The Biden administration’s justification of the first cycle of Medicare drug price negotiations is fueling curiosity and uncertainty about a process largely held behind closed doors, just as another round of talks begin in the coming weeks under a new administration.
The Centers for Medicare & Medicaid Services released 10 highly anticipated explanations about its process for determining offers and counteroffers in its landmark Inflation Reduction Act program to set the prices of some of the most expensive and widely used drugs covered under Medicare.
The CMS was required by March 1 to publish explanations about how it determined the negotiated drug prices released in August 2024, but moved weeks early, “to provide insight into the negotiation process and to help interested parties prepare for public submission and engagement opportunities for the second cycle of negotiations,” according to an agency spokesperson.
Despite the release of hundreds of pages with information, data, and meeting minutes from the negotiations, some industry watchers were disappointed the explanations lacked more details about how the agency took a quantitative and methodical approach to reaching the negotiated price.
Such details, some argue, would allow the industry to forecast how drugs will be priced in future negotiations. The second cycle is set to begin by Feb. 1 with the selection of up to 15 additional Part D drugs.
“The CMS explanation enumerates the agency’s findings regarding each aspect that it is charged with considering,” said Darius Lakdawalla, chief scientific officer at the USC Schaeffer Center for Health Policy & Economics. “However, there is no real transparency into how it weighed its findings for each drug to come up with a single finding on price.”
“Real transparency would require a more systematic and quantitative approach to computing the value of a product,” he said.
Manufacturers including
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The maximum fair price, or MFP, is the negotiated price under the program.
Therapeutic Alternatives
According to the explanations for all 10 drugs, more than 50 revised offers or counteroffers were proposed by the CMS or a manufacturer after the 10 initial offers the CMS made and the 10 written counteroffers provided by drugmakers.
A major factor the CMS considered for driving offers and counteroffers was comparing the selected drugs to their therapeutic alternatives—a product that is clinically comparable to the selected drug.
The agency considered the clinical benefit of a drug in the context of its therapeutic alternatives and applied its understanding of the comparative effectiveness for identified indications.
For example, it listed various indications of
However, industry watchers were expecting the agency to thoroughly explain how it weighed each therapeutic alternative, beyond listing what they were.
“Part of this process is they’re going and looking at a bunch of other drugs that are supposedly similar,” said Brian Reid, a principal at Reid Strategic. “CMS could signal how they compared the selected drugs with the alternatives, and the fact that they didn’t do that leaves everyone shrugging their shoulders and wondering what exactly the standards are.”
The explanations were also “opaque,” and “did not fully consider the value of these medicines,” said Megan Van Etten, vice president of public affairs for the Pharmaceutical Research and Manufacturers of America.
Alternatively, the listed therapeutic alternatives were viewed as beneficial for other instances where payers are seeking to lower drug prices.
“We are struggling with what the therapeutic alternatives are” said Gerard Anderson, a member of the Maryland Prescription Drug Affordability Board. “How CMS defines therapeutic alternatives is very important, and is well done, but requires an awful lot of analysis that’s drug specific. That’s the additional guidance that we didn’t have prior to last year.”
The CMS said it considered the therapeutic alternative’s cost, prescribing information approved by the FDA, and the extent to which it addressed unmet medical needs.
“CMS seems to have stuck pretty closely to current treatment standards,” said Anna Kaltenboeck, a principal at ATI Advisory, pointing to alternatives for Bristol-Myers Squibb’s blood thinner Eliquis, which included Pradaxa and Xarelto, but not Warfarin.
“I see that as a signal that they are being attentive to clinical practice and the value of newer agents as opposed to referencing to the lowest possible alternative to get a lower price point.”
‘Stake in the Ground’
Despite some pushback on the explanations, other industry watchers consider the information valuable as it gives a look into a confidential process.
“It is something we’ve never had before,” Sarah Emond, chief executive officer of the Institute for Clinical and Economic Review. “When purchasers negotiate with drug companies, they do so incredibly secretively and everything is 100% confidential.”
“Even though it’s not super detailed and not the playbook that some people wanted, there is now a stake in the ground about the level of information released and results of the program.”
The explanations ranged from 26-to-48 pages, with some parts redacted to protect proprietary information. The agency also included hundreds of pages from manufacturers with data and information regarding their drug, with most details redacted.
“This is all pretty remarkable in terms of its transparency,” said Leigh Purvis, a prescription drug policy principal for AARP. “I can’t think of any other US payer that has disclosed this much information about how it negotiates drug prices, much less the prices that resulted from that negotiation.”
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