CMS Administrator Seema Verma said Wednesday there need to be "serious discussions" on how to pay for new and extremely pricey drug innovations but slammed the idea of giving Medicare negotiating power.
Verma told reporters that Medicare's and Medicaid's payment systems were not expected to deal with high costs for new and curative innovations.
"Last year we had a new drug for blindness that is about $850,000, and now we are hearing about price tags that could be reaching $5 million for a treatment," Verma said. "These drugs that are coming out are one-time, curative treatments and so these are very different than what we have dealt with in the past."
Verma did not endorse a specific idea on how to address these high price tags, saying that she wants to tap researchers from the outside.
She floated the idea of value-based or outcome-based payments for drug therapies, where patients would pay for treatments that work and potentially get a rebate if it fails.
The idea has gained traction even among some in the pharmaceutical industry. Pharma giant AstraZeneca entered into a value-based contract with insurer UPMC Health Plan in January for the heart drug Brilinta.
But Verma questioned whether such arrangements could "encourage higher launch prices because (the drug company) is going to be potentially giving rebates if the treatment isn't effective."
She vehemently shot down providing Medicare negotiating power over drugs, a popular reform among Democrats.
"I would say that we have negotiators and those are" pharmacy benefit managers, she said. "They have kept our premiums fairly level."
She added that competition among PBMs would keep prices and premiums low, but the government doesn't have a competitor and doesn't have the same incentive to lower costs.
The government "would be making all of the decisions and all of the choices, and consumers will get stuck with one less plan," Verma said.
Some congressional Republicans also oppose the measure.
Senate Finance Chairman Chuck Grassley (R-Iowa) said that the current structure for Medicare Part D has worked.
"Beneficiary enrollment has been robust, and enrollee premiums have remained low and stable," he wrote in a letter on May 10 to the Congressional Budget Office.
Verma also told reporters Wednesday that the CMS hopes to release the updated rule to modernize the Stark law by the end of this year.
The CMS previously put out a request for information last June to get feedback on how to update Stark and the anti-kickback statute. She said in a speech in March that changes will include removing barriers for doctors participating in value-based arrangements.
"There are a lot of technical problems that is creating unnecessary bureaucracy," she told reporters.