By Leaving "Therapeutic Alternatives" Undefined, CMS Tilts the Playing Field of Drug Price Negotiations

In its initial guidance and information collection request (ICR) for drug price negation under the Inflation Reduction Act, the Centers for Medicare and Medicaid Services (CMS) indicated that it will require manufacturers to guess CMS’s views of potential therapeutic alternatives. What is more, manufacturers will have to defend higher price points by demonstrating superior outcomes relative to every such hypothetical alternative. Remarkably, CMS tasks manufacturers with price justification based on comparative clinical benefit, safety, and patient experience for all such alternatives and every indication in a mere 3,000 words.

What Is A “Therapeutic Alternative”?

The Inflation Reduction Act of 2022 does not define the term “therapeutic alternative.”

Nor does CMS guidance incorporate more commonly used or understood terms such as “pharmaceutical alternatives” and “therapeutic equivalents”—both of which are carefully defined by the Food and Drug Administration (FDA) with criteria meant to reflect the science behind the drugs and biologics they classify. As a result, the guidance fails completely in its primary goal of helping manufacturers understand the field of negotiation.

Fortunately, there are tools already in place to provide greater clarity. In its Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the “Orange Book,” the FDA identifies approved drugs with therapeutically equivalent products. The FDA applies evidence-based, scientific judgement when determining therapeutic equivalence. To be equivalent, two drugs must both:

• Be FDA-approved as safe and effective;
• Contain identical amounts of the same active ingredients in the same dosage and form;
• Meet compendial or other applicable strengths of strength, quality, purity, and identity;
• Be bioequivalent, meaning they present no known or potential bioequivalence problem, and meet an acceptable in vitro standard;
• Be adequately labeled; and
• Manufactured in compliance with Current Good Manufacturing Practice regulations.