LANSING, Mich. (AP) — Michigan has become the second state to win federal approval for a drug-pricing experiment aimed at saving money in the Medicaid program and ensuring better patient outcomes.

The Centers for Medicare and Medicaid Services on Wednesday authorized the state’s proposed “outcomes-based” approach to entering contracts with pharmaceutical companies. Drug manufacturers would be liable for increased supplemental rebate payments to Michigan’s Medicaid program if a medicine does not perform as claimed.

The move came more than four months after the Trump administration OK’d a similar proposal from Oklahoma.

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said Michigan is now empowered to “demand results” from drug manufacturers in exchange for paying for medicines.

“Value-based payment is not a panacea, but it is an important part of our strategy to lower drug prices,” she said at a pharmaceutical industry conference in Washington, D.C.

State officials said the amendment to Michigan’s Medicaid plan addresses the impact of innovative but costly new drug therapies. Medicaid, the joint federal-state health insurance program for lower-income residents, covers nearly a quarter of the state’s 10 million residents.

Kathy Stiffler, acting medical services director for the state Department of Health and Human Services, said the new arrangement has the potential to improve the quality, value and efficiency of drug-based treatments. A department spokesman said it is too early to estimate cost savings.