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Analysis

Understanding CMS' Proposed Value-based Purchasing Rule

By Jack O'Brien  
   July 17, 2020

An industry stakeholder says the proposal could be a "a positive sign" for providers entering value-based arrangements.

About a month ago, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that ties payment for prescription drugs to patient outcomes.

The agency stated that the proposal aims to loosen regulations on developing value-based purchasing (VBP) arrangements, encourage innovation, and empower "states, private payers, and manufacturers to pay for prescription drugs based on clinical outcomes."

The announcement is the latest effort by the Trump administration to move healthcare organizations towards a system based value-based care and address the issue of high prescription drug prices.

Related: CMS Proposes Rule to Base Prescription Drug Payments on Patient Outcomes

Meena Datta, global co-leader of the healthcare practice at Sidley Austin LLP, a Chicago-based law firm, told HealthLeaders that CMS' proposal is mostly a "grab-bag of issues," tackling niche issues that the broader healthcare industry has been seeking guidance on for some time.

Datta added that the proposal could benefit hospitals and health systems with additional flexibility as they move towards VBP arrangements.

"I think that this signals a positive sign for providers, with respect to so called VBP arrangements and reflects the potential for increased flexibility for manufacturers to offer these VBP arrangements," Datta said. "To that end, what the marketplace could see, particularly institutional providers or other providers that purchase drugs from pharmaceutical manufacturers, is additional flexibility for the types of commercial arrangements that could be entered into that allow the parties to negotiate drug prices based on value instead of the volume purchase."

Related: Seema Verma's American Dream: Empower Consumers, Unleash Competition

Datta said that the Trump administration has longed to make an impact on the drug pricing debate in recent years but has been stymied by a number of false starts, including policies that have been challenged in the courts and proposals that have subsequently been withdrawn.

"I think there is a commonality among various stakeholders involved in purchasing and supply chains that VBP arrangements are a good thing. [Therefore], a regulatory path needs to blazed in order to encourage the proliferation of these arrangements, that the current rules are too restrictive or too uncertain to allow for the arrangements to proliferate," Datta said. "So what you see in this particular rule is an effort to allow for the proliferation of certain types of VBP arrangements, in particular, ones that are based on so-called evidence-based measures or outcomes-based measures."

In October, an Avalere survey found that about 60% of insurers use outcomes-based contracts (OBC) with prescription drug manufacturers. 

Compared to the first survey conducted in 2017, the amount of health plans using OBCs increased 35%, with nearly one-third of insurers reporting that they utilized more than 5 OBCs.

Related: Nearly 60% of Insurers Have Outcomes-Based Contracts

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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