Editor’s Note: This month, we offer updates on two significant regulatory topics and advice to pharmaceutical manufacturers on steps they should consider now and in the coming months. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Value-Based Purchasing and Multiple Best Price

As of July 1, 2022 (per 42 CFR 447, Federal Register Vol 46), manufacturers have had the option to offer multiple Best Prices (MBP) when engaging in value-based purchasing (VBP) agreements with commercial customers. VBP arrangements are broadly categorized as outcome, evidence-based, or a combination of both that tie the final price paid for a given treatment to a defined performance metric(s). These arrangements result from a growing concern that a treatment’s cost and the treatment’s clinical benefit are potentially unlinked. Uncertainty over a treatment’s clinical benefit can be ascribed to a number of therapeutic areas where the clinical trial limitations hinder the provision of clear benefits against high costs. For example, accelerated approval pathways, clinical trial design such as cross-over or basket trials and surrogate endpoints, and curative treatments such as gene therapies all present challenges when bridging the gap between efficacy and effectiveness. 

How does this factor into CMS establishing a MBP scenario? Under a non-VBP arrangement, a manufacturer’s BP is less likely to experience highly variable prices that would increase their Medicaid liability. However, under a VBP arrangement, if the clinical performance does not meet the defined metric(s) in the agreement, a potentially large rebate could be triggered. As a result, manufacturers have much lower price points that are included in BP calculations, further shifting the financial risk onto the manufacturer. This increased risk has likely deterred manufacturers from engaging in more VBP agreements that can exacerbate speculation on a drug’s price vs. effectiveness and hinder broader patient access.

Manufacturer Considerations. One major consideration for MBP is that a manufacturer must offer their VBP agreement to all states. Otherwise, per CMS guidance, the price points triggered under the VBP must be included in the traditional BP. Further, CMS is largely not going to mediate these agreements across contract details, invoices, and disputes. CMS takes this stance with the aim of not hindering the range of VBP agreements that payers and manufacturers can curate, and there is no specific guidance on what is “value-” or “evidence-” linked outcomes.

Going forward, manufacturers should consider a number of important issues when determining a VBP arrangement: 

  • Specifying what is being measured, how the performance metrics will be measured, which parties involved will implement each step 
  • The states’ and payers’ capacity to monitor, track, and capture the VBP-specified-metrics varying price points, invoicing and payment cadence, dispute resolution mechanisms, and contract terms and duration 

Under such general guidance, fully considering and documenting reasonable assumptions will be key to realizing the most benefits of engaging in MBP and VBP arrangements and can reduce a manufacturer’s audit liability. Ultimately, these policies have the potential to provide greater access to patients, deliver better risk-sharing mechanisms for manufacturers and payers, and facilitate a stronger value-based portfolio. 

Reference: This post was based on the presentation by Jeff Baab (VP, Operational Consulting, IntegriChain) and John Gould (Partner, Arnold and Porter) during the 2022 MDRP Summit in Chicago, Illinois on October 12-14, 2022.

Interchangeability in Biosimilars

Interchangeability, allowing the automatic substitution of biosimilars for their original brand biologics at the pharmacy counter, is a popular topic when considering ways to potentially reduce healthcare costs. Now a new proposal in the Senate might make this a strong possibility. 

Generally, when the FDA approves a biosimilar, the manufacturer is required to also conduct a switching study, which is meant to prove that alternating between the branded product and the biosimilar multiple times does not lower the efficacy or cause greater risk than using the branded product without any alterations. This allows the biosimilar to obtain interchangeable status. An interchangeable biosimilar product might be substituted for the branded product without the intervention of the provider who prescribed the branded product, similar to how generic drugs are routinely substituted for brand name drugs. A provider is also able to prescribe an interchangeable biosimilar just like they would prescribe a biosimilar or a branded product.

Recently, the FDA approved a biosimilar product and granted it interchangeable status without requiring a switching study. A proposal introduced by Senator Mike Lee (R-Utah) would make this effective for all biosimilars by putting an end to switching studies and, in effect, making all approved biosimilars interchangeable. One argument in support of this proposal, by Sarfaraz Niazi, an entrepreneur, author, and former professor at the University of Chicago, points to the fact that the standards set by the FDA for approval of biosimilars is reason enough to eliminate interchangeability. Niazi argues that “biosimilars have no clinically meaningful difference with their reference product, so if there is no difference, they should be interchangeable without extensive and expensive switching and alternating studies.”

IntegriChain will be keeping a close eye on the potential progress of the legislation and will provide updates as they come.


Pharma Year-End Watch List

The end of 2022 is approaching and with the new year comes a number of cyclical events and legislative changes that might impact gross-to-net, contracts and pricing, and compliance teams. As you recharge over the holiday season and get ready for 2023, here are a few items to keep in mind:

  • January is a popular month for pricing actions, which can require several GTN accrual rates to be adjusted accordingly.
  • Many managed care contracts have price protection terms that reset January 1.
  • Part D standard benefit design parameters change and can impact Coverage Gap liabilities.
  • Coverage Gap accrual rates often reset and change in Jan as beneficiaries plan year resets.
  • Part D specialty-tier cost threshold is being maintained at $830, which is relevant for coverage decisions as well as many State Price Transparency Reporting requirements.
  • Copay accrual rates are often cyclical and typically reset (and increase) in January as beneficiaries’ plan years often reset, leading to many patients going back to the deductible phase (and, increasingly, to a high deductible phase).
  • Lives might shift within commercial and Part D books of business as employers or plans shift among PBMs and payer mixes and managed care rebates might change as new formularies are deployed and as other coverage decisions are implemented.
  • In preparation for year-end audit, this is often a good time to refresh returns reserves and retail inventory assumptions to ensure that pipeline accruals, with potential January pricing actions, are properly accrued.
  • Inflation Reduction Act Part B inflation rebates go into effect 1Q 2023 and the Part D inflation rebates that went into effect October 1, 2022, continue and manufacturers should account for any January 2023 pricing actions. For more on the operational considerations and financial implications of the Inflation Reduction Act, register for our January webinar
  • A long-delayed legislative change will become effective January 1: the U.S. territories, including Puerto Rico, will become eligible for Medicaid rebates and sales and discounts to these territories may be eligible for Best Price and other GP calculations.
  • A number of the State Price Transparency periodic WAC reports due in January as well including:
    • Louisiana (SB 59 (2017)) Quarterly WAC Report, due 1/1/23
    • North Dakota (HB 1032) Quarterly WAC Report, due 1/15/23
    • New Mexico (HB 666) Annual WAC Report, due 1/15/23
    • Texas (HB 1033) Annual WAC Report and Fee payment ($258), due 1/15/23
    • West Virginia (SB 689) Annual Report, due 1/15/23
    • Maine (LD 686) Annual Registration Confirmation, due 1/30/23
    • New Hampshire (HB 1280) Annual Registration, due 1/30/23
    • New Hampshire (HB 1280) Annual Drug Pricing Report or Attestation for not reporting, due 1/30/23

About the Author

Carter Hall

Carter Hall


Carter Hall is an up and coming consultant on the Operational Consulting team at IntegriChain. He earned his Bachelor's degree in Microbiology at Kansas State University and has worked with many different organizations, including the FDA and Johns Hopkins University, on research projects spanning neuroscience, and immunology, as well as a publication for research on gene editing techniques. More recently, he completed his Master's in European Health Economics and Management, with an emphasis in pharmaceutical decision making, across four European universities. During the program, he supported both small and large manufacturers in market access and strategic collaborations. To conclude the Masters program, he completed a thesis focused on comparing solid tumor value frameworks to traditional health technology assessment metrics. His background and experience bring a new perspective to Government Contracts & Pricing services for Life Sciences manufacturers of all sizes.

About the Author

Michael Gorokhovsky

Michael Gorokhovsky

Manager, Operational Consulting

Michael has over seven years of experience in life sciences and healthcare consulting, working with small startups and single-physician offices to some of the largest manufacturers and health systems in the US. Michael began his career at Deloitte Risk and Financial Advisory, specializing in Bona Fide Service Fee and Fair Market Value analyses. Michael also has experience working with manufacturers, payers, and providers on various finance, M&A, systems implementation, and change management projects.

About the Author

Olivia Nweze

Olivia Nweze

Senior Consultant, Advisory Services Team

Olivia Nweze is a Senior Consultant on IntegriChain's Operational Consulting team specializing in state price transparency, healthcare compliance, and government pricing. She has worked with a wide variety of pharmaceutical manufacturers to establish state price transparency infrastructure, evaluate compliance with state reporting obligations, perform compliance assessments, billing audits, and policy documentation reviews. Olivia earned her Bachelor of Science and Master of Science in Global Health degrees from the University of Notre Dame.