Oklahoma Medicaid Payment Reform: Success or Bust?

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Oklahoma’s experimental Medicaid program is increasingly seen as a warning for the proponents of value-based pharmaceutical payment. According to an article, drugmakers are leery of risks in the program and only four contracts have been signed to date. Oklahoma is the first state Medicaid program to initiate this payment reform innovation.


As described by CMS, this first-ever approved state plan allows 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 is the first state plan amendment permitting a state to pursue CMS-authorized supplemental rebate agreements involving value-based purchasing arrangements with manufacturers.

“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.”

Warning Signs

As noted in a recent Morning Consult article written by Yusra Murad, there is increasing political pressure to address the rising costs of drugs and lawmakers have supported value-based payments, or setting drug prices based on efficacy, as a means to reduce drug costs. Murad notes, since August 2018, Oklahoma has signed four contracts with pharmaceutical companies in which rebates vary based on performance, appraised by metrics such as patient adherence, reduced hospitalizations and rate of distribution.

However, “over the last five months, the state has faced significant roadblocks, said Nancy Nesser, OHCA’s pharmacy director. For one, Oklahoma has dedicated an enormous amount of time to enter contracts that may not have been very meaningful: All four apply to treatments covering a total of approximately 1,700 patients, a meager slice of the 808,000 beneficiaries with coverage through the state.”

Murad cites several other authorities describing broader concerns with value-based arrangements, especially given the difficulty of defining “value” in a pharmaceutical context. “Becca Davison, director at health care advisory company ADVI Health and former director at the Pharmaceutical Research and Manufacturers of America, said some of the more rote, formulaic ways that have been used to place ‘value’ on drugs in the past have failed to take into account metrics that are important to society, such as quality of life and the overall effect on the health care system.”

It may not be surprising then that only a quarter of pharmaceutical executives reported being involved in a value-based contracts, according to a PwC survey released in September 2017.

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