Congressional Medicaid policy advisers voted Friday to recommend raising the Medicaid rebate percentage and inflation penalty on drugs that are quickly and conditionally approved to treat serious conditions that fill an unmet need.
If Congress follows the Medicaid and CHIP Payment and Access Commission’s (MACPAC) advice, 340B covered entities might see lower ceiling prices on “accelerated approval” drugs, due to 340B prices being based on the Medicaid unit rebate amount and the additional rebate tacked on when a drug’s price has risen faster than inflation.
Congress created the accelerated approval pathway in 1992 in response to the HIV and AIDS crisis. As of the end of last year, the U.S. Food and Drug Administration had approved drugs 253 times this way. Some, like Merck’s cancer drug Keytruda and Bristol-Myers Squibb’s cancer drub Opdivo, have been granted multiple accelerated approvals for different indications.
The accelerated approval pathway is controversial because drugs aren’t approved based on clinical trial outcomes, but instead on other findings that predict a clinical benefit. States worry that they could be paying too much for drugs that ultimately don’t prolong survival, improve quality of life, or work as predicted. Also, questions have been raised whether the accelerated approval pathway is overused. According to the FDA, 12 percent of the novel drugs it approved from 2011 through 2018 used the pathway.
Later this month, an FDA advisory committee on oncology drugs is holding a public hearing on whether confirmatory clinical studies validate prior FDA decisions to approve Keytruda, Opdivo, and Roche’s cancer drug Tecentriq for a total of six indications under the accelerated pathway.
MACPAC staff, in an April 8 presentation to the commission, said raising the Medicaid rebate percentage and inflation penalty on accelerated-approval drugs would give drugmakers a financial incentive to complete confirmatory clinical trials promptly. Increasing the inflation penalty on the drugs “would help mitigate any increases in list price that occurs before confirmatory trial is completed,” the staff said.
The Medicaid rebate percentage and inflation penalty would drop back to normal levels once manufacturers complete clinical trials on the drugs and the FDA grants the drugs traditional approval. MACPAC did not recommend how much higher the rebate percentage and inflation penalty should be set. The commission staff report, however, noted that the Congressional Budget Office has found that increasing the rebate percentage by 10 percentage points could save the federal and state governments up to $50 million per year, and that boosting the inflation penalty by 20 percent could generate up to $1 billion per year in extra savings.