Fed panel urges new Medicare Part B pricing system
The Medicare Payment Advisory Commission (MedPAC) voted unanimously Thursday to recommend a competitive pricing program and make other changes to reimbursement for drugs under Part B of the Medicare program.
“Medicare, as a large third-party payer, always needs to take steps to make sure it’s paying the right amount,” said commission member Paul Ginsburg, PhD, of the Brookings Institution, a left-leaning think tank here. “I’m particularly excited [about the pricing program] — it’s not often we have the opportunity to foster competition in areas important to Medicare.”
Under the Drug Value Program (DVP) — which would be voluntary for physicians — a small number of vendors would negotiate prices being paid for the drugs, but those vendors would not be the ones shipping the product. Providers would then buy the drugs at the vendor-negotiated rate, and Medicare would pay providers that rate plus an administration fee based on either the physician fee schedule or the outpatient prospective payment system. Providers also would have a chance to share in any cost savings generated by the DVP program.
The recommendation also includes several other changes to the reimbursement model for drugs paid for under Part B, which are those administered in the physician’s office:
Improving average sales price (ASP) data reporting. Currently, only drugmakers who have rebate arrangements with Medicaid are required to report ASP data. Under the proposal, all manufacturers of drugs covered under Part B would have to report the data, and penalties for not reporting would be increased.
Modifying the payment rate for drugs that are paid for based on wholesale acquisition cost (WAC). Currently, some drugs are paid for at WAC plus 6%; the proposal would reduce the rate to WAC plus 3%.
Limiting payment rate increases for drug payments based on ASP. Currently, physicians are paid for administering certain drugs at a rate of ASP plus 6%, but there is no limit on how much those payments can increase over time; staff members noted at a commission meeting in March that between January 2010 and January 2017, nine of the top 20 highest-expenditure drugs had annual ASP growth of 5% or more. Under the proposal, manufacturers would have to pay a rebate if their products’ ASP exceeded a particular inflation benchmark, such as the consumer price index.
Instituting consolidated billing codes for biosimilar drugs. Currently, brand-name drugs and their generic counterparts are paid under a single billing code; the proposed policy would require reference biologics and their biosimilars also to be paid under a single code. The Health and Human Services Secretary also might consider use of a consolidated billing code for groups of products with similar health effects, commission staff member Nancy Ray said at the March meeting.
To make it more attractive for physicians to transfer to the DVP, the ASP add-on percentage would be cut. If implemented, the recommendation would decrease spending by an estimated $250-$750 million in the first year and $1 billion to $5 billion over 5 years, according to commission staff.
One concern with the DVP is how sensitive providers might be to changes in the drug formulary, manufacturer, or price that might come as a result, said commission member Alice Coombs, MD, a critical care specialist at Milton Hospital in Weymouth, Mass. However, she added, “the golden nugget [of this] is the inflation rebate.”
“I’ve got some parts I’m more optimistic about than others,” said commission member Jack Hoadley, PhD, of Georgetown University here. “I’m skeptical about some aspects of the DVP, [although] it’s grown on me a bit over the discussions — it’s definitely something worth trying.”
The commission also heard a presentation on possible responses in case Congress and the Trump administration decide to institute a Medicare premium support program, in which Medicare beneficiaries would receive a set amount of money from the federal government to purchase one of several health insurance plans offered to them. Commission staff member Eric Rollins outlined several ideas:
- The Medicare fee-for-service program should remain available and be treated like a competing plan
- The use of a standard benefit package or another form of standardization would make it easier for beneficiaries to understand their options
- Plans offered should have flexibility to include alternate forms of cost-sharing and to offer extra benefits
- Beneficiaries would need good decision support tools to make informed choices
- Competitive bidding should be used to set benchmarks
- The base premium should be similar to the Part B premium
The effects of a premium support plan are “highly uncertain,” according to Rollins, who added that the effects would vary across areas. Some beneficiaries would switch to lower-cost plans, but it’s not clear how many, he said.
Commissioners expressed concern about the idea. “I worry about Medicare becoming too much of an income-related program, which undermines the whole point of social insurance,” said commissioner Kathy Buto, MPA, a health policy expert from Arlington, Va. If low-income beneficiaries can only go to certain providers because they are in a lower-cost plan, “we are creating a two-tiered system of care.”
Commission chair Francis Crosson, MD, a retired physician from Los Altos, Calif., emphasized that although MedPAC was looking at what to do if premium support were implemented, it was not endorsing the idea. “Going in that direction is not the position of the commission,” he said. “We simply attempted to say… that based on the fact that others are thinking about this and it’s our responsibility to provide facts and advice if we can, that we would do that service. But we have not taken a position about moving from traditional Medicare to this model.”