The American Healthcare Quality Board publishes national coverage indications; a service inside an indication is paid on the clinician's attestation. Congress sets the ethical frame and the numbers encoding it, and AHQB applies them — an unelected board choosing a value threshold would be illegitimate, while the same board applying one set by statute is not. The cost-effectiveness corridor governs end-stage life-prolonging therapy only; the rest of the floor is a clinical determination on evidence of benefit, with price disciplined by procurement and negotiation.
Reference pricing benchmarks a basket drawn annually from peer systems. National purchasing replaces fragmented negotiation. Managed entry handles the case where a treatment is cost-effective per patient and still fiscally disruptive at scale.
The payer separates pharmacy service from drug margin, so dispensing capability in deserts is funded as capability rather than cross-subsidized from the spread.
One payer cannot be played against thirty. That is most of the mechanism.
The second reason is that the coverage corridor governs only end-stage life-prolonging therapy, which leaves everything else without a price test. A new $500K-a-year drug for a chronic condition would otherwise be a pure efficacy determination with no price question attached, and at ten thousand patients it slips under the budget-impact trigger entirely. Procurement, reference pricing and negotiation are what fill that gap, and they have to be named or the narrowed corridor reads as an absence.
Any intervention projected to add more than a defined share of annual floor outlay in any of its first three years enters mandatory managed entry: price negotiation, phased indication rollout, or an outcomes-based agreement.
Sofosbuvir is the case that justifies the instrument. It was highly cost-effective per patient and catastrophic for state budgets, and the response was rationing by fibrosis stage — clinically indefensible rationing conducted through the back door because no front-door instrument existed.
Coverage with evidence development handles promising-but-unproven care: conditional coverage contingent on registry enrollment and data submission, default three years with one renewal to five, then automatic termination absent affirmative confirmation. Price at the conditional stage reflects evidentiary uncertainty, with retrospective reconciliation on confirmation.
Keystone pharmacies in deserts receive capacity payment tied to hours, dispensing, vaccines, medication review, emergency stock, delivery and participation in the regional record.
Reference pricing free-rides on other countries' negotiations and invites manufacturers to raise prices there or delay launch here.
Both are real responses and both have been observed. The counterweight is market size: a payer covering 340 million people is not one a manufacturer can route around. Launch delay is the risk worth monitoring, and coverage with evidence development is partly there to keep a door open when price is the only obstacle.
Honesty about gaps. Distributed Healthcare has more unresolved specification than other Engines because operational complexity is higher; the items below are flagged for v10.2 specification or for outside expert review.
- Where the budget-impact trigger should sit as a share of floor outlay — too high and it never fires, too low and every common drug enters managed entry.