NEW YORK (Reuters) – The U.S. government is considering setting new payment methods aimed at curbing costs for Medicare and Medicaid coverage of breakthrough medical treatments with very high prices, particularly novel gene-based therapies for cancer and other diseases, a top health official said on Thursday.
Seema Verma, head of the Centers for Medicare and Medicaid Services (CMS), made the comments in an interview with Reuters on the sidelines of the Forbes Healthcare Summit in New York.
CMS, part of the U.S. Department of Health and Human Services (HHS), spends hundreds of billions of dollars annually on medicines for seniors, disabled people and low-income households through the huge Medicare and Medicaid programs. CMS does not negotiate prices or purchase drugs, but sets ground rules for the managed care companies and state Medicaid agencies that do.
“We are trying to do whatever we can to increase competition and give the (health insurance) plans more tools so that they can be better negotiators on our behalf,” Verma said.
Roughly 125 million Americans are covered by Medicare and Medicaid.
The United States is the world’s most expensive market for prescription drugs. Government agencies and private sector companies are struggling to cover the costs of new medicines that have made the most progress to date in treating cancer and rare genetic disorders, some with annual price tags of nearly $500,000.
Verma said one model under consideration was paying different prices for a single drug based on its success treating a particular condition, such as paying more for a therapy that works better for breast cancer than it does for lung cancer or liver cancer.
A second method would be to extend the payment of an extremely expensive medicine over a longer time-frame, rather than immediately after it is given to a patient, Verma added, saying both are being tested by private sector pharmacy benefit managers.
That approach could be particularly useful for gene-based therapies aimed at small patient populations, she said. One such treatment expected to be approved by early next year is Spark Therapeutics’ therapy for a genetic mutation that causes blindness in around 1,000 to 2,000 patients. Some industry experts expect it to carry a list price of as much as $1 million.
Earlier this year, drugmaker Novartis said it reached an agreement with CMS over its revolutionary new blood cancer drug Kymriah, which has a list price of $475,000. Novartis is paid based on the outcomes achieved among pediatric and young adult leukemia patients by the end of the first month.
A similar treatment that harnesses the immune system’s CAR-T cells from Gilead Sciences Inc’s Kite Pharma unit was approved last month and costs $373,000. Other companies including Juno Therapeutics and BlueBird Bio have similar treatments in advanced clinical trials, all of which aim to cure the disease with a one-time treatment.
President Donald Trump has promised to curb drug costs, but little concrete action has been taken so far. CMS has begun seeking information from insurance plans and drug companies as it considers possible changes, Verma said.
Alex Azar, Trump’s nominee for HHS secretary, on Wednesday promised to address drug prices if confirmed to the job, where he would be Verma’s boss.
Some Democratic and Republican lawmakers, as well as healthcare experts, have urged Congress to enact new laws allowing the government to negotiate drug prices directly with manufacturers. In the meantime, Verma is focusing on what she is already authorized to do.
“We are trying to do whatever we can within the regulatory structure,” she said.
Reporting by Caroline Humer; Editing by Michele Gershberg and Will Dunham