- More states are turning to alternative payment models for prescription drugs in the Medicaid program as they balance increasing drug costs with public health goals.
- Yet barriers remain to the spread of alternative payment models including regulatory and implementation hurdles, according to a paper from Duke University's Margolis Center for Health Policy.
- The paper outlines several steps states can take to accelerate alternative payments models and showcases early successes in other states.
When blockbuster drugs came to market a few years ago that could cure diseases, like hepatitis C, it forced states to pay greater attention to its pharmaceutical spending.
Many states struggled with ways to deal with the rising cost of curative drugs and who should get those drugs first. As states grapple with these issues, some have turned to alternative payment models.
Louisiana's "Netflix" model approach has captured many headlines, and may prove an example for other states seeking solutions to curb drug spending. The state reached a deal with drugmaker Gilead in which the state will receive an unlimited supply of its hepatitis C drug, Harvoni, for a fixed sum each year for five years.
The Netflix model for states is a "promising approach to improving population health while ensuring budget certainty for the state government," the report noted.
Other ideas build incentives into the contracts to reward for positive outcomes. For example, some contracts have incentives for how well patients adhere to their medication regimens.
Oklahoma, Michigan and Colorado have negotiated outcomes-based contracts with drug manufacturers, in some way reimbursing the drugmaker for how well the drug works.
Oklahoma has different contracts in place targeting drugs that treat schizophrenia, bacterial skin infections, and epilepsy, according to the paper.
The contracts stipulate that the better the outcomes, the bigger the rebates for the state. To measure for outcomes, the state looks at adherence, ER visits and total cost of care. But there can be limitations, the report said.
"A measurement challenge is that few meaningful outcomes can be assessed through readily available health care claims data," the report noted.
As states weigh their options, there are steps states can take to accelerate these new ideas. States can request authority from CMS to implement outcomes based contracting. The paper also encourages CMS to encourage states to apply for new authority through state plan amendments.