In recent years, drug development technologies, platforms, and processes have evolved, contributing to an increase in novel drugs and technologies. In response, the FDA created a number of expedited approval pathways including the Breakthrough Therapy process and the Fast Track process. These pathways speed the market entry of promising therapies but often with limited evidence of efficacy, safety, or cost-effectiveness. Therapies approved through these expedited pathways are often more costly. As of 2019, 60% of all new drug approvals benefited from at least one of the expedited approval pathways.

The Department of Medical Assistance Services (DMAS) facilitated two workgroup meetings with stakeholders including physicians, pharmacists and leadership from both DMAS and the six Managed Care Organizations (MCOs) contracted with DMAS to address coverage and clinical criteria for therapies approved through the fast track and breakthrough therapy programs, as well as risk sharing arrangements and reimbursement methodologies. Under Section 1927 of the Social Security Act, Medicaid programs are required to cover all FDA-approved drugs that participate in the Medicaid Drug Rebate Program. Given federal requirements mandating Medicaid coverage, the workgroup focused not on whether the Agency covers certain therapies, but how to create appropriate clinical standards for FDA fast track drugs and emerging breakthrough technologies, and how to best manage their costs.

In the discussion on the process for clinical criteria development, most stakeholders agreed the focus should be on FDA fast track drugs and emerging breakthrough therapies, especially orphan drugs and gene therapies, which may treat conditions with few or no available alternative treatments, low prevalence, and very high cost. Stakeholders emphasized the need for a collaborative process between DMAS and the managed care organizations (MCOs) to develop standardized criteria for these therapies. As part of the discussion, DMAS noted that moderate to substantial resources would be required to accomplish this goal.

In the discussion on risk sharing and reimbursement methodologies, DMAS presented five risk mitigation models: risk pool (DMAS’ current approach), partial carve-out, risk corridor, kick payments, and individual reinsurance (or stop-loss). DMAS led a discussion detailing the implications and trade-offs for each model with respect to the level of risk assumed by both DMAS and the contracted MCOs. Finally, DMAS reviewed approaches used by other states, noting that several states have recently adopted a carve-out approach.

By the end of the workgroup sessions, the six MCOs were unanimous in their recommendation that DMAS return to an individual reinsurance methodology, which had been implemented between 2013 and 2018.