Reforming oncology reimbursement is one method that could increase incentives to manufacturers and subsequently reduce drug shortages, according to testimony at a Senate Finance Committee hearing.
Changing oncology reimbursement could cut drug shortages, lawmakers told
The hearing addressed causes of the recent drug shortages. About 30% of the drugs in short supply are oncology products.
Oncology drugs are reimbursed according to average sales price and an additional 6% markup that covers practice costs as a result of the Medicare Modernization Act in 2003, according to a perspective published last month in the New England Journal of Medicine. The authors said in the perspective that oncologists have incentive to use brand-name drugs that will provide a higher margin.
"Reimbursement changed practice dynamics significantly," Dr. Patrick Cobb, an oncologist for Frontier Cancer Center in Billings, Mont., said during the hearing. "The ASP system turned generic drugs into commodities."
Cobb later suggested scrapping the ASP model of reimbursement.
Some generic-drug manufacturers have exited less-profitable markets, leaving few vendors or sometimes only one manufacturer to continue to produce a generic drug. Providing incentives to manufacturers to continue making certain generic drugs has increasingly been discussed as a way to reduce drug shortages in the U.S.
Dr. Rena Conti, assistant professor at the University of Chicago, noted that even with incentives for generic manufacturers, group purchasing organizations would have to support price increases in their contracts with these companies.
At a drug-shortages hearing of the House Oversight and Government Reform Committee's health subcommittee last week, one witness said that the change in the reimbursement rate in 2003 makes it difficult for generic drug manufacturers to raise prices, which in turn provides companies with little incentive to continue to manufacture a drug.
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