Doctors could see changes in how they are paid by the Centers for Medicare & Medicaid Services for the drugs they administer in their office, depending on the outcome of two recent regulatory actions proposed by the agency.
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The more immediate action could see an alteration to payment rates for newly launched drugs. The more long-term action could be the relaunch of the Competitive Acquisition Program, although there is much more uncertainty surrounding that change.
CMS is seeking to lower the Part B add-on payment for drugs that are new to market and do not yet have an average sales price (ASP) established. The proposal calls for these drugs to be reimbursed at the wholesale acquisition cost (WAC) plus 3%, rather than the current rate of WAC plus 6%. The change is part of the proposed physician fee schedule for 2019.
The add-on payment has no statutory definition as to what it is intended to cover, but CMS noted in the proposed rule that it “is widely believed to include services associated with drug acquisition that are not separately paid for, such as handling and storage, as well as additional mark-ups in drug distribution channels.”
Agency officials said that the add-on payment has raised concerns in recent years “because more revenue can be generated from percentage-based add-on payments for expensive drugs, and an opportunity to generate more revenue may create an incentive for the use of more expensive drugs.”
CMS also noted that once an ASP has been established – generally after a drug has been available for several months – the price for that drug is generally lower than the WAC price and, citing a 2014 HHS Office of Inspector General report, noted that “WACs often do not reflect the actual market price for drugs.”
The move to lower payments to WAC plus 3% for new drugs is consistent with a recent recommendation from the Medicare Payment Advisory Commission (MedPAC).
CMS added that the reduction would reduce beneficiary out-of-pocket costs, since copayments are a percentage of the total cost of the drug, including the add-on payment amount.
“The proposed approach would help Medicare beneficiaries afford to pay for new drugs by reducing out-of-pocket expenses and would help counteract the effects of increasing launch prices for newly approved drugs and biologicals,” CMS said in the proposed regulation.
But the American College of Rheumatology raised concerns about the proposal. Specifically, ACR is concerned that plans to cut add-on payments for new drugs “could slow market uptake of biosimilars and thwart the Administration’s efforts to reduce drug prices,” the group said in a statement.
The Community Oncology Alliance (COA) also took issue with the proposal. “This is a payment cut from the current rate of Wholesale Acquisition Cost (WAC) plus 6%, or what is really plus 4.3% when factoring in the sequester,” the COA said in a statement. “COA believes that this payment cut for new cancer therapies will result in drug manufacturers actually increasing WAC list prices so that their new products will not be at a competitive disadvantage to existing products, which are reimbursed at average sales price (ASP) plus 6%.”
The second proposal, which could take longer to materialize, revolves around the potential relaunch of the failed competitive acquisition program (CAP) for Part B drugs. CMS is currently requesting information, with questions on what a revamped program could look like if the agency were to move forward with it. The request for information is part of the proposed rule updating the Outpatient Prospective Payment System for 2019.
Under the original CAP, physicians who participated in the program would order drugs from an approved vendor, who would then bill Medicare and collect cost-sharing payments from the beneficiary. The original program was in operation for 18 months, ending on Dec. 31, 2008, after it had little participation and faced other concerns.
More recently, MedPAC recommended a revised version of the program, which they dubbed the Part B Drug Value Program (DVP). Under this construct, private vendors would acquire drugs at lower prices using various negotiation tools, and physicians would be encouraged to make more value-based use decisions based on opportunities for shared savings though their Medicare billing for the use of Part B drugs.
CMS is asking for feedback on a wide range of questions on how the revamped CAP program should be designed, including program design, which suppliers and drugs to include, how to incentivize participation, how to structure outcomes-based arrangements, and whether indication-based pricing should be used.