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August 15, 2017

Value-Based Pricing and State Reform of Prescription Drug Costs

Author Affiliations
  • 1Program on Regulation, Therapeutics, and Law, Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital and Harvard Medical School, Boston, Massachusetts
JAMA. 2017;318(7):609-610. doi:10.1001/jama.2017.8255

Faced with increasing prescription drug costs and congressional gridlock, some states have enacted meaningful reforms. In April 2017, New York State became the first public payer in the United States to authorize limits on prescription drug costs based on their therapeutic benefits.1 Under its new budget legislation, the state can identify high-cost drugs, determine a value-based price, and use enhanced powers to negotiate supplemental rebates to achieve this target price for its Medicaid program. New York’s Medicaid program is the second-largest in the United States, covering approximately 6 million beneficiaries who account for 10% of national Medicaid drug expenditures.2 This Viewpoint discusses New York’s novel approach to addressing drug costs and assesses the potential effect of this value-based pricing system.

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