Last week, the Medicare Payment Advisory Commission (the “Commission”) debated a package of policy reforms that would change the way Medicare reimburses physicians for Medicare Part B drugs. In the midst of calls to lower drug prices, the Commission has been developing its Part B reform package over the last two years and now, finally, appears poised to move forward with a vote at next month’s meeting.
Medicare Part B drugs are a multi-billion dollar benefit and typically include higher cost specialty drugs that are administered in a physician’s office on an outpatient basis. Drugs covered under Medicare Part B are reimbursed through a so-called “buy and bill” approach. That is, the physician buys the drugs and bills Medicare for their use. Medicare pays the provider the average sales price (“ASP”) of the drug plus a markup of 6% of the ASP. The 6% markup is generally considered compensation to physicians for the storage, handling, and other administrative costs associated with these specialty drugs.
The way physicians are reimbursed for Part B drugs has long been on the Commission’s radar as in need of an overhaul. As support for its position, the Commission points to the fact that Medicare spending on Part B drugs in 2015 was $26 billion – up from $23 billion in 2014 – and has grown an average of 9% per year since 2009. Additionally, the Commission believes that the current Part B “buy and bill” payment system with its 6% markup provides incentives for physicians to use higher-priced drugs.
The Commission’s proposed package calls for reforms on a variety of fronts to be implemented over a four year period between 2018 and 2022:
Not surprisingly, drug manufacturers and oncology practices objected to the draft recommendations, citing decreased patient access for Part B drugs and the detrimental impact on physician practices by accelerating the shift of care from physicians’ offices to hospitals.
The Commission will vote in April on whether, and in what form, to send the recommendations to Congress in June. Regardless of the package that is ultimately approved by the Commissioners, it remains to be seen what, if anything, Congress and the Trump administration will do with the recommendations. One thing is certain, however, the drug pricing debate is not going away any time soon and manufacturers, payors, and health care providers should begin preparing for what could potentially be dramatic shifts in how drugs are reimbursed in the coming years.