Assessing clinical benefit in the Medicare Drug Price Negotiation Program: A 2-step approach for improving transparency, consistency, and meaningful patient engagement

Abstract

In early 2024, the Centers for Medicare & Medicaid Services (CMS) will send initial price offers to the manufacturers of the first 10 drugs selected for the Medicare Drug Price Negotiation Program, established under the Inflation Reduction Act. However, CMS has not specified exactly how it will adjust the starting point for an initial price offer based on assessment of a drug’s clinical benefit. This article addresses unanswered questions relating to CMS’ methods for assessing clinical benefit. Specifically, we address how CMS can weigh various measures of evidence, ensure transparency and consistency, meaningfully incorporate patient and other stakeholder perspectives, and support addressing evidence gaps. We propose a 2-step approach for assessing the overall clinical benefit of a selected drug compared with its therapeutic alternatives that builds on the framework outlined by CMS. In step 1, CMS would evaluate conventional clinical benefit, defined in terms of outcomes commonly used in clinical studies for the selected drug and indications. In step 2, CMS would evaluate other outcomes broadly related to patient experience that are not adequately represented in the clinical literature. Overall, our approach incorporates the advantages of both qualitative and quantitative approaches to value assessment and decision-making. We describe a set of loose decision rules to improve transparency and consistency, recommend incorporating ranks and weights to signal to researchers and manufacturers which elements of clinical benefit and sources of data are the most important, and center meaningful deliberation with clinical experts, patients, and caregivers.

Plain language summary

The Centers for Medicare & Medicaid Services (CMS) will soon negotiate drug prices. How will clinical benefit inform prices? How will CMS assess clinical benefit? We answer these questions. Our approach has 2 steps. First, CMS should assess conventional clinical benefit. Second, CMS should assess impacts on patient experience. We propose decision supports to improve transparency. We recommend ranks and weights to signal which aspects of clinical benefit are most important. Finally, we include patient-centered deliberation.

Implications for managed care pharmacy

Medicare price negotiations may result in lower prices for selected drugs. These lower prices will impact patient out-of-pocket costs, frequency of use of other drugs by patients with comorbidities, and total reimbursement from payers. These effects will impact revenue and cost-saving efforts in managed care pharmacy. Our proposed approach will help ensure that Medicare price negotiations appropriately align the price of selected drugs with their clinical benefit and impact on the patient experience.

In early 2024, the Centers for Medicare & Medicaid Services (CMS) will send initial offers for the maximum fair price (MFP) to manufacturers of the first 10 drugs selected for the Medicare Drug Price Negotiation Program, established under the Inflation Reduction Act (IRA).¹ In its latest guidance, CMS described how it will determine the initial offer price.² For each selected drug, CMS will begin with the prices of therapeutic alternatives (net price or average sales price for Part D or B drugs, respectively). In cases with multiple therapeutic alternatives, CMS will determine a utilization-weighted average price. Next, CMS will adjust this price based on the drug’s clinical benefit compared with its alternatives. CMS will consider a range of information in its assessment of benefit, including real-world evidence and information on patient experience. CMS will consult with various stakeholders during this process and has committed to holding patient-focused listening sessions. Finally, CMS will further adjust this price based on manufacturer-specific data (eg, the drug’s research and development costs and prior federal financial support for the drug’s development). Overall, CMS will use a “qualitative” approach when making these adjustments, rather than “a more thoroughly pre-specified quantitative approach.”² Although the initial price may be further adjusted during negotiation with the manufacturer, the IRA defines a ceiling for the MFP as the lower of (1) the Part D drug’s net price or Part B drug’s average sales price or (2) a percentage of the drug’s nonfederal average manufacturer price that varies based on time on market.^1,2

This article addresses unanswered questions relating to CMS’ methods for assessing clinical benefit. Specifically, we address how CMS can weigh various measures of evidence, ensure transparency and consistency, meaningfully incorporate patient and other stakeholder perspectives, and support addressing evidence gaps. We propose a 2-step approach for assessing the overall clinical benefit of a drug compared with its therapeutic alternatives. In step 1, CMS would evaluate conventional clinical benefit, defined as outcomes commonly used in clinical studies for the selected drug and indications. In step 2, CMS would evaluate other outcomes broadly related to patient experience and not adequately represented in the clinical literature. Below, we describe a roadmap (Figure 1) for this proposed approach and discuss its strengths.

FIGURE 1.

Roadmap Describing the 2-Step Approach for Assessing the Overall Clinical Benefit of a Selected Drug Compared With Its Therapeutic Alternatives

Assessment of Conventional Comparative Effectiveness

REVIEW OF EVIDENCE

Selecting Indications and Therapeutic Alternatives. The proposed process begins with the identification of indications and relevant therapeutic alternatives for each indication. For drugs with many indications and alternatives, a prevalence-based threshold, such as those represented by at least 5% of the target population, can help determine which to prioritize for assessment.

Identifying Relevant Conventional Outcomes. The next step is identifying relevant conventional clinical outcomes through a literature review of clinical studies in the appropriate therapeutic areas. These outcomes can be grouped by domains such as clinical effectiveness endpoints, safety, and quality of life.

Prioritizing Outcomes. Once outcomes are identified, the next step is to prioritize them by importance. For each selected drug, we propose that CMS convene an expert deliberative committee to assess the drug’s clinical benefit. The committee should be designed to reflect the expertise of a hospital pharmacy and therapeutics committee, but with a focus on representing national diversity. The first task of the committee would be to determine the relative importance of each identified outcome as an indicator of clinically meaningful improvement. There are many approaches that CMS could use to support prioritization, but the SMART (Simple Multi-Attribute Rating Technique) ranking and weighting method has been shown to mitigate cognitive burden.³ This method can be carried out efficiently in person or virtually to allow for a greater number of participants and reduced resource needs; specific details about this method can be found in the cited reference.⁴

Assessing Evidence. Subsequently, CMS will assess evidence related to the conventional clinical outcomes, considering factors such as the study design and quality, uncertainty, impacts on specific populations, and the alternatives used. The priorities identified in the previous step (Prioritizing Outcomes) can inform how CMS focuses its efforts around data generation, collection, assessment, synthesis, and presentation, thus helping CMS conduct the reviews in a timely manner.

Broadly, we propose that CMS quantitatively assess a selected drug by indication compared with each alternative in terms of the identified conventional clinical outcomes using primarily real-world data (RWD). Because CMS provides financial coverage for pharmaceutical treatments to all its beneficiaries, it is imperative to assess the value of these therapies within the real-world population that relies on them. RWD is the most suitable source of information to demonstrate the comparative effectiveness of these treatments for Medicare enrollees. We do not provide detailed suggestions for this part of the process as the methods for conducting comparative effectiveness using RWD are well known.

CATEGORICAL RATING OF THE CLINICAL BENEFITS

We propose that CMS then translate the findings from these analyses into one of several categorical ratings of comparative effectiveness that would be linked to pricing benchmarks defined by the prices of therapeutic alternatives. This aspect of our proposal adapts an approach used in countries like France and Germany where drugs with the lowest levels of benefit compared with alternatives are therapeutically reference priced.^5,6 In France, for example, drugs are rated as offering major, important, moderate, minor, or no added benefit; drugs with minor added benefit are priced according to the price of therapeutic alternatives, and drugs with no added benefit may be priced lower.^5,7

The second task of the expert committee would therefore be to deliberate, ideally in person, and vote on the drug’s overall added benefit (ie, substantial, minor, or no/less clinical benefit) after being presented with the findings from CMS’ review of the evidence. We recommend that the committee hold separate votes for each indication and alternative as warranted (ie, in cases where the results of CMS’ evidence assessment clearly demonstrate differential effectiveness across indication or alternative). The prioritization weights for different outcomes identified previously would be provided to the committee to structure their deliberation in support of these votes but need not be algorithmically incorporated. In addition to structuring the deliberation, these weights can help inform CMS, manufacturers, and other researchers about what evidence is and will be most important in the negotiation program, thus helping to prioritize resources around evidence generation and collection in subsequent years of the program. A similar approach has been implemented by the Colorado Prescription Drug Affordability Board to help prioritize legislative criteria and select drugs based on those criteria.⁸ After voting has concluded across all relevant indications and alternatives, CMS would determine a utilization-weighted overall added benefit rating based on the ratings by indication and alternative. Because these ratings are categorical, this final step may require some approximation and discretion on the part of CMS.

DETERMINING THE STARTING POINT FOR AN INITIAL PRICE OFFER

For a drug determined to offer substantial added benefit (or for a drug with no therapeutic alternatives), the initial offer price would be set at the statutory ceiling for the MFP. This strategy would maximally reward the manufacturer within the bounds of the IRA (hopefully incentivizing further investment by manufacturers in developing drugs with substantial added clinical benefit) and preclude the need for further assessment of the drug by CMS, thus alleviating some demand on CMS resources.

For drugs offering minor or no/less added benefit, the starting point for the initial offer price would be set at either the weighted-average price of therapeutic alternatives or the price of the lowest-cost alternative, respectively. It is possible that for drugs with minor or no/less added benefit the prices of therapeutic alternatives will be higher than the statutory ceiling. In this case, CMS has stated it will use Federal Supply Schedule or Big Four prices as a starting point for the initial offer.²

Assessment of Patient Experience Elements

Following the assessment of conventional comparative effectiveness, drugs determined to offer minor or no/less added benefit will undergo a second assessment to identify and incorporate other outcomes broadly related to patient experience and not adequately captured in the clinical literature.

REVIEW OF EVIDENCE

Identifying Relevant Outcomes. Existing frameworks can inform the identification of outcomes related to patient experience that are not typically represented in the clinical literature.^4,9-11 For example, previous work focused on the rare disease context identified several value elements related to patient experience, including the ability to achieve major life goals, the subjective experience of the treatment regimen, and impacts on anxiety or social isolation.⁴ Additionally, the justice-enhanced cost-effectiveness analysis framework has proposed that impacts on agency, association (eg, the ability to establish and maintain meaningful social relationships), and respect (eg, experiences of stigma) ought to be considered as part of a drug’s value.¹¹ Beyond drawing on existing frameworks like these, CMS should also solicit specific input regarding outcomes related to patient experience in public comments or in the planned patient-focused listening sessions.

Prioritizing Outcomes. Next, we propose convening a second deliberative committee comprising patients, caregivers, and their representatives who have experience with the selected drug across its relevant indications and therapeutic alternatives. As in step 1, the first task of this committee will be to prioritize and weigh the patient experience outcomes.

Assessing Evidence. There is not likely to be ample, high-quality published evidence describing a drug’s impact across the identified patient experience outcomes. Some evidence may be identified in qualitative studies of patient experience and presented to the deliberative committee, but the assessment process will likely need to rely largely on expert opinions of participants shared during the deliberative session. For this reason, CMS should consider carefully how to build a diverse committee that is free from significant conflicts of interest.

CATEGORICAL RATING OF PATIENT EXPERIENCE BENEFITS

As in the first step, the committee would deliberate and vote on the drug’s overall added benefit (ie, substantial, minor, or no/less added benefit) in terms of its impact on patient experience. The weights identified previously will be made available to the committee to structure their deliberation. We recommend that CMS adequately recruit patients to this committee across indications and alternatives to vote on the totality of the evidence. In cases where recruitment does not achieve diversity across indications and alternatives, supplemental patient experience evidence can be gathered through conventional survey methods.

ADJUSTING THE STARTING POINT FOR AN INITIAL PRICE OFFER

The starting point for the initial price offer determined in step 1 would then be adjusted upward based on the level of added benefit in terms of the patient experience (Figure 2). For example, a drug with minor added conventional clinical benefit could have its starting point adjusted upward toward the statutory ceiling based on the level of added benefit in terms of patient experience. A drug with no/less added conventional clinical benefit could have its starting point adjusted upward toward the weighted-average price of alternatives, but not higher. CMS could also consider informing the degree of adjustment by asking the patient committee how much it values elements of patient experience relative to conventional clinical benefits. In a third step, CMS could adjust this price based on manufacturer-specific data, but describing this step further is not within the scope of this article.

FIGURE 2.

Illustration of How to Adjust the Starting Point for an Initial Price Offer

Discussion

CMS has not specified exactly how it will adjust the starting point for an initial price offer based on assessment of a drug’s clinical benefit, preferring instead “a qualitative approach to preserve flexibility in negotiation.”

Preserving flexibility in the drug price negotiation program will be important, especially in the first years as implementation evolves in response to stakeholder input. But the desire to avoid a “more thoroughly pre-specified quantitative approach”² does not necessitate eschewing all decision rules or numerical aids. A middle-ground approach like ours that incorporates advantages of both qualitative and quantitative approaches to decision-making is possible. In fact, previous research into multicriteria decision analysis (MCDA) has recommended to “move away from a typology that distinguishes MCDA in terms of quantitative and qualitative assessment and instead focus on how well different deliberative, multi-criteria approaches are able to incorporate and balance the various types of qualitative and quantitative informational inputs that are morally relevant to the decisions at hand.”¹² For example, a set of loose decision rules like those we have proposed can improve the transparency and consistency of a decision-making process while preserving flexibility. Additionally, ranks and weights of different outcomes need not be algorithmically incorporated in the decision-making process but can instead signal to researchers and manufacturers which elements of value and sources of data are most important and worth investing in. Sending these signals may be especially important for incentivizing investment in evidence generation regarding patient experience, thus addressing research gaps. Prioritization weights can also help structure a deliberative process by potentially reducing cognitive burden¹³ or mitigating the impact of biases that may arise in deliberation, such as an anchoring effect.¹⁴ Most importantly, our proposal centers deliberation, a hallmark of “qualitative” approaches to MCDA given its potential benefits, such as higher-quality decisions, greater perceived legitimacy of the decision-making process, and benefits to participants such as learning and a respect for different perspectives.^12,15-19

Additionally, to ensure that often overlooked elements of the patient experience are considered, our approach offers suggestions for meaningfully incorporating the patient and caregiver perspective into the process of determining an initial price. CMS has not indicated how or whether the patient-focused listening sessions it plans to convene will impact the initial price.²⁰ Without granting some sort of meaningful participation or control to patients and caregivers, these listening sessions risk tokenizing these groups.²¹ In our proposal, if the patient committee concludes that a drug provides additional benefit in terms of patient experience, this perspective directly translates to a higher valuation of the drug. This increased price can signal to manufacturers an important upside to investing in the development of drugs that improve patient experience.

Finally, our proposal is pragmatic. Our 2-step approach allows for CMS to terminate its assessment of comparative effectiveness if a drug is determined to offer substantial benefit in terms of conventional clinical outcomes. Only in cases where the conventional clinical benefit is voted as less than substantial is it critical for CMS to move forward and consider broader outcomes related to patient experience. In rare cases, a drug may offer substantial added conventional clinical benefit, but at the cost of an important impact on patient experience, like the ability to have children. If public comment raises such a concern, then CMS could consider including step 2 even if step 1 finds substantial added benefit. Furthermore, our proposal does not depend on alternatives to the quality-adjusted life-year (eg, the equal-value life-year), which continue to raise ethical and political concerns around discrimination—especially due to their common reliance on health state preferences elicited from the general public²²—and instead directly incorporates the patient perspective.

Conclusions

Our proposal addresses several unanswered questions related to assessing clinical benefit in CMS’ drug price negotiation program, including how to weigh various measures of evidence, ensure transparency and consistency, meaningfully incorporate patient and other stakeholder perspectives, and address evidence gaps.