United States: CMS Pitches Controversial Payment Model For Medicare Part B Drugs

CMS recently announced a proposed rule that would potentially create a new Medicare Part B prescription drug payment model. The proposed model is intended to improve quality of care and deliver better value for Medicare Part B beneficiaries. However, many providers and drug manufacturers have expressed concern that the new payment model will emphasize cost-cutting measures at the expense of ensuring beneficiary access to treatment. A number of groups, including the National Cancer Care Alliance and the Prevent Cancer Foundation, are urging Congress to withdraw the proposed rule in the interest of patient care. CMS has asked for comments on the proposed rule in general and specific areas of interest. Interested parties must submit comments no later than 5 p.m. on May 9, 2016.

Medicare Part B

Unlike for most drugs covered under Medicare Part D, Medicare Part B covers prescription drugs that are administered in a physician's office or hospital outpatient department (e.g., oncology treatments). Specifically, drugs covered under Medicare Part B typically fall into one of three categories:

  • Drugs furnished incident to a physician's service in the office or hospital outpatient setting
  • Drugs administered via a covered item of durable medical equipment
  • Other categories of drugs explicitly identified under applicable law

Currently, Medicare Part B generally pays physicians and outpatient departments the average sales price (ASP) of the drug plus 6 percent. Some believe that doing so encourages these facilities and/or physicians to use more expensive or specialty drugs. Specifically, those physicians or facilities that use cheaper drugs are penalized because their additional 6 percent reimbursement results in less money than is reimbursed to facilities treating the same patient with a more expensive drug.

By changing the payment methodology, CMS hopes to "encourage better care, smarter spending, and healthier people by paying providers for what works, unlocking health care data, and finding new ways to coordinate and integrate care to improve quality." Specifically, the new method would reduce the 6 percent upcharge but would add a flat fee per drug per day.

The Proposed Part B Drug Payment Model

The new payment model would take place in two phases:

Phase 1

Under the new payment model, the add-on payment would be decreased from 6 percent to 2.5 percent. However, in addition to the upcharge, physicians or hospital outpatient departments would also receive a flat fee payment of $16.80 per drug per day. This model is intended to test whether this revised payment system alters prescribing incentives and leads to improved quality and value. CMS would update the flat fee at the beginning of each year by the percentage increase in the consumer price index for medical care for the most recent 12-month period. This phase will begin in late 2016, no earlier than 60 days after the final rule on the payment model.

Phase 2

Commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization currently use various value-based pricing tools and feedback on prescribing patterns to improve the value of drug payments. CMS has identified such tools and feedback mechanisms that may be applicable for Part B drug payments to improve the value of such payments. This phase would begin no sooner than January 1, 2017.

These proposed value-based pricing strategies include the following:

  • Discounting or eliminating patient cost-sharing. Patients are often required to pay for a portion of their care through cost-sharing. This proposed test would decrease or eliminate cost sharing to improve beneficiaries' access and appropriate use of effective drugs.
  • Feedback on prescribing patterns and online decision support tools. This proposed test would create evidence-based clinical decision support tools as a resource for providers and suppliers focused on safe and appropriate use for selected drugs and indications. Examples could include best practices in prescribing or information on a clinician's prescribing patterns relative to geographic and national trends.
  • Indications-based pricing. This proposed test would vary the payment for a drug based on its clinical effectiveness for different indications. For example, a medication might be used to treat one condition with high levels of success but an unrelated condition with less effectiveness, or for a longer duration of time. The goal is to pay for what works for patients.
  • Reference pricing. This proposed model would test the practice of setting a standard payment rate – a benchmark – for a group of therapeutically similar drug products.
  • Risk-sharing agreements based on outcomes. This proposed test would allow the Centers for Medicare and Medicaid Services (CMS) to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments.

Considerations for Affected Parties and Entities

Affected parties and entities should take advantage of the comment period, which closes May 9, 2016, to comment on specific areas of concern, including:

  • Monitoring per-patient drug usage. If CMS is concerned about reducing drug spend, will the agency also be monitoring drug usage per patient? By paying a per-drug fee, is CMS encouraging physicians to utilize drugs that previously were considered PRN (as needed for patients)? For example, will we see an increase in pain or anti-emetic medications?
  • Actual acquisition cost utilization. We note that this new methodology is not that much different from the methodology utilized in the AAC (actual acquisition cost) payment structures. Specifically, many AAC Medicaid-based programs now use the acquisition cost plus a small markup with a $10 or greater dispensing fee. By moving in this direction, is CMS showing its hand for future AAC utilization?
  • Greater recognition of pharmacist services. Will pharmacists encourage the adoption of this methodology? There has been a push for years for pharmacists to be recognized as a "practitioner" by CMS. By increasing the dispensing fee, or per-drug fee, and moving away from reimbursement based on ingredient cost, is there more recognition for the pharmacists' services?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.