Under the conditions of a new Medicaid program in Oklahoma, the state will only pay drugmakers the full agreed-upon price of the drug if it works as advertised.

Oklahoma's plan is part of the Trump administration's commitment to lower drug prices.

Oklahoma’s Medicaid program this month will start implementing a first-in-the-nation drug pricing policy where it will only compensate drug companies the full price for their medication if they work exactly as advertised.

This type of rebate program aims to hold pharmaceutical companies accountable for the efficacy and safety of their drugs. The program is state-wide and will not affect the pricing of drugs in any other states.

The program works as follows: Oklahoma and the drug companies agree on a certain price for a certain medication. If the drug works as promised, the states pay the drug company the full price. But if it falls short in terms of effectiveness, then the state only pays the drug company a fraction of the initial agreed-upon price.

If it works, it could save the state an estimated $2 million.

It's all part of of the Trump administration's plan to lower drug prices.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” Secretary Alex Azar said in a Center for Medicaid and Medicare services press release in June when the plan was first announced. “The Trump Administration is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs.”

The state, however, is not forcing drug companies to participate in the program. Sign-up is voluntary, but can positively affect company reputation. Additionally, drug companies that do sign up will have their effective products that have passed through this system put on a preferred drug list, which could result in more profit in the long run.

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