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The drug pricing debate steps into the future

Sen. Chuck Grassley
Sen. Chuck Grassley. Photo: Win McNamee/Getty Images

The Senate is working on a proposal that would allow state Medicaid programs to pay for new gene therapies over time, and tie those payments to patients' outcomes.

Why it matters: Tying payments to how well drugs work, on this scale, would be an enormous policy change. But some experts are skeptical, saying such a model would perpetuate high prices.

Driving the news: Members of the Senate Finance Committee, led by Chairman Chuck Grassley, are exploring the idea. Grassley considers it a top priority.

  • But no policy has been agreed to, according to a spokesman for Sen. Ron Wyden, the top Democrat on Finance.

How it works: Lawmakers are concerned that high prices and strained state budgets could prevent Medicaid recipients from getting access to new treatments like Zolgensma, a cure for a rare pediatric genetic disease with a $2.1 million price tag.

  • Novartis has said it will accept payment for Zolgensma over 5 years. The Grassley-led proposal would build a similar option into Medicaid, and make it easier to adopt the same model in the private market.
  • The proposal also would require states and drugmakers to agree on clinical benchmarks that must be reached for each payment.
  • Grassley spoke of the proposal in broad strokes last week, and sources familiar provided Axios with more details.

To address concerns that multiyear payment plans would cause manufacturers to inflate their overall price, the total cost of the payments would have to be lower than the price a state would pay all at once.

The other side: Critics have said proposals like this one don’t do enough to tackle drug prices.

  • “These outcomes arrangements may be an attempt to distract from the underlying question of how much a drug should cost when it does work," Peter Bach of the Memorial Sloan Kettering Cancer Center wrote in a recent congressional testimony.
  • Bach is also skeptical of the long-term payment model: “Financing does not reduce total spending, it just changes current obligations," he added.

Go deeper: The real drug pricing debate is upon us