Press Releases

CMS Approves State Proposal to Advance Specific Medicaid Value-Based Arrangements with Drug Makers

First-of-its-kind approval for Oklahoma Medicaid will drive value

Today, the Centers for Medicare & Medicaid Services (CMS) issued the first-ever approval of a state plan amendment proposal to allow the state of Oklahoma to negotiate supplemental rebate agreements involving value-based purchasing arrangements with drug manufacturers that could produce extra rebates for the state if clinical outcomes are not achieved. The state plan amendment proposal submitted by Oklahoma will be the first state plan amendment permitting a state to pursue CMS-authorized supplemental rebate agreements involving value-based purchasing arrangements with manufacturers.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” Secretary Alex Azar said, “The Trump Administration is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs.”

Value-based purchasing can link the payment of a drug to its effectiveness and the outcomes it achieves. Promoting value-based payment is one many initiatives outlined in the Administration’s American Patients First Blueprint, which President Trump’s sweeping plan to address the high drug prices facing Americans. Oklahoma submitted to CMS an amendment that added value-based supplemental rebate agreement (SRA) language to their state Medicaid plan. Today, CMS approved the state plan amendment Oklahoma proposed, permitting the state to enter into tailored agreements with manufacturers on a voluntary basis. The state and each manufacturer can now jointly agree on benchmarks based on health outcomes and the specific populations for which these outcomes-based benchmarks will be measured and evaluated.

“President Trump is committed to lowering prescription drug prices and working with states in their pursuit towards innovative state health plans. We want to ensure we are giving states all the tools they need to better negotiate with manufacturers,” said CMS Administrator Seema Verma. “We applaud Oklahoma’s proposal for a state-plan amendment, which is an innovative approach to reform how we pay for prescription drugs and will lead to better deals for our beneficiaries and our program.”

About supplemental rebate agreements

Almost every state Medicaid plan includes the authority of the state to negotiate supplemental rebate agreements (SRAs) with drug manufacturers that provide rebates at least as large as those set forth in the Medicaid national drug rebate agreement. Since Medicaid is a federal and state partnership, CMS reviews all state plan amendments, including SRAs. Consistent with regulations at 42 CFR 447.505(c)(7), SRAs are exempt from the Medicaid “best price” rule that requires drug manufacturers to extend the lowest price for a drug they negotiate with any other buyer to all states in the Medicaid program.

State Plan Amendment: