While Democrats and Republicans have been wary of proposed changes to how Medicare pays for drugs administered at physicians' office, a recent GAO report found that other federal agencies pay lower prices for the same drugs.
A hearing Tuesday will examine the Medicare Part B proposal and the general role of the agency that is recommending it, the Centers for Medicare and Medicaid Innovation, an agency created by the Affordable Care Act to test new methods of paying for value in medicine.
Republicans in general have said the rule would be a change that is too sudden and not tested enough, but Democrats have also asked the CMS to postpone implementation.
The GAO study looked at data for 10 high-cost drugs administered by physicians from the four states with the highest Medicaid spending: California, New York, Pennsylvania and Texas. Medicare drug spending was compared to spending by Medicaid, the Department of Veterans Affairs and two large private payers.
It found that Medicare generally paid the same or more for the drugs than other federal payers and the VA never paid more than 68% of the Medicare rates for the drugs. The private payers often paid more than Medicare.
Medicare currently reimburses providers at 106% of the drugs' average sales price. Some argue that this creates a perverse incentive for providers to prescribe costlier drugs, although others counter that the expense to a doctor's office for acquiring such drugs would negate any such profit.
The proposed rule would change the Medicare Part B payments to 102.5% of the average sales price plus a payment of $16.80 per drug per day.
The VA negotiates drug prices with the manufacturers and use a contracted distribution vendor that further discounts the drugs. The private payers said the Medicare rate of 106% sometimes serves as a benchmark for negotiation. It also notes that drug manufacturers may give a rebate to commercial payers. This means Medicare is unable to leverage purchasing power that state Medicaid agencies, the VA and private payers can use to get lower drug costs.
The VA maintains a formulary, whereas Medicare and Medicaid do not limit coverage of certain drugs. The VA also has quantity limits for certain drugs and may require patients to try using lower cost drugs at first, the report notes.
House Republicans have targeted the CMMI and suggested rescinding its funding. The Congressional Budget Office, however, found that eliminating the agency would increase the deficit in the next 10 years by about $45 billion.
In a blog post last year, the Committee for a Responsible Federal Budget stated that the CMMI's efforts to find alternative payment models that lower costs without sacrificing quality are needed to keep health costs in check.
“With fast-rising healthcare costs a key detriment both to the economy and our nation's fiscal future, CMMI's ability to experiment and innovate is desperately needed, particularly as evidence grows that delivery system reform changes are playing a role in the recent cost slowdown,” they wrote.