Bloomberg Law
May 25, 2023, 9:35 AM

Medicare Drug Price Talks Look to Tap Real-World Evidence Data

Jeannie Baumann
Jeannie Baumann

Medicare’s drug price negotiation presents a pivotal moment to advance the use of real-world evidence into how well drugs work compared with others, but a former CMS head said the agency must clearly lay out which data it’ll accept.

The Centers for Medicare & Medicaid Services said in its initial March guidance on the drug price negotiation process that it will consider evidence such as “comparative effectiveness of the selected drug and its therapeutic alternatives, including the effects of the selected drug and its therapeutic alternatives on specific populations.”

Drugs won’t be eligible for negotiation in the US unless they’ve been on the market for about a decade, unlike in other high-income countries that set prices when drugs first hit the market, said Mark McClellan, who ran the CMS and Food and Drug Administration under President George W. Bush. McClellan is the founding director of the Duke-Margolis Center for Health Policy.

“That is a long time” to generate data on drugs that’s hard to gather in controlled clinical trial environments, such as how well a drug works in diverse populations and in real-world settings, McClellan said at a University of Pennsylvania drug pricing event this month.

Clear Guidance Needed

If the CMS can provide clear guidance on the type of real-world data sources they’ll factor into the drug price negotiation under the Inflation Reduction Act (Public Law 117-169), it would be the first time a high-income nation won’t draw solely on clinical trial data as the evidence for how well a drug works, he said.

“This is a unique opportunity globally,” said McClellan, who implemented the initial Part D drug benefit that Medicare is now redesigning under the IRA.

The agency plans to release an updated version of its drug price negotiation guidance this summer.

The explosion of health data from real-world sources, ranging from medical records and insurance claims data to wearable technology, has increased opportunities to understand how well medications work in real-world situations.

Drawing on evidence about the risks and benefits of medical products based on data that comes from outside a clinical trial has long been a priority for the FDA. The drug regulator issued a real-world evidence framework in 2018 and approved a new indication for a drug using real-world evidence two years ago.

If the CMS process can overcome challenges like missing data and ensuring the data sources fit their purpose, it will build on the FDA’s longstanding work to advance real-world evidence.

The Inflation Reduction Act exempts most drugs from government price negotiations until nine years after their approval date. Biologics, which are made from living cells or biological processes and are more costly to make, are exempt until 13 years after approval.

Those nine or 13 years on the market means the CMS will have to rely on real-world evidence, including how a selected drug compares to similar medicines, McClellan said.

Comparative Effectiveness Research

Such comparative effectiveness research “is vital to answering questions that cannot readily be explored through trials focused on determining efficacy,” said Nakela L. Cook, executive director of the Patient-Centered Outcomes Research Institute, which funds comparative clinical effectiveness research.

“By generating evidence about the comparative benefits and potential risks of health-care options shown to have efficacy, CER provides individuals and those who care for them with a fuller understanding of their options so that they can make the best choices for themselves, which is important given that people have individual needs and circumstances and there is seldom a one-size-fits-all solution,” Cook said.

Comparative effectiveness research can generate real-world evidence but not all CER is conducted with that aim, Cook said.

“Teasing out differences in treatment effect requires sufficient volumes of data and numbers of participants from various population groups,” Cook said. PCORI has developed clinical research networks to conduct CER and other health research more efficiently and to generate real-world evidence on a large scale, she added.

European regulators use comparative effectiveness through randomized clinical trials for drug companies to demonstrate their drug has added therapeutic value compared with the standard treatment, McClellan said.

Specific Benchmarks

Comparative effectiveness research provides a more “specific, independent, and publicly available price benchmark” that payers can use to lower prices, according to a report by the Institute for Clinical and Economic Review.

“The limitations to payer leverage in price negotiations, however, are not solved just by having a more specific price point,” ICER said. “Payers cannot walk away from the table and decide not to cover important new drugs that have no close analogue in clinical effectiveness, and therefore all the pressure they can bring to the negotiation may not be enough to get drugmakers to restrain their pricing on the basis of CER findings.”

To contact the reporter on this story: Jeannie Baumann in Washington at

To contact the editors responsible for this story: Karl Hardy at; Cheryl Saenz at

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