Michigan's Medicaid program granted approval to pay for drugs based on efficacy: 5 things to know

Michigan's Medicaid program received approval from CMS to enter into value-based care arrangements with drugmakers, CMS administrator Seema Verma announced during a speech at a biopharma conference Nov. 14. The proposal grants the state's Medicaid program permission to pay for drugs based on their efficacy.

Here are five things to know:

1. The agreement allows Michigan's Medicaid program to take a rebate from drug companies. The amount of the rebate depends on patients' outcome after taking the medication.

2. Under the proposal, drug companies and the state would have to agree on the outcome measure, how the measure is calculated and the population to which the measure would be applied.

3. "Michigan's waiver will empower the state to demand results from drug manufacturers in exchange for paying for medicines," Ms. Verma said during the speech.

4. The new value-based care arrangements could decrease the amount Michigan Medicaid pays for prescription drugs. It remains unclear how the value-based care arrangements would affect out-of-pocket costs for consumers.

5. This is the second proposal of its kind approved by CMS. Oklahoma's Medicaid program received approval to enter into value-based care arrangements with drugmakers earlier this year.

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