Medicaid Drug Proposal is Boon for Contracts Based on ‘Value’

The federal Medicaid agency on Wednesday offered some financial protection for drug companies looking to enter contracts with state Medicaid plans and commercial plans based on how well a drug works.

The premise is simple: States pay for a drug, but if it doesn’t work the state gets a partial refund from the drug company. These type of contracts are especially attractive for newer, expensive drugs.

Some states, like Oklahoma, have already adopted those types of contracts for some drugs. The change has not been adopted everywhere because that sort of payment structure can clash with existing regulations that are ...