CMS is offering four approaches to change the process through which physicians are paid for drugs covered by Medicare in proposed rules announced Friday.
Under the current system, Medicare pays physicians 95% of the average wholesale price (AWP) for covered drugs, which is set by an industry guide and is viewed as artificial by many oncologists and others. Medicare currently pays physicians based on an "inflated" AWP, even while physicians acquire the drugs for significantly less, according to CMS.
"Many doctors tell us they use these overpayments to supplement their office expenses," says CMS Administrator Thomas Scully in a written statement. "We want to make sure that we pay them higher rates for treating their patients rather than allow this unbalanced payment system to continue. We ought to pay them the right amount for drugs and services, and this proposed rule will start the process to get us there."
A 1999 study by the Office of the Inspector General of HHS of the AWP system, released in 2001, found the government overpaid $1.6 billion for drugs, prompting Congress to call for a new payment mechanism.
CMS is seeking comment on these four proposals:
- Medicare would pay the same price as private insurers for covered drugs.
- Medicare would apply a 10% to 20% discount from AWP in 2004 and establish "more reasonable" payment updates in future years.
- Medicare would use existing sources for market-based prices and develop other sources, such as drug price catalogs, to monitor future market changes.
- Medicare would establish a competitive bidding process and would require pharmaceutical companies to report their average sales prices (ASP).
The method proposed in the House bill lets oncologists choose between obtaining drugs through a competitive bidding process or paying 112% of the manufacturer?s average selling price (ASP) in 2005, and 100% of ASP in subsequent years.
The Senate bill allows Medicare to pay for most drugs at 85% of the AWP as of April 1, 2003. CMS would pay a lower amount if it learns a lower price is widely available. In those cases, the Medicare allowable amount would not decrease more than 15% a year. New drugs would be paid at the price the physicians pay.
Meanwhile, CMS also says it will increase payments to physicians for administering cancer drugs and for administering multiple chemotherapy agents to a patient on the same day. Reimbursement would be based on practice expense survey data submitted by the American Society of Clinical Oncology.
The proposed rule will be published in the Federal Register on Wednesday, with a public comment period open until Oct. 14.