Newswise — Lawrenceville, NJ, USA—October 1, 2024—ISPOR—The Professional Society for Health Economics and Outcomes Research announced today the publication of a study that provides estimates of how the Centers for Medicare & Medicaid Services (CMS) may have determined initial price offers for the first 10 drugs selected for Medicare price negotiation. A prepublication version of the study was released online on the same day the CMS announced it reached agreements for lower drug prices. The article, “Integrating Price Benchmarks and Comparative Clinical Effectiveness to Inform the Medicare Drug Price Negotiation Program,” was formally published in the October 2024 issue of Value in Health.
The Inflation Reduction Act (IRA) of 2022 introduced a groundbreaking provision enabling Medicare to negotiate prices for select high-spend prescription drugs for the first time in its history. In 2023, CMS initiated negotiations with manufacturers of the first 10 drugs chosen for price negotiation. The negotiation process, as outlined in the IRA and detailed in published CMS guidance, involves several steps. It begins with CMS presenting an initial price offer to each drug manufacturer, followed by 2 rounds of negotiation. For the first 10 brands, CMS announced the final negotiated prices, known as maximum fair prices (MFPs), on August 15, 2024. These newly negotiated prices will take effect in 2026.
Although CMS guidance clearly identifies the factors to be used in developing the initial price offers, there is uncertainty about how these parameters informed those offers. The analysis announced by ISPOR today illustrates complexities in the interpretation of CMS guidance and demonstrates the authors’ ability to devise and follow a standardized process to derive initial price offers based on information made available by CMS.
"Our analysis sheds light on important price benchmarks and clinical evidence factors for the determination of the initial price offers," explained author Sean D. Sullivan, PhD, Professor, The CHOICE Institute, School of Pharmacy, University of Washington, Seattle, Washington, USA. "While we were not able to simulate the offer and counter-offer process, our findings provide a transparent and systematic way to estimate initial price offers that are consistent with CMS guidance.”
To make their estimates, the authors used estimates of net prices and other price benchmarks for the 10 drugs and their therapeutic alternatives, searched for and integrated data on comparative clinical effectiveness for the primary indications, and outlined a range of plausible initial price offers based on CMS guidance and the authors’ own interpretation of regulatory intent.
The study results suggest that for ibrutinib and ustekinumab, statutorily defined ceiling prices likely determined the initial price offers. The integration of net pricing and clinical evidence from comparator branded products should have informed the initial price offers for apixaban, empagliflozin, etanercept, and insulin aspart. Rivaroxaban and sacubitril/valsartan have therapeutic alternatives that are generics, so CMS may have applied a discount to current net prices. To achieve savings in the negotiation of dapagliflozin and sitagliptin, CMS would have needed to leverage additional negotiation factors, as statutory defined ceilings and net prices of therapeutic alternatives are similar or higher.
The researchers note that their analysis should be interpreted as an attempt to inform the drug policy community about CMS initial price offers given context-dependent scenarios, as opposed to a prescriptive report of the process that CMS should follow in the derivation of the initial price offers. This is a critical nuance in the interpretation of the findings, which identified major sources of uncertainty in the interpretation of the guidance, as well as important difficulties encountered in the attempt to reproduce the MFPs.
“CMS is not required to reveal detailed information on how they arrived at the initial price offers. They are required to release an explanation of how they arrived at the MFPs, but not until later in 2025,” explained Sullivan. “We believe that our analysis can help improve transparency in the negotiation process and shed light on what evidence might contribute most substantially to the negotiated prices.”
The number of drugs subject to price negotiation will increase in future years. Specifically, CMS will negotiate prices for 15 Medicare Part D drugs in 2027, another 15 drugs covered under Medicare Part D or Part B in 2028, and an additional 20 drugs covered under Part D or Part B in 2029 and subsequent years. Thus, future research should build on the work done in this study to promote transparency in the CMS process and generate lessons learned.
The authors will be joined by panelists from industry for a webinar, “IRA Part III: Medicare’s Maximum Fair Prices for the First 10 Negotiated Drugs and Anticipated Cost Savings,” which will be hosted by ISPOR on October 22, 2024 from 10:00 – 11:00 am ET.
Suggested Reading:
- Has the Centers for Medicare Medicaid Services Implicitly Adopted a Value Framework for Medicare Drug Price Negotiations?
- Section 50 of the Inflation Reduction Act Drug Price Negotiation Program: Considerations for the Centers for Medicare Medicaid Services, Manufacturers, and the Health Economics and Outcomes Research Community
- Can Generalized Cost-Effectiveness Analysis Leverage Meaningful Use of Novel Value Elements in Pharmacoeconomics to Inform Medicare Drug Price Negotiation?
- Informing the United States Medicare Drug Price Negotiation for Apixaban and Rivaroxaban: Methodological Considerations for Value Assessments Many Years After Launch
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ABOUT ISPOR
ISPOR—The Professional Society for Health Economics and Outcomes Research (HEOR), is an international, multistakeholder, nonprofit dedicated to advancing HEOR excellence to improve decision making for health globally. The Society is the leading source for scientific conferences, peer-reviewed and MEDLINE®-indexed publications, good practices guidance, education, collaboration, and tools/resources in the field.
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ABOUT VALUE IN HEALTH
Value in Health (ISSN 1098-3015) is an international, indexed journal that publishes original research and health policy articles that advance the field of health economics and outcomes research to help healthcare leaders make evidence-based decisions. The journal’s current impact factor score is 4.9 and its 5-year impact factor score is 5.6. Value in Health is ranked 5th of 118 journals in Health Policy and Services, 15th of 174 journals in Health Care Sciences and Services, and 56th of 597 journals in Economics. Value in Health is a monthly publication that circulates to more than 55,000 readers around the world.
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