Oregon recently applied to the Centers for Medicare and Medicaid Services (CMS) for an extension of its Section 1115 Medicaid waiver demonstration, which allows the state to operate its Medicaid program with various federal eligibility, benefit, and other requirements waived or modified. As part of this request, Oregon is seeking authority to deny Medicaid coverage of “accelerated-approval” drugs. The Food and Drug Administration (FDA) grants faster approval to these drugs based on surrogate endpoints that are reasonably likely to predict clinical benefits even though clinical benefits themselves have not yet been demonstrated. If the federal government approves this request, it could result in some low-income Oregonians losing access to newer, high-cost prescriptions.
While the FDA accelerated-approval pathway has a vital purpose — allowing faster access to new drugs for people with serious health conditions — it suffers from substantial shortcomings. For example, some drug manufacturers never complete required postmarket confirmatory clinical trials or do so only after long delays. Some do not convert their drugs to traditional FDA approval for many years, if at all. This inhibits timely and full assessments of these drugs’ clinical benefits. Some states have expressed significant concerns about their Medicaid programs covering accelerated-approval drugs with high list prices before manufacturers have shown a verified clinical benefit. However, these drugs constitute only about 4 percent of net Medicaid drug spending, according to one estimate. In its waiver extension, Oregon claims that the ability to exclude accelerated-approval drugs would allow the state to “avoid spending on high-cost drugs marketed to treat conditions that have yet to demonstrate a clinical benefit.” It also could “incentivize drug sponsors to complete their regulatory obligations to demonstrate clinical benefit as laid out by the FDA upon approval” despite Oregon’s relatively small population.
This, however, would violate the longstanding federal open-formulary requirement, under which state Medicaid programs must cover nearly all FDA-approved drugs, including those under the accelerated-approval pathway, to ensure beneficiaries have access to needed prescription drugs. The open-formulary protection is a key element of the Medicaid Drug Rebate Program, under which drug manufacturers must provide significant rebates to the federal government and states as a condition of having their drugs covered by Medicaid. By eliminating the open-formulary protection, Oregon’s waiver proposal to potentially exclude accelerated-approval drugs poses some significant risks to beneficiaries. For example, the waiver could result in some low-income beneficiaries with cancer and other serious health conditions going without promising new drug treatments. So far, only one state — Tennessee — has received waiver approval to impose a closed formulary, which would allow the state to drop coverage of medications in many drug classes, not just accelerated-approval drugs. However, Tennessee’s closed formulary has not yet been implemented and its overall waiver, which also would convert federal Medicaid funding to a block grant, is currently under reconsideration by the Biden administration.
Oregon states it will only exclude accelerated-approval drugs “with limited or inadequate evidence of clinical efficacy,” as determined by state review. But it is difficult to assess how this would affect access, because the waiver provides little detail on how the proposal would work in practice. For example, the state does not specify which accelerated-approval drugs would be subject to state review. It could encompass all accelerated-approval drugs that have not yet converted to traditional FDA approval, which would be the majority of drugs approved within the past five years. Or it could include only drugs that have not completed confirmatory clinical trials within the FDA timelines set in the original approval.
The state also does not indicate the criteria it would use to determine if a particular accelerated-approval drug should be excluded. It only promises that the review will be “rigorous” and will be based on the timelines set in the original FDA approval and on data in peer-reviewed literature or from privately and publicly funded clinical studies. However, an appendix in the waiver application indicates most or all accelerated-approval drugs that have not converted to traditional approval could be defined as having limited or inadequate clinical efficacy. This means that the state could exclude many accelerated-approval drugs. The waiver application also does not identify the entity responsible for conducting the review or explain the review’s procedures. Finally, the waiver application does not state whether beneficiaries can appeal decisions on coverage of excluded accelerated-approval drugs or what criteria would be used to evaluate such appeals.
With beneficiary access at risk and with so many unanswered vital questions, federal policymakers could instead adopt other policies to address problems associated with accelerated-approval drugs but without similarly threatening beneficiary access. Congress could, for example, require drug manufacturers to temporarily pay higher Medicaid rebates until clinical benefits have been proved and traditional approval has been granted by the FDA, as recommended by the Medicaid and CHIP Payment and Access Commission. This would create far more robust financial incentives for drug manufacturers to complete their confirmatory trials, while preserving the open-formulary protection for beneficiaries.
The FDA accelerated-approval regime itself could be improved. For example, new FDA Commissioner Robert Califf recently committed to “use every authority” at the FDA’s disposal to “encourage the initiation of well-designed confirmatory studies.” In addition, new legislation introduced by the Chair of the House Energy and Commerce Committee would set new requirements on manufacturers of accelerated-approval drugs and provide the FDA with additional authority in this area. These reforms could be included in FDA user fee reauthorization legislation considered by Congress later this year.
Public comments to Oregon’s waiver extension application are due April 13, 2022, and can be submitted here.
