Policy Brief
Novel State Payment Models for Prescription Drugs: Early Implementation Successes and Challenges
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
Marianne Hamilton Lopez, PhD, MPA
Senior Research Director, Biomedical Innovation
Faculty Director of the Duke-Margolis Postdoctoral Associates & Affiliated Fellows Program
Adjunct Associate Professor
Senior Team Member
Margolis Core Faculty
Mark McClellan, MD, PhD
Director of the Duke-Margolis Institute for Health Policy
Robert J. Margolis, MD, Professor of Business, Medicine and Policy
Margolis Executive Core Faculty
Robert Saunders, PhD
Senior Research Director, Health Care Transformation
Adjunct Associate Professor
Senior Team Member
Margolis Core Faculty