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One approach CMS has is the Cell and Gene Therapy (CGT) Access Model. Under the CGT Access Model, CMS (at the federal level) will negotiates outcomes based agreements (OBAs) with manufacturers, which will include pricing terms and outcomes to be evaluated. Then states can elect to participate in the contract terms negotiated by CMS or they can opt out and negotiate on their own. From CMS’s perspective, they are hoping that the increased purchasing power will lead to lower prices (or equivalently, more negotiated rebates). For manufacturers, they are hoping that the CGT access model will expedite access for patients and reduce transaction costs since manufacturers would have to negotiate with much fewer than 50 State Medicaid Agencies. For both parties, outcomes-based contracts are burdensome to implement; having CMS will support …

That is the topic of a U.S. Senate hearing last week. One person testifying was an economist, USC Professor Darius Lakdawalla. While his full testimony is here, his key points of contention are worth reading. These include:

• The challenge for public policy is to sustain the pace of medical innovation while ensuring that valuable new technologies remain affordable and accessible.
• The U.S. is by far the largest market for pharmaceuticals in the world and the engine of global pharmaceutical innovation. Other countries, in effect, free ride off the innovation stimulated by the American market.
• Despite stable or falling net prices paid to prescription drug manufacturers over the past decade novel medicines lie increasingly beyond the financial reach of American patients.
• Blunt price controls are not the solution to the worsening affordability of prescription drugs or to global free-riding: Schaeffer Center research suggests that introducing European-style pricing policies would reduce Americans’ life expectancy. …