U.S. proposes Medicare, Medicaid programs to cut drug costs, including $2 generics

Pharmaceutical tablets and capsules are arranged in the shape of a U.S. dollar sign on a table in this picture illustration taken in Ljubljana August 20, 2014. Picture taken August 20. REUTERS/Srdjan Zivulovic

WASHINGTON – The U.S. health department proposed on Tuesday three new pilot projects aimed at lowering prescription drug prices for people enrolled in government health insurance plans, including offering some essential generic drugs for $2 a month.

The Centers for Medicare and Medicaid (CMS) said it would test the models in the Medicare health program for people age 65 or over and the disabled and the Medicaid program for the poor.

The proposed models would lower the out-of-pocket cost of commonly used generic drugs for chronic conditions, such as hypertension, to $2 a month for people on Medicare, improve access to expensive lifesaving cell and genetic treatments for those on Medicaid, and get CMS better deals for expensive new therapies that lack complete clinical trial data, CMS said.

The first model sees CMS encouraging Medicare Part D plans, which cover most prescription drugs, to offer a monthly $2 fixed co-payment for a standard list of around 150 generic drugs targeting conditions common among Medicare beneficiaries, such as hyperlipidemia and hypertension. It is voluntary.

The second voluntary model allows state Medicaid agencies to pay for cell and gene therapies by delegating authority to CMS so it can facilitate contracts and payment models as well as structure and coordinate multi-state arrangements with manufacturers.

The agency also said it would work on developing a mandatory model for payment methods for drugs approved by the U.S. Food and Drug Administration (FDA) under its Accelerated Approval Program (APP).

CMS has raised concerns about covering drugs under the pathway such as those for Alzheimer’s disease because it does not require the same degree of drug efficacy data as the FDA’s regular approval process.

The model would address the high cost and lack of confirmed effectiveness of drugs that receive accelerated approval through providing drugmakers with incentives to speed up the completion of confirmatory clinical trials, CMS said, and would be developed in consultation with the FDA.

CMS will announce the first model’s start date “as soon as operationally feasible”, it said. Development on the Medicaid gene and cell therapy model will start in 2023 and launch for testing in 2026. The agency will start working with the FDA on the accelerated approval model in 2023 but has no planned launched date yet.