Oct 11, 2023

CMS Innovation Center’s One-Year Update on the Executive Order to Lower Prescription Drug Costs for Americans

Liz Fowler, Deputy Administrator and Director of the Center for Medicare and Medicaid Innovation Vinod Mitta, Medical Officer for the Seamless Care Models Group in the Center for Medicare and Medicaid Innovation
and Laurie McWright, Deputy Director for the Seamless Care Models Group in the Center for Medicare and Medicaid Innovation

This October marks one year since President Biden issued Executive Order 14087 “Lowering Prescription Drug Costs for Americans,” which complements the historic provisions in the Inflation Reduction Act that lower prescription drug costs. The Secretary of Health and Human Services, in response to the order, delivered a report to the White House outlining three selected models aimed at improving prescription drug affordability and access for people with Medicare and Medicaid: the Medicare $2 Drug List Model; the Cell and Gene Therapy Access Model; and the Accelerating Clinical Evidence Model. Learn more about the Executive Order and corresponding report.  

Since the release of the report, the Center for Medicare and Medicaid Innovation (Innovation Center) has been further developing the three selected models, focusing on:

  1. Conducting targeted analyses to validate the feasibility and effectiveness of these models.
  2. Gathering input from internal and external parties.
  3. Identifying operational and timeline considerations crucial to success (e.g., Inflation Reduction Act implementation efforts).

In this blog post, we provide an update on the development of these models.

Addressing affordability is one of the Innovation Center’s strategic objectives. The development updates described here are one of multiple ways the Innovation Center is pursuing to improve the affordability of health care, including by addressing health care prices, increasing access, and reducing out-of-pocket costs.

Affordable Drugs Made Simple: The Medicare $2 Drug List Model

Many chronic conditions can be treated with low-cost generic medications, but different Part D plan sponsors charge varying copayments. Doctors often do not know which formulation will be cheapest for which patient, leaving patients paying more than they have to and making them less likely to stay on their medication. The Medicare $2 Drug List Model would allow Part D plan sponsors to offer a low, fixed (up to $2 per month supply) copayment across all cost-sharing phases of the Part D drug benefit (up to the out-of-pocket limit) for a standard Medicare-defined list of generics. The included drugs would target common chronic conditions among Medicare beneficiaries. In addition to lowered copayments, the prescription drugs on the list would not be subject to utilization management requirements (except drug safety-related requirements) or network restrictions.

To inform model development, the Innovation Center reviewed the plan year 2023 offerings by Part D sponsors. It found that within certain drug benefit types, plan sponsors may already offer generic drugs at low copayments not subject to a deductible. However, only 20.5% of Part D beneficiaries (or about 8 million beneficiaries) are enrolled in plans offering a benefit equivalent to what is proposed for the model (Figure 1). Almost all these enrollees were in Medicare Advantage Prescription Drug (MA-PD) Enhanced Alternative (EA) plans, likely due to EA plans having the flexibility to use supplemental dollars from Part C bids to subsidize beneficiary cost sharing in the Part D benefit. The specific drugs found on each plan’s “preferred generic tier” (the typical name used by plans for the lowest cost generic tier) also varied considerably across plan sponsors and formularies.

 Prevalance of Benefit Designs Similar to the "$2 Drug List"

Most stand-alone Prescription Drug Plans (PDPs) also offer a preferred generic tier with a copayment of $2 or less, but only at a select set of ‘preferred’ retail pharmacy locations, not across the entire retail pharmacy network. A similar trend was noted in the structure of PDP mail-order pharmacy networks.

The Innovation Center also reviewed historical prescription drug events (PDEs) to understand beneficiaries’ out-of-pocket costs for generics. Of the 10 most commonly filled generics in 2021, a beneficiary paid more than $2 in out-of-pocket costs for a one-month supply roughly 10-40% of the time (Figure 2).

: Patient Out-of-Pocket Costs for Part D Generic Drugs

These findings indicate that there is an opportunity to improve beneficiary access to stable, predictable copayments for a standardized list of high-value generics, while also encouraging robust plan participation. To achieve the greatest impact, the $2 Drug List Model would primarily focus on generic medications already on lower-cost formulary tiers. The Innovation Center’s goal is to include approximately 150 drugs that, in total, would offer a treatment option in over 90% of instances when a drug may be prescribed to a beneficiary. The Innovation Center is also considering ways to maximize patient and provider awareness of the drugs available under the model (e.g., sending print or digital materials).

The Innovation Center is also carefully considering the changes occurring in the Part D benefit under the Inflation Reduction Act and their potential impact on the model design, beneficiaries, and plan sponsors. For example, a recent analysis by the Assistant Secretary for Planning and Evaluation (ASPE) estimates that the Inflation Reduction Act’s changes to the Part D benefit design will reduce out-of-pocket costs for approximately one-third of Part D beneficiaries by about $400 annually. The Innovation Center expects the model to serve as a natural complement to these Part D benefit changes, testing a way to address drug affordability issues and reduce out-of-pocket costs even further.

The Innovation Center intends to continue to develop this model and engage interested parties to understand factors influencing model participation, plan flexibilities that would encourage participation across all Part D market segments, and ways to study the impact of this model on health equity metrics. CMS will release additional details about this model as soon as is feasible.

Making Revolutionary Treatments a Reality: The Cell and Gene Therapy Access Model

Cell and gene therapies are a subset of drugs with the potential to address severe diseases and disorders. However, the high upfront cost poses a barrier to accessing these potentially life-changing therapies. The issue is of particular concern for state Medicaid agencies. The Cell and Gene Therapy (CGT) Access Model, as outlined in the Secretary’s report, would establish a multi-state approach for pursuing and administering outcomes-based agreements (OBAs) in Medicaid. Instead of states individually pursuing agreements with manufacturers, state Medicaid agencies would have the option of assigning CMS to structure and coordinate multi-state OBAs with participating manufacturers. CMS would, in turn, take on the responsibility of implementing financial and clinical outcome measures agreed upon in the OBAs, reconciling the data, and monitoring and evaluating the results.

Since the Secretary selected this model for testing by the Innovation Center, the pipeline for cell and gene therapies has expanded rapidly. This year, the Food and Drug Administration (FDA) approved several new cell and gene therapies, including treatments for Hemophilia A and Duchenne muscular dystrophy, and forecasts a rapidly increasing number of approvals in the coming years. Acknowledging this robust pipeline and the opportunities it presents to test the CGT Model, the Innovation Center is evaluating multiple conditions for inclusion in the model, including treatments for sickle cell disease, as suggested in the initial report.

The opportunity to increase access to novel therapies among historically underserved populations and advance health equity, all through a multi-state partnership, makes this model unique. The Innovation Center has been collecting feedback from patient groups, clinicians, professional societies, federal agencies, states, and manufacturers on holistically addressing access and affordability issues in these populations. Some topics discussed include outcomes measurement, barriers to care for Medicaid beneficiaries, the need for complementary services, and cross-state access. Participation in the model would be voluntary for both states and manufacturers, and so a model design that addresses the needs of all participants is important.

Interested parties have also highlighted the importance and complexities associated with data capture and data sharing. Post-market data for these novel therapies will be crucially important to understand the clinical benefit realized by patients, especially given the trend of cell and gene therapies initially coming to market with narrow indications (with potential for additional indications in the future) and/or post-market requirements to confirm efficacy, such as the FDA Accelerated Approval Pathway (AAP). The Innovation Center is also considering how real-world clinical data is available to benefit patients, providers, and manufacturers, and how that data could be generated and used when testing the use of federally facilitated OBAs.

The Innovation Center, in partnership with the CMS Center for Medicaid and CHIP Services, has begun gathering input from state Medicaid agencies to better understand their needs and priorities. With feedback obtained through multiple listening sessions, convened primarily by the National Association of Medicaid Directors, the Innovation Center has observed that states are forecasting a rapid increase in spending on cell and gene therapies, and are interested in the potential of OBAs with manufacturers. The report, in response to the Executive Order, envisioned that this model would launch in 2026. To meet the imminent need expressed by states, the Innovation Center is accelerating model development and aiming for rolling launch dates with states joining the model throughout 2025.

Paying for Drugs that Work: The Accelerating Clinical Evidence Model

The FDA approves certain drugs through a process called “accelerated approval” based on interim clinical results, but some drug manufacturers fail to complete confirmatory trials by the date to which they committed at the time of accelerated approval. The Accelerating Clinical Evidence (ACE) Model, the third model outlined in the Secretary’s report, would include Medicare Part B payment adjustments to providers for drugs approved via the AAP Program as a potential method to encourage the expeditious completion of manufacturer confirmatory trials. Incomplete and delayed data from confirmatory trials may result in ongoing utilization of drugs that subsequently fail to confirm effectiveness, which is concerning for patients and payers.

To inform model design, the Innovation Center, in partnership with the FDA, reviewed data on the current and historical trends of Part B drugs approved through the AAP. The analyses showed that more than 90% of accelerated approvals for Part B drugs over the past five years were for oncology indications. The time to complete confirmatory trials for Part B drugs for oncology indications has remained below five years (60 months) since 2014 (Figure 3). The active approach taken by the FDA’s Oncology Center of Excellence may be an important contributing factor to this trend.

Time to Complete Confirmatory Trials (Oncology Approvals

Outside of oncology, delays in confirmatory trial completion do occur, but only a small number of drugs have experienced long delays. These cases are often drugs approved for orphan indications where no alternative treatments are available, making enrollment in confirmatory clinical trials difficult once the drug receives marketing approval. The FDA believes that new authorities provided in the Consolidated Appropriations Act, 2023 may reduce the likelihood of new accelerated approval drugs extending beyond their confirmatory trial deadlines. The new expedited procedures for withdrawal may also aid in resolving approvals with long-delayed confirmatory trials.

Feedback the Innovation Center has received over the past six months from the FDA and interested parties, including patient groups, providers, and manufacturers, has suggested that there is an opportunity for a model that would test ways to encourage completion of confirmatory trials. Additional review and consideration of both the FDA’s new authorities and the shifting mix of products entering the AAP is needed. The Innovation Center will continue to monitor these developments.

Looking Ahead

Addressing drug affordability and accessibility for Americans remains a top priority for CMS and the Biden-Harris Administration. As the Innovation Center continues to move forward in developing these models as described above, it looks forward to continued engagement from all interested parties. Success will require close partnership with beneficiaries, providers, manufacturers, health plans, and states to ensure the models are designed to meet beneficiaries’ needs while encouraging robust participation in the model tests. Further inquiries related to these initiatives can be sent to


The Innovation Center would like to acknowledge the following individuals for contributions to this report: Aurelia Chaudhury, Judith Geisler, Teddy Pitaktigul, Catherine Jansto, Andrew Xuan, Jason Petroski, Purva Rawal, and Ellen Lukens.