Value-based performance arrangements for chronic conditions: an economic simulation of Medicaid Drug Rebate Program reforms

ObjectiveChanges to the Medicaid Drug Rebate Program (MDRP) determination of Medicaid Best Price (MBP) enables Value-based purchasing arrangements (VBPAs) to address financial uncertainty. This study estimates the likely effectiveness of MDRP-enabled VBPAs for chronically dosed medicines.MethodsMonte Carlo simulations examined: Multiple Best Prices and Bundled Sales MBP approaches authorized under MDRP and a third National Pooling approach using payment misalignment; needed payer size for practical participation; and the resulting potential number of covered lives under a VBPA as evaluation metrics.ResultsBoth Multiple Best Prices and National Pooling enable VBPAs for 95% of scenarios (including all 5i chronic products with >= 1,000 treated patients per year), with 75% of those with payment misalignment <= 9%. National pooling for retail drugs has less participation and worse misalignment (5i: 95% contracted, 75% <= 9% misalignment; retail: 71%, 66%). Bundled Sales performed worst (5i: 40%, 75% <= 9%; retail: 31%, 88%) due to rebate volatility risk of breaking best price and Average Manufacturer Price impact. Medicaid sees worse misalignment for the 60% drug performance scenarios because of comparison to the statutory rebate (23.1%).ConclusionThe Multiple Best Prices approach has the lowest misalignment and could be applied to most chronic therapies, even rare ones.