On March 11, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule to establish a nationwide demonstration regarding payment for outpatient drugs covered under Medicare Part B. This proposal was reported and summarized in our March 30 issue of this newsletter. Since the issuance of the proposed rule, there have been a number of important developments that we describe below.

The proposed demonstration engendered a strong reaction from a wide variety of stakeholders as soon as it was issued. Numerous clinical groups, trade associations and pharmaceutical manufacturers voiced immediate opposition to the demonstration. Most of the arguments against the demonstration articulated the following concerns:

• Lack of consultation with stakeholders in the development of the proposal
• Lack of transparency as to the basis for the specifics of the proposals
• The nationwide, mandatory nature of the demonstration
• Inadequacy of the payment levels contained in the proposal to ensure patient access to Part B drugs
• Lack of detail as to how the value-based incentives under Phase 2 of the demonstration would work; and
• Lack of analysis as to the impact on Medicare beneficiaries’ health and healthcare treatment.

On June 15, the nation’s largest physician association, the American Medical Association (AMA), adopted a resolution opposing the proposed rule. AMA’s resolution urges CMS to withdraw the proposed rule, and indicates that if CMS does not do so the AMA will support and advocate for Congressional action to block the rule.

On the other hand, a number of consumer organizations and insurers came out in favor of the proposed model, believing that private sector experience with similar initiatives indicates that the model can be implemented in a manner that promotes the use of the most effective drugs instead of the higher reimbursed drugs, and which can reduce drug expenditures while maintaining patient access to medically necessary drug treatments.

All of these arguments found their way to Congress. CMS received letters from Congressmen and Senators, several with numerous signatures (one letter was signed by 239 Congressmen), expressing strongly-worded concerns about the demonstration as proposed. Several Democrats, while supporting the overall thrust of the demonstration, indicated that CMS should consider modifying the proposal to reflect input received from stakeholders. CMS has indicated that it is open to changes in the proposal, but also stated its intention to proceed on schedule.

Over the past several weeks, there have been several actions in Congress pertaining to the proposed demonstration. On April 29th, Congressmen Larry Bucshon (R-IN), Robert Dold (R-IL), Charles Boustany (R-LA), Tom Price (R-GA), and John Shimkus (R-IL) introduced H.R. 5122, which would prohibit CMS from implementing the planned demonstration. On June 8th, Congressman Dold testified before the House Ways & Means Health Subcommittee urging passage of H.R. 5122. And, on June 28th, the Senate Finance Committee will hold a hearing on the demonstration. CMS Deputy Administrator and Chief Medical Officer Patrick Conway is expected to testify.

What does this mean to CMS’ plans to begin the demonstration on August 1st? It may not mean much as far as the implementation of Phase I of the demonstration goes, although CMS has signaled that it may make some modifications to the proposal when it finalizes the rule. Congress will not be in session many more days until the recess for the national conventions in July through August, and it is unclear what Congress can achieve in that timeframe. Congress currently plans to come back into session right after Labor Day, and the election recess would begin in early October and continue to mid-November. Whether Congress will attempt to move legislation post-election will depend on the election results.

Phase 2 of the demonstration, which is scheduled to begin on January 1, 2017, could be a more likely target for changes.

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