This bill modifies Medicaid and Medicare drug pricing calculations to better accommodate value-based purchasing arrangements tied to patient outcomes and directs a study on their effectiveness.
Markwayne Mullin
Senator
OK
The Medicaid VBPs for Patients Act updates federal rules to better integrate value-based purchasing (VBP) arrangements into Medicaid and Medicare drug pricing calculations. This legislation allows for more flexible "best price" reporting for performance-based drug deals and clarifies how refunds or rebates tied to patient outcomes affect average price calculations. Furthermore, the Act mandates new guidance for states on using VBPAs for inpatient Medicaid drugs and creates an exception to the federal anti-kickback statute for certain manufacturer payments related to these arrangements. Finally, it directs the GAO to study the effectiveness and impact of VBPAs across federal healthcare programs.
New Medicaid Rules Tie Drug Payments to Patient Results, Changing Pricing Formulas for High-Cost Meds
The “Medicaid VBPs for Patients Act”—the MVP Act—is a major policy shift focused on high-cost prescription drugs, especially those often covered by Medicaid. Essentially, this bill is trying to change the game from paying manufacturers for volume to paying them for results. If a drug doesn't work as promised for a patient, the manufacturer might have to give money back, and this bill changes how those refunds are factored into federal pricing calculations.
The Shift to Pay-for-Performance
The core of the MVP Act is the formal codification of Value-Based Purchasing Arrangements (VBPAs) in Medicaid. Think of a VBPA like a warranty on a drug. Instead of a state Medicaid program just paying $10,000 for a dose, they pay $10,000, but if the patient doesn't hit a defined health goal (like staying out of the hospital for six months), the state gets a rebate or a refund. This is great in theory because it aligns the manufacturer’s profit with the patient’s health.
Section 2 is where the pricing changes get real. Currently, drug manufacturers report a single “best price” to the government for rebates. This bill allows them to report multiple “best price points” for a single drug dosage if they are using a VBPA. This is a big deal for manufacturers because it allows them to structure complex deals without triggering massive rebates across all their federal contracts. The catch? They have to offer that same VBPA deal to every state before they can use this multi-price option. This means if you live in State A, your state could benefit from a deal negotiated in State B, but it also gives manufacturers more leverage in setting the national terms for these outcome-based deals.
What Happens When Drugs Don’t Work?
If a patient doesn't meet the health goals defined in the contract, and the manufacturer issues a refund or rebate to the state, Section 2 mandates that this financial adjustment must be factored into the Average Manufacturer Price (AMP) calculation. The AMP is the number the government uses to calculate mandatory rebates. By including performance-based refunds in the AMP, the bill ensures that the true, lower cost of the drug (when it fails to perform) is reflected in the official pricing data. This is a win for taxpayers and state Medicaid programs, as it prevents manufacturers from reporting high prices while secretly issuing large refunds when the product underperforms.
This change is particularly important for expensive, cutting-edge treatments like gene therapies, where the cost is high and the long-term effectiveness is crucial. If a $2 million therapy fails after three years, the refund mechanism, now integrated into the AMP calculation, helps keep federal drug spending honest.
Clearing the Regulatory Roadblocks
Section 5 tackles a major headache for VBPAs: the federal Anti-Kickback Statute. This law is designed to prevent fraud by prohibiting manufacturers from giving anything of value to encourage the use of their products. If a manufacturer gives a state a rebate because a drug failed, that rebate could technically be viewed as an illegal “kickback.” The MVP Act creates a specific legal exception (a “safe harbor”) for payments made by a manufacturer directly to a state government as part of a Medicaid VBPA when performance metrics aren't met. This is necessary regulatory housekeeping; without it, these outcome-based payment models would be legally risky and difficult to implement.
Additionally, Section 3 makes a corresponding adjustment to how Medicare calculates the Average Sales Price (ASP) for drugs. It ensures that the performance-based payments excluded from the Medicaid AMP calculation are also excluded from the Medicare ASP calculation, preventing financial adjustments from being counted twice. This simplifies reporting for manufacturers and helps ensure consistency between the two massive federal programs.
The Long View: Study and Supervision
Finally, the bill acknowledges that this is complex territory and requires oversight. Section 6 mandates that the Government Accountability Office (GAO) study the real-world effects of VBPAs across all federal programs (Medicaid, Medicare Part B, and 340B). The GAO must look at whether these deals actually improve access to new drugs (like gene therapies), reduce costs, and address socioeconomic disparities in access. This is crucial, as implementation could get messy. We won’t have the full report until June 30, 2029, which means these significant pricing changes will be in effect for several years before Congress gets a comprehensive, independent review of their success or failure.