CMS Approves Colorado Medicaid Plan for Value-Based Pharmaceutical Contracts

Manufacturer contracts will drive accountability on appropriate clinical use


February 26, 2019

Media Contact:
Marc Williams

Denver, CO – The Centers for Medicare and Medicaid Services (CMS) has approved a Colorado plan allowing the Department of Health Care Policy & Financing (Department) to negotiate supplemental rebate agreements involving value-based contracts with pharmaceutical companies. Value-based contracts would produce additional rebates that lower net cost for the state for drugs covered under such contracts, if clinical outcome targets for those drugs are not achieved.

"Colorado becomes the third state to take advantage of an innovative approach to lowering drug costs and demanding value from prescription drug manufacturers,” said Seema Verma, CMS Administrator. “I applaud the state's bold initiative - as we see innovations in biomedicine, it is incumbent on payors to modernize approaches to payment for new drugs."

Value-based purchasing can link the payment of a drug to its effectiveness and the outcomes it achieves. Promoting value-based payments is one tool the Department is using to reduce high drug prices in its Medicaid program. Under the plan, the Department and manufacturers will agree on benchmarks based on health outcomes and the specific populations for which these outcomes-based benchmarks will be measured and evaluated.

“Pharmaceutical costs are a significant driver of our Department’s budget,” said Kim Bimestefer, executive director. “Colorado is taking a proactive approach to holding manufacturers more accountable to their clinical promises and controlling the costs of high-cost and specialty drugs. This approval reflects a critical step forward in Colorado’s Affordability Roadmap and our overall affordability strategy in the Medicaid program.”

Colorado has not yet identified specific drugs or manufacturers it plans to approach with value-based contracts.

“We want to start by identifying those drugs where the outcomes are more concrete and easier to measure,” said Cathy Traugott, pharmacy section manager for the Department. “We will take what we learn from those situations before moving into drug categories that are more complex.”

About the Colorado Department of Health Care Policy and Financing: The Department administers Health First Colorado (Colorado’s Medicaid Program), Child Health Plan Plus and other programs for Coloradans who qualify. For more information about the Department, please visit