Physicians could be facing a cut in reimbursement for drugs administered in their offices that cost more than $480, according to an Avalere analysis of the proposed Medicare Part B drug payment rule.
The Centers for Medicare & Medicaid Services recently proposed to test new pricing models aimed at lowering physician-administered drug costs. The proposal seeks to compare the traditional average sales price (ASP) plus 6% payment to a model of ASP plus 2.5% and an additional flat fee of $16.80.
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Under the proposal, released in March, about half of physicians who administer Part B drugs would be paid under the traditional model, while the other half would be paid under the 2.5% plus $16.80 model. The evaluation, which would run for 5 years, is aimed at finding out if the new model will remove current incentives to prescribe higher-cost drugs.
CMS officials said they expect the lower add-on percentage combined with the flat fee “will cover the cost of any drug paid under Medicare Part B,” according to an agency fact sheet highlighting the proposed rule.
An Avalere analysis of the rule found that the impact varied by specialty.
Ophthalmologists could expect an 18% reduction in reimbursements, followed by oncologists at 14%, and rheumatologists at 6%. Hospital outpatient departments could see a 60% decrease in payments.
Conversely, family physicians could see a 19% increase in payments, with orthopedic surgeons seeing a 15% increase, and internal medicine getting a 13% increase.
“We have found that $480 is the tipping point for how Part B drug reimbursement would change under this new rule,” Avalere Vice President Adam Borden said in a statement. “Physicians who prescribe drugs that cost more would receive lower Medicare payments.”
Further research from Avalere also shows that more than half of the payment reductions will be concentrated across 10 drugs, which would save Medicare $252 million. Seven of the drugs treat cancer, two are for ophthalmic conditions, and one treats immunologic conditions. The company said that more than 1 million Medicare beneficiaries were treated with one of these 10 drugs in 2014.
CMS is also seeking to test a variety of “value-based pricing strategies,” including indication-based pricing and reference pricing. For example, indication-based pricing would set a payment rate based on the clinical effectiveness of a drug, while reference pricing set a benchmark price for a group of therapeutically similar drug products. On the patient side, CMS wants to test the elimination of patient cost sharing for office-administered drugs. These strategies would be tested among a subset of the physicians in the traditional ASP plus 6% payment group, as well as in a subset of the physicians being paid ASP plus 2.5% and the flat fee.
Comments on the proposal are due May 9, but more than 300 medical and patient groups already are calling on Congress to ask CMS to withdraw the proposed rule.
In a March 17 letter to congressional leaders, the coalition challenged the CMS assertion that the current payment model encourages the use of more expensive drugs.
“This assumption fails to take into account the fact that providers’ prescribing decisions depend on a variety of factors, including clinical characteristics and the complex needs of the Medicare population,” they wrote. “Most importantly, there is no evidence indicating that the payment changes contemplated by the model will improve quality of care, and may adversely impact those patients that lose access to their most appropriate treatments.”
Meanwhile, the Medicare Payment Advisory Commission is addressing the Part B drug payment issue as part of its upcoming report to Congress. While the panel is not making any specific recommendations, they plan to outline a variety of options.
Among the options being considered are moving to a payment of ASP plus 3.5% with a $5 per drug per day flat fee. Additionally, they are looking at limitations to ASP growth, consolidating billing codes, restructuring the Competitive Acquisition Program, risk-sharing agreements, and clinical pathways. The report will also look at two oncology-specific recommendations: oncology medical homes and oncology episodes of care.
During the April 8 MedPAC meeting, commissioners voted unanimously to recommend lowering dispensing and supplying fees to $5 for Part B drugs. They noted that the government spent $155 million on these fees in 2014. Dispensing fees for inhalation drugs are $33 per 30-day supply and $66 per 90-day supply, while the supplying fee for oral anticancer, oral antiemetic, and immunosupressive drugs is $24 for the first prescription and $16 for additional prescriptions in a 30-day period. In comparison, Medicaid and Medicare Part D paid dispensing fees of less than $5 per prescription in 2011, MedPAC staff reported.