
Value-Based Payment for Medical Products
Amidst the broader shift from a fee-for-service (FFS) payment structure to a value-based U.S. healthcare marketplace, significant concerns have arisen over a medical product pipeline that is full of innovative - but also high-cost - therapies. These concerns have led to increased interest in developing new payment and alternative financing models for health care that strive to ensure better outcomes for the dollars spent, and thus higher value. Some limited but growing experience exists with these models, broadly referred to as Value-Based Payment (VBP) arrangements, but key regulatory, operational, and infrastructure challenges remain.
Projects Relating to Value-Based Payment for Medical Products
Project
Early-Stage Alzheimer's Disease Treatment
Alzheimer’s disease (AD) is a significant health burden for the elderly population, and is associated with more than 1.9 million annual deaths worldwide and more than $226 billion in direct healthcare costs in the U.S. With only five drugs currently on the market, there is an unmet medical need for patients. A number of innovative “early stage” AD therapies are currently under development that...
Alzheimer’s disease (AD) is a significant health burden for the elderly population, and is...
Read MoreDuke-Margolis Faculty & Research Team

Nitzan Arad
Assistant Research Director

Beena Bhuiyan Khan, MSc
Research Director for Medical Products Payment and Coverage Policy

Christina Bush, M.P.H.
Policy Analyst

Lee Fleisher, MD
Visiting Fellow

Hannah Graunke, MPP
Senior Policy Analyst

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

Aparna Higgins
Senior Policy Fellow

Grace Hoover
Policy Research Assistant

Taruja Karmarkar, PhD
2018-20 Post-Doctoral Health Policy Fellow

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

Barak Richman, PhD
Edgar P. and Elizabeth C. Bartlett Professor of Law
Margolis Executive Core Faculty
2020 Intern Mentor

Morgan Romine, MPA
Chief of Staff
Senior Team Member

Devdutta Sangvai, MD, MBA
Faculty Director of the Margolis Summer Experience
Margolis Core Faculty
Professor, Family Medicine, Pediatrics, Psychiatry
Duke SOM Professor, Program in Education
2020 Intern Mentor
Anti-Racism and Equity Committee Member

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

Christina Silcox, PhD
Research Director, Digital Health
Adjunct Assistant Professor
Senior Team Member
Margolis Core Faculty

Erin Soule, PhD
Assistant Research Director

Kate Tsiandoulas
Policy Analyst
Events About Value-Based Payment for Medical Products
More EventsEvent 2/28/2023
Accelerating Delivery System and Payment Reform in the Safety Net
The Duke-Margolis Center for Health Policy is hosting this webinar to discuss strategies to improve…
Read MoreEvent 9/11/2019
Fulfilling the Promise: Leveraging Payment Reform to Advance Patient Access to Transformative Treatments
WASHINGTON, DC
Amid the ongoing debate over drug and medical device prices, payment, and patient access, an…
Read MoreEvent 9/20/2018
Expanding Access to Effective Treatment for Opioid Use Disorder: Provider Perspectives on Reducing Barriers to Evidence-Based Care
WASHINGTON, DC
Despite rising rates of Americans suffering from opioid addiction, millions of Americans still lack…
Read MorePublications About Value-Based Payment for Medical Products
More PublicationsComment Letter
Comment Letter on Proposed Updated Coverage with Evidence Development Guidance
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
2023
Read MoreComment Letter
Comment Letter on Proposed Guidance for Clinical Endpoints: Knee Osteoarthritis
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
2023
Read MoreComment Letter
Comment Letter on Proposed Transitional Coverage for Emerging Technologies (TCET) Notice
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
Beena Bhuiyan Khan, Hannah Graunke, Mark McClellan
2023
Read MoreJournal Article
Payment Reform for Better Value and Medical Innovation
Mark B. McClellan, David T. Feinberg, Peter B. Bach, Paul Chew, Patrick Conway, Nick Leschly, Greg Marchand, Michael A. Mussallem, Dorothy Teeter
Mark B. McClellan, David T. Feinberg, Peter B. Bach, Paul Chew, Patrick Conway, Nick Leschly, Greg Marchand, Michael A. Mussallem, Dorothy Teeter
2017
Read MoreNews About Value-Based Payment for Medical Products
More News
August 30, 2023
Lee Fleisher, MD Joins Duke-Margolis as Visiting Fellow
Lee A. Fleisher, MD, former Chief Medical Officer and Director of the Center for Clinical Standards and Quality at the Centers for Medicare & Medicaid Services (CMS), has joined Duke-Margolis as a Visiting Fellow.
Lee A. Fleisher, MD, former Chief Medical Officer and Director of the Center for Clinical Standards...
Read MorePress Release June 2, 2020
COVID-19 Pandemic Magnifies Need to Identify Value-Based Payment Reforms for Drugs and Devices
Washington, DC— Although new biomedical treatments have the capacity to save lives and improve patient outcomes, an ongoing challenge is balancing the need for innovation to discover new therapies with ensuring accessibility for the patients that need them. Value-based payment models for drugs and...
Washington, DC— Although new biomedical treatments have the capacity to save lives and improve...
Read MoreNews Update September 10, 2019
Clarifying Medicaid Best Price Regulations In the Context of Value-Based Payment Arrangements
The Duke-Margolis Center for Health Policy is pleased to share with you a new policy brief, Clarifying Medicaid Best Price Regulations in the Context of Value-Based Payment Arrangements, exploring opportunities to update the Medicaid Best Price reporting requirement to better facilitate value-based...
The Duke-Margolis Center for Health Policy is pleased to share with you a new policy brief,...
Read MoreTopics Related to Value-Based Payment for Medical Products
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Drug-Resistant Infections & Antimicrobial Resistance (AMR)
Drug-resistant infections and antimicrobial resistance (AMR) are increasingly concerning. According…

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Digital Health
Digital Health leverages the digitalization of health data and novel tools to empower more…

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Biomedical Innovation
Duke-Margolis, in partnership with FDA and a wide array of other stakeholder groups, is focused on…
The Medicaid Best Price (MBP) policy requiring drug manufacturers to give Medicaid programs the lowest price among purchasers (with a few exceptions) plays a critical role in achieving relatively low fee-for-service (FFS) drug prices in Medicaid. However, its current interpretation has been widely cited as a substantial barrier to the adoption of alternative payment models for drugs that shift away from FFS reimbursement. For example, if a Value-Based Payment (VBP) arrangement ties payments to outcomes,1 a very low payment for a particular patient in which a treatment does not work could become a new MBP for all patients – even if it only applies to a non-representative subset of patients in the drug payment contract.
In this paper, developed by the Duke-Margolis Center for Health Policy, with guidance from its Valuebased Payment for Medical Products Consortium, we describe how the Centers for Medicare and Medicaid Services (CMS) could use its existing statutory authority to provide clarifications for applying MBP to VBP models, without compromising the key goal of MBP. Specifically, we focus on CMS’ interpretation of the bundled sales provision, which requires that discounts on all drugs in the bundle are allocated proportionately across the undiscounted value of the products for MBP reporting, in the context of VBP arrangements. We argue that a low price paid for a patient with a poor outcome as an element of an outcome-based contract for a covered population does not accurately reflect the “unit price” for the drug in that population. Rather, that particular drug price should be “bundled” with other prices for the population – including the mix of higher payments when the drug achieves its performance goal. This approach is consistent with past examples of how MBP should be calculated in the context of bundled drug pricing contracts and, importantly, does not create an exemption of VBP arrangements from MBP reporting; indeed, if the resulting average price of the drug for patients in the VBP arrangement is lower than in other contracts, then that lower price will be the MBP. Rather, this clarification of existing regulations is intended to update the concept of bundled sales to accommodate VBP arrangements, and to increase legal certainty for payers and manufacturers who seek to enter VBP arrangements, without restricting the statutory intent of MBP to enable a population of Medicaid recipients to get the best price that is offered in the marketplace. Additionally, we consider the role of the limited free goods exception in interpreting the MBP requirements.
Below, we outline the basis for CMS’ statutory authority to revise its interpretations regarding the bundled sales provision and free goods flexibilities to MBP. These potential revisions would reduce uncertainty about the implications of VBP arrangements for manufacturers and payers, while still preserving the role of MBP to achieve the lowest net drug prices for Medicaid populations.