Trump's drug model likely won't lower prices, may delay access to care

The Trump administration's new plan to rescind doctors' and hospitals' ability to bill Medicare for the drugs they buy for patients won't lead to price decreases and may actually worsen access to needed treatment, according to providers.

The proposed International Pricing Index Model, or IPI, announced Thursday would upend the current system for Medicare Part B pricing. The CMS would contract with private-sector vendors to buy drugs and distribute them to providers. Previously, physicians and hospital outpatient departments took care of that purchasing and billing themselves.

While the CMS claimed the new mandatory pay model could create new competition and lower prices through aggregate purchasing and volume-based discounts, the idea has been panned by providers.

Hospitals knew the CMS was considering a model liked this after the agency posted a request for information last summer, and they were skeptical that the concept would lead to meaningful change in Medicare spending.

It's unclear what real power these vendors would have to get deals on newly introduced drugs, said Eric Lucas and Clara Evans, two senior regulatory officials at Dignity Health, which operates 39 hospitals.

"We are skeptical that these third-party vendors will be able to compel drug manufacturers to reduce prices," Lucas and Evans said in a letter. "Drug manufacturers commonly refuse to negotiate pricing on new drugs for which there is no competition."

The new vendors in the model seem to be middlemen that will add additional administrative burdens on hospitals, according to Steven Bernstetter, director of health policy and regulatory compliance at BJC HealthCare, a St. Louis-based health system. IPI vendors bear a strong likeness to pharmacy benefit managers (PBM) used by private insurance companies, he said.

"A significant driver of inflated drugs costs involves the proliferation of what amount to rent-seeking middlemen who contribute nothing to the actual development, distribution or deployment of pharmaceuticals by healthcare professionals," Bernstetter said.

But to truly bring down prices, Congress would need to step in and allow Medicare to bargain directly with manufacturers, he said.

HHS Secretary Alex Azar has opposed this idea, which he equated to "socialized medicine."

The CMS has compared the new model to the Competitive Acquisition Program (CAP) that ran between 2006 and 2008, and it's driving some of providers' opposition to Trump's plan.

Like the new program, the CMS under CAP contracted with vendors to purchase Part B drugs for providers.

The agency junked the model after it failed to save money or inspire provider interest since it was voluntary. Only 1,000 practices participated, according to federal data. It also struggled to find vendors for the program. Only one vendor joined the demonstration.

The American College of Rheumatology urged the CMS not to revive the model. It pointed out that providers in CAP couldn't get the drugs they needed on time. Physicians in that demonstration had to order specific treatments from the program's vendor in advance of a patient's visit.

"This limited their ability to adjust therapies or dosages based on different patient needs they might identify in the visit," Dr. David Daikh, president of American College of Rheumatology, said in a comment letter.

But HHS Secretary Alex Azar said the IPI model won't repeat those mistakes. IPI will be mandatory for providers in 50% of the country, which makes it more likely that the model will reduce spending, he said.

"How could we expect doctors to be interested voluntarily choosing to give up making money on expensive drugs?" Azar said Friday during an appearance at the Brookings Institution.

IPI could also succeed because there is a supply chain infrastructure in place that wasn't present a decade ago, according to Kuo Tong, a managing director at the consulting firm Navigant.

"One of the problems with CAP was real-time delivery," Tong said. "This [model] is clearly designed for an Amazon-type vendor that can compete, consolidate sales and leverage negotiating power."

Health systems and practices that want to oversee their drug purchasing could retain that power by competing to be IPI vendors. They didn't have that opportunity under CAP, according to Tong.

Vendors will have more leverage to make deals with drug companies now that the CMS will require hundreds of thousands of providers to work with them, according to Fred Bentley, vice president of Avalere.

Mandatory participation may be a win for vendors and the CMS, but doctors that bill for Part B drugs don't like that they will be forced into the program.

In 2006, Medicare Part B started paying physicians 6% on top of the average sales price for drugs. Under IPI, they doctors would receive a flat fee that isn't linked to a drug's price.

Doctors worry they may lose a significant amount of their revenue under this formula.

"It could create a significant disruption in patient care if small and rural practices are not able to remain financially viable under potential changes to reimbursement," said Dr. Angus Worthing, chair of the American College of Rheumatology's government affairs committee. "In those cases, patients may be forced to receive treatment in more expensive settings or stop a treatment program entirely."