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Oklahoma is leading the nation when it comes to innovative drug pricing approaches.  Over the summer, it became the first state to implement what’s known as “value-based contracting” for medications paid for by its Medicaid program.

Value-based contracting, when a drug’s price is based on how much it helps patients, typically takes one of two forms.  First, there’s indication-based pricing. This is where the drug’s effectiveness at treating a certain condition, as proven by clinical trials, dictates its cost.  The same drug can treat multiple conditions, but may vary in its effectiveness depending upon the condition.

Second, there’s outcomes-based pricing. With this approach, the drug’s price is based on how well a given patient responds.  In both cases, the innovative approach can not only save money, but also expand patient access.

Oklahoma is exploring the outcomes-based approach with a long-acting antipsychotic used to treat schizophrenia.  The agreement between Oklahoma Medicaid and the therapy’s manufacturer ties the state’s financial benefit to patient adherence.  The medication’s cost decreases every other month – so long as the patient refills his or her prescription. The ideal scenario benefits both the state and the patient.

Oklahoma also has established a value-based agreement for a medicine used to treat bacterial skin infections.  The state previously required prior authorization for the medication because of its cost. But that requirement is now unnecessary with the new value-based contract in place.  

Despite Medicaid receiving a 23 percent discount, most state programs spend billions annually on medications.  Rising drug prices and enrollment have states feeling pressure to contain costs. Value-based contracting ties limited health care dollars to positive patient outcomes.  It can also enhance access to high-cost, high-value medications.

Other states are following Oklahoma’s lead.  Michigan and Colorado, for example, are both considering value-based arrangements.

To learn more, watch “Understanding Value-Based Contracting”.

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