States, private payers and manufacturers now have more flexibility to enter into value-based purchasing (VBP) arrangements for prescription drugs under Medicaid. The Centers for Medicare & Medicaid Services on Monday finalized regulatory changes to modernize Medicaid prescription drug purchasing and drive payment innovation.

"Rules on prescription drug rebates and related reporting requirements have not been updated in thirty years and are thwarting innovative payment models in the private sector," CMS Administrator Seema Verma said. "Medicaid's outdated rules have consistently stymied the ability of payers and manufacturers to negotiate drug reimbursement methods based on the actual outcome of the treatment. A new generation of approaches to payment methods is needed to allow the market the room to adapt to these types of curative treatments while ensuring that public programs like Medicaid remain sustainable and continue to receive their statutorily required discounts."