CMS approved Michigan’s plan to allow its Medicaid program to negotiate “value-based” payment arrangements with drugmakers, linking drug costs to patient outcomes such as quality of life improvements.

CMS Administrator Seema Verma described the action as part of administration efforts to modernize payment policies and keep up with biomedical innovation.

Though “value-based payment is not a panacea… it is an important part of our strategy to lower drug prices,” she told the Biopharma Congress in Washington, D.C.