Novel State Payment Models for Prescription Drugs: Early Implementation Successes and Challenges

Policy Brief

Novel State Payment Models for Prescription Drugs: Early Implementation Successes and Challenges

Published date

September 13, 2019

While more stable in recent years, health care expenditures continue to be one of the fastest growing areas of state budgets.As a result, a growing number of states are exploring the use of alternative payment arrangements for prescription drugs to address cost concerns while achieving public health goals. This brief examines new payment models for prescription drugs being implemented or considered by states, including value-based payment models that tie drug payments to observed outcomes (i.e., outcomes-based contracts) and those that are population-based payment models. The primary challenges for states in launching new payment models are operational factors, including limited data capacity for tracking people's health outcomes and the lack of well-established contracting models. The brief also identifies potential policy options for moving ahead. For example, drug payment reforms could spread if there was more clarity around what is allowed by current law and regulations, and further regulatory flexibility or CMS guidance could allow for states to implement advanced reforms that fully shift payment from utilization to broader individual or population health improvement. 

Duke-Margolis Affiliated Authors

Nick Fiore

Nick Fiore

Senior Policy Analyst

MHL

Marianne Hamilton Lopez, PhD, MPA

Senior Research Director, Value-Based Payment Reform
Adjunct Associate Professor
Senior Team Member
Margolis Core Faculty

Mark McClellan

Mark McClellan, MD, PhD

Director of Margolis Center
Robert J. Margolis, MD, Professor of Business, Medicine and Policy
Margolis Executive Core Faculty

Robert Saunders

Robert Saunders, PhD

Senior Research Director, Health Care Transformation
Adjunct Associate Professor
Senior Team Member
Margolis Core Faculty