WASHINGTON – Members of the Medicare Payments Advisory Committee (MedPAC) spoke Friday in favor of considering a new approach to how Medicare pays for Part B drugs.
“I think we’re heading in the right direction,” said Gary Poulsen, MBA Specialist at Intermountain Healthcare in Salt Lake City, Utah. “I think it’s an improvement.”
Poulsen, who developed in the committee’s previous discussions on the topic, was referring to MedPAC chief policy analyst Nancy Ray, MS at Committee 9 Recommendations presented at the monthly meeting. Ray noted that price has been the biggest driver of Part B spending growth, with Medicare spending $40.7 billion on Part B drugs in 2020. And spending is highly concentrated, with 52% coming from just 20 drugs.
Currently, Medicare pays for Part B-covered drugs—drugs dispensed in a doctor’s office or other outpatient facility—based on the drug’s average selling price (ASP) plus a 6% administrative fee. MedPAC staff suggested an alternative where Medicare would pay the ASP and the lesser of three administration fees: 6%, 3% plus $21 or $175 per drug per day. This approach converts the “percentage” portion of the administrative fee into a flat fee ($21) in one case, and limits the administrative surcharge to 6% for lower-priced drugs and capped at 6% for higher-priced drugs, Ray said. 6%. The drug costs $175. She noted that these figures were illustrative and other figures could be considered.
Using this formula will reduce the variance in administrative surcharges for drugs and will result in the largest fee reduction for higher priced drugs. For example, under the current formula, the surcharge for a drug with an ASP of $15,000 is $900, but under the proposed alternative, that figure would be $175, Ray said.
Ray also outlines options for using reference pricing in cases where a higher-priced drug has a lower-priced treatment option. Currently, the financial incentive is to choose a higher-priced drug and thus receive greater reimbursement, as the administration fee is based on a percentage of the drug’s price. Ray proposes three optional payment methods, based on:
- Minimum ASP for products in the reference group
- Volume-weighted ASP of all products in the reference group
- Volume-weighted ASP and ASP of the drug being taken The lower value of the administered
options will save beneficiaries and taxpayers alike, she said.
Commissioner Robert Cherry, MD, of UCLA Health, expressed concern about an idea that Ray mentioned in the reference pricing proposal: Medicare could consider whether Medigap policies could cover prices higher than The cost of the drug at the reference price.
“My concern about this is just from a fairness standpoint whether or not this is really a viable solution,” he said. “Because to buy those Medigap private supplement policies, you have to be able to afford them, so it excludes another group of beneficiaries who may not necessarily benefit from the appropriate medication, so their providers may not be able to order.”
Dr. Stacie Dusetzina, Commissioner at Vanderbilt University School of Medicine in Nashville, supports this: “I really don’t like the idea of requiring beneficiary coinsurance in this situation; I think we should remove the Mention that beneficiaries pay more.”
Dusetzina said she “fully agrees” with the reference pricing model for biosimilars and biologics. “I think that’s exactly where we should be,” she said. However, “Other treatment alternatives are more complicated and figuring out how we define what can be considered an alternative. I think that makes this part a bit tricky, but I support the plan.”
In her presentation, Ray also addressed how to deal with drugs that have been approved by the FDA but are considered to have uncertain clinical benefit, such as aducanumab (Aduhelm). One idea in the field is to limit payments for such drugs until confirmatory trials show clinical benefit.
Scott Sarran, MD, MoreCare, Cook County, Illinois, commented that the way Medicare covers Aduhelm is part of its Evidence Development (CED) program coverage; Patients paid for the drug, although no deadline was set for completing the trial.
“I wonder what the best way to do this is to encourage CMS to apply for CED more frequently than before and advise them to do so within a time frame that is actually determined, beyond which [the agency] can do it at any time case will refuse to cover it,” he said.
Commissioner Lawrence Casalino, MD, of Weill Cornell Medical College in New York City, said he has no problem with reference pricing recommendations and changes to the current ASP plus 6% reimbursement The formula is “very enthusiastic”. He played down concerns that the payment changes would make drug companies less interested in developing new treatments.
“Pharmaceutical companies are very profitable and have an incentive to innovate,” he said. “I’m not sure that pharmaceutical companies would continue to innovate if they were less profitable.”
But Commissioner Marge Ginsburg, BSN, MPH of the Center for American Healthcare Decision Making, Sacramento, Calif., disagreed and urged Be cautious about these proposals.
“We know what happens – Big Pharma rises, the public rises as the public thinks angrily that we’re going to stop innovation with these draconian measures to cut costs,” she said . “I do think we need to be careful…I’m really excited about the approach we’re talking about, I just want to make sure we’re very aware of the impact Big Pharma has on the public.”
Supervised by Joyce Frieden MedPage Today’s Washington coverage, including coverage of Congress, the White House, the Supreme Court, healthcare industry associations, and federal agencies. She has 35 years of experience in healthcare policy. Follow