaid.gov. June 27, 2018. Accessed January 26, 2021. https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-185.pdf
17. TennCare III Medicaid section 1115 demonstration. Medicaid.gov. Updated January 20, 2021. Accessed January 26, 2021. https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/tn-tenncare-iii-ca.pdf