Pfizer: How does Pfizer’s warranty program get the best price?

At October 13 our friends at STAT announced the news [sorry, Paywall] about a pilot program “guarantee” of Pfizer which offers both patients and health plans (including Medicare Part D plans) the ability to receive reimbursement for any amount paid to purchase the long-standing oral treatment for lung cancer from the XALKORI Company when use is discontinued within the first three months for clinical reasons. The program has been unique from other emerging value-based agreements for several years, not least because it relies on a guarantee as its reimbursement mechanism, includes Medicare Part D plans alongside commercial payers, and because ‘It offers reimbursements to patients for out-of-pocket expenses, as well as insurers. Of course – this is a Medicaid blog – so we would like to focus on one issue today. How the Pfizer Guarantee Program Avoid Involving Medicaid Best Price?

A quick reminder on why we care about the best price

As our regular readers know, we speak a lot about the best Medicaid price on this blog, especially because of the intersection of this central pricing rule and new and emerging value-based agreements. My colleague Haider took a deep dive into the best price rules earlier this year against the backdrop of a Trump administration settlement that would allow manufacturers to set multiple best prices to encourage value-based deals. In 2016 (man, we’re getting older!) I did a great intro that explained to our readers why the best Medicaid price and innovative payment terms are often at odds. But I still think it’s worth reminding our readers why we’re even having this conversation.

For your information, as part of the Medicaid drug reimbursement program, Congress required manufacturers to offer discounts on sales of covered outpatient drugs to the states and the federal government as a condition of payment for those drugs under Medicaid. The reimbursement amount for each drug is the greater of two amounts: That is a fixed percentage multiplied by the average manufacturer’s price (AMP) of the drug Where the drug’s AMP minus its “best price,” that is, the highest discount given to a purchaser of the drug. These two requirements are detailed in Article 1927 of the Social Security Act.

The best price policy dates back to the beginnings of the Medicaid Prescription Drug Rebate Program (adopted as part of the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508), which was originally based on the idea that Medicaid programs should ‘State should be obtained the status of most favored customer. Section 1927 (c) (1) (C) of the Social Security Act defines best price, in part, as meaning:

In 42 CFR § 447.505, CMS clarified the meaning of the best price as follows:

Of course – price reporting is complicated – and there are many exceptions and exclusions to the definitions above. But for the sake of our discussion today, it suffices to know that the best price is usually the “best price” offered by a maker to a defined set of buyers, with a few exceptions. While this rule has very noble political goals at its root, it has also had the unintended impact of preventing some new value-based arrangements. Why? Because in a traditional value-based agreement (such as an outcome-based agreement), in which a manufacturer agrees to reimburse a payer if therapy fails, that reimbursement could redefine a manufacturer’s best price. For example, if a manufacturer offers a $ 100,000 therapy but provides a $ 50,000 discount / refund in case of clinical failure, the manufacturer’s best price could become $ 50,000 (demanding that the manufacturer now lower its price for the Medicaid program to this new lower amount). One could also imagine an even more extreme example where a full refund resulted in a better price of $ 0.

How does the Pfizer warranty program avoid the best price?

In many respects, from the perspective of the payor or the individual, the Pfizer the program is very similar to other traditional value-based arrangements and therefore would appear to raise traditional concerns about the best price (there are potential issues with the anti-recoil law as well – but we will save these for another article and probably a other blog!) If a patient has to discontinue treatment for clinical reasons, the patient / payer is entitled to reimbursement up to the bulk acquisition cost, or WAC, of ​​the drug. In the case of the XALKORI pilot program, this could go up to $ 57,432 (the program is currently limited in time until the end of the year and is only available if you stop the product before your fourth 30-day recharge).

Now is the time that I need you to scroll to the top and look at the law and regulations! If you read the fine print of Pfizer program, Pfizer is not make any reimbursements to patients or health plans under this warranty program. Instead of, Pfizer has partnered with an insurance company (here, New Hampshire Insurance Company, a AIG Company) to subscribe to the program and pay / process refunds. In exchange for paying the premiums to its insurer (details are of course not public), the insurance company (no Pfizer) guarantees the clinical utility of XALKORI. And what if a patient stops using XALKORI for clinical reasons within the first three months? The insurer, no Pfizer, pays the patient or the health plan.

Remember the wording of the best price definition? “The lowest price available from the manufacturer. “ When New Hampshire Insurance Company cut a $ 57,432 check with a health plan for a patient discontinuation, it is not the manufacturer who makes the payment and therefore, arguably, the best price is not involved.

What does CMS have to say about all of this

There is no safe haven or best price exception guarantee, but Pfizer appears to have devised a program that allows it to make value-based deals with health plans and patients, offer full refunds, and avoid involving the best price. Do we have any idea if CMS has or will adhere to this argument. We do (sort of!)

As a reminder, did I mention the Trump administration’s regulations published at the end of 2020 which are now subject to multiple delays? Well, in that regulation, which dealt in part with a new policy that (if eventually implemented) would allow manufacturers to establish various better prices to encourage the use of value-based arrangements, CMS ruled on – and seemed to bless– the guarantee model:

CMS takeaways: while premium payments from Pfizer to the insurance company may involve the best price, reimbursement payments facilitated by a third party insurer not imply the best price because they do not represent “a price available from the manufacturer”.

And after

In the future, we expect other manufacturers to follow suit. Pfizer in developing their own guarantee programs for proven therapies. At this time, the Pfizer The program is due to expire at the end of 2021, so we will have to wait and see if the program has been successful. We will of course come back here as this story evolves!

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