Drugmakers and providers say the newest proposal to change the way drugs are paid for under Medicare Part B is likely dead in the water.
The Medicare Payment Advisory Commission Thursday voted 15-0 to recommend that Congress enact new drug reimbursement laws through several proposals that would decrease Medicare spending by as much as $750 million in the first year of implementation and $5 billion over five years.
Drugmakers and providers successfully lobbied lawmakers during the Obama administration to kill a previous attempt. However, President Donald Trump supports Medicare's direct negotiation on drug prices and that's one of the ideas on the table.
MedPac suggests cuts to wholesale prices and market-based negotiation to help curb the rising drug costs for the Part B program which hit $26 billion in 2015. That's up from $23 billion in 2014.
A similar attempt by the CMS was canceled last year following protests from both providers and lawmakers. That idea was also based on a MedPac recommendation.
Medicare currently pays 6% above wholesale cost for new drugs that are administered by infusion or injection in doctors offices and hospital outpatient departments. That means providers are paid more when they choose more expensive medications, for example, a drug that costs $100 generates a $6 bonus while a drug that costs $1,000 yields $60.
Once a drug has been on the market for a few months, Medicare then pays 6% on top of the average sales price of the medication.
Critics say the model provides a clear incentive for physicians to favor a pricier drug.
The proposal would drop payments over wholesale cost by 3% in 2018.
In an effort to bring transparency to the part b program, MedPac suggests drugmakers now be required to submit average sales price data to the CMS. They would face a fine if they failed to do so.
MedPac also proposed that drugmakers pay Medicare a rebate when the average sales price exceeds an inflation benchmark set by Congress.
Drugmakers aren't given limits to how much they can increase the average sales price for a Part B drug. MedPac found that between 2010 and 2017, nine of the highest-costs drugs had annual cost growth of 5% or more.
PhRMA slammed the inflation proposal in a post on its website, calling it “a form of government price controls.”
It said the idea could stifle innovation.
Starting in 2022, MedPac calls for a voluntary market-based program in which private vendors would negotiate prices with manufacturers on behalf of physicians. Under that program, Medicare would reimburse physicians based on the vendor-negotiated price. The vendors would receive an administrative fee and could keep some savings they achieve for Medicare. They would create a drug formulary that would limit providers' prescribing choices.
To further entice providers to use these vendors, Medicare would begin reducing the 6% average sales price bonus in 2022.
Giving these companies such power “is simply reckless,” Dr. Jeff Vacirca, president of the Community Oncology Alliance said in a March 24 letter sent to MedPac late last month after it revealed a draft of the recommendations.
He said the move would keep the most appropriate cancer therapy away from patients.
Neeraj Sood, director of research at the Schaeffer Center for Health Policy and Economics at the University of Southern California disagreed, saying the formulary will help set more competitive prices, increasing access.
Vendors could also hire an arbitrator to decide what a drugmaker charges doctors.
MedPac Commissioner Amy Bricker, who is also vice president for supply chain strategy at pharmacy benefits manager Express Scripts, doubted that would result in substantial savings.
“For me, it's a bridge too far,” Bricker who is also vice president for supply chain strategy at Express Scripts, pharmacy benefits manager, said at the meeting Thursday. “There is a way for us, I believe, to foster competition, to bring value to the market without adopting something as drastic as this.”
Bricker supported the Part B package of proposals as a whole and voted for it.