Led by Dr. Anirban Basu, researchers at the CHOICE Institute, University of Washington, have published an economic-principles-based guide on factors the Centers for Medicare and Medicaid Services (CMS) may consider when drafting their strategy to implement drug price negotiations under the Inflation Reduction Act (IRA). The authors recommend that CMS should always use a value-based strategy for calculating maximum fair prices.
Should CMS decide to follow a cost-plus approach under specific scenarios, the guide identifies situations where a cost-plus approach might be appropriate. The paper also provides a strategy for implementing a cost-plus approach and summarizes acceptable and transparent approaches to implementing value-based pricing strategies, especially those that will align with the requirements of IRA.