Why real-world evidence matters in Medicare drug price negotiations

Newly proposed best practices checklist details how real-world evidence (RWE) can be generated and evaluated to support the Centers for Medicare & Medicaid Services (CMS)’ decision-making in Medicare drug price negotiations.

An article in Health Affairs Scholar explores how RWE can support CMS in implementing the Medicare Drug Price Negotiation Program under the Inflation Reduction Act (IRA). Authored by Sean Tunis, Jason Shafrin, Kyi-Sin Than, Melanie Whittington, Richard Willke, and Murtuza Bharmal, the paper argues that RWE can help address evidence gaps not covered by clinical trials and proposes a best practices checklist to guide CMS and drug manufacturers in evaluating and generating high-quality RWE.

The IRA authorizes CMS to negotiate a “maximum fair price” (MFP) for select high-cost Medicare drugs that have been on the market for at least 9 years (or 13 years for biologics). As part of this process, CMS must evaluate a range of evidence, including the drug’s therapeutic value, comparative effectiveness, impact on specific populations, patient-reported outcomes, and its potential to meet unmet medical needs. However, while randomized controlled trials (RCTs) provide foundational evidence for clinical efficacy, they often lack real-world relevance, especially among older adults with complex health profiles. RWE can provide meaningful insights into how treatments perform in real-world settings, across diverse patient populations and over longer periods of time.

Drawing on real-world examples, the  authors outline six key dimensions, mandated in the IRA and included in the CMS guidance, where RWE can offer actionable insights, including:

1. Identification of therapeutic alternatives: RWE helps manufacturers and CMS identify real-world comparators that may have emerged since RCTs were conducted.
2. Evaluation of therapeutic advance (health benefits): RWE supports long-term safety and effectiveness assessments in everyday clinical use.
3. Evaluation of therapeutic advance (costs and resource use): Real-world data (RWD), such as claims data, enables evaluations of cost-effectiveness and healthcare resource utilization, which RCTs often overlook.
4. Effect on specific populations: Subgroup analyses using RWE can provide larger, more representative samples and shed light on how treatments work for populations often excluded from trials, such as the elderly or terminally ill.
5. Patient-centered outcomes: Real-world registries collecting longitudinal RWD or patient preferences surveys expand the evidence base for patient-reported outcomes, which can be useful to identify unmet need or assessing a treatment's clinical impact.
6. Unmet medical needs: RWE can help demonstrate the continued burden of disease, gaps in response to existing treatments, and quality-of-life concerns that remain unaddressed.

The authors emphasize that while CMS has demonstrated openness to incorporating RWD (as seen in its recently released guidance for using RWD in national coverage determinations), the agency has yet to issue concrete guidance on acceptable standards or methodologies for RWE within the context of Medicare Drug Price Negotiations. Given the unique opportunity RWE offers to enhance the negotiation process, the authors urge CMS to provide clear, actionable guidelines for manufacturers on how best to generate and present RWE that aligns with regulatory expectations.

To address this gap, the article proposes a best practices checklist for both CMS and manufacturers designed to add greater structure and transparency to the submission and evaluation of RWE. For CMS, the checklist serves as a standardized framework to assess whether submitted evidence meets the evidentiary requirements outlined in the IRA. For manufacturers, it provides a forward-looking guide to help them plan and conduct RWE studies with methodological rigor, reproducibility, and transparency well in advance of a product reaching the negotiation stage.

By building on existing RWE frameworks and offering a practical tool to evaluate evidence quality, the checklist is intended to support more consistent, informed, and equitable decision-making. Although the checklist may continue to evolve, the authors underscore the importance of early and definitive guidance from CMS. Such clarity will be crucial in shaping how and when manufacturers invest in RWD infrastructure and evidence generation, especially for therapies that may be several years away from entering the MFP negotiation process.