Addressing High-Cost Pharmaceutical Drugs

As the end of the month approaches, so does the end of phase one of SMART-D, the State Medicaid Alternative Reimbursement and Purchasing Test for High-Cost Drugs. A project of the Center for Evidence-based Policy (CEbP) at Oregon Health and Science University, SMART-D is part of a series of grants from the Laura and John Arnold Foundation in Houston, Texas, that address the rising cost of pharmaceutical drugs. The Center is a strategic partner of the Milbank Memorial Fund (MMF); the two organizations collaborate on promoting the development of evidence-informed health policymaking capacity in states.

SMART-D is aimed at developing a better menu of options for states to consider in purchasing high-cost drugs in Medicaid. Phase one of SMART-D concentrated on research, in which investigators looked at the current status of state Medicaid programs and high-cost drugs, including the options they have for paying for them. Researchers looked at four specific areas:

• The Pipeline
  What new drugs will be relevant to state Medicaid programs, given that the patient population Medicaid serves is different from that of Medicare and commercial payers?
• Legal Analysis
  What latitude, if any, do states have to enter into voluntary financial or outcome-based payment arrangements with drug manufacturers? The federal Medicaid Drug Rebate Program constrains Medicaid purchasing activity in return for guaranteed statutory rebates.
• Alternate Payment Models
  What payment models exist in commercial or international markets that might serve as best practices for Medicaid?
• Medicaid Best Practices to Manage Specialty Drugs
  What policy options and management tools are being used by specific state Medicaid programs that can be broadly used as models?

Before it is finalized, the work of phase one will be reviewed by an expert advisory panel convened by the MMF on behalf of the CEbP.

Phase two of the project will focus on planning—and help Medicaid programs identify potential collaborative agreements with drug manufacturers, focusing on patient outcomes and value-based reimbursements.

“States have a limited toolset in dealing with high-cost drugs,” says Pam Curtis, executive director of the CEbP. “Our work is focused on broadening the purchasing and cost management tools available to state Medicaid programs to ensure patient access to effective drugs that will improve health outcomes.” The goal of the project will be to pilot the alternative payment models between state Medicaid programs and drug manufacturers.