By Leah Ralph, Director of Health Policy, ACCC
The noise around drug costs seems to have gotten louder in recent months, with policymakers clamoring for controls on drug pricing, Congressional hearings calling on pharmaceutical executives to testify, and recommendations from the Medicare Payment Advisory Commission (MedPAC) focused on containing Medicare spending in the context of ever-increasing prescription drug costs.
In early March, the Centers for Medicare and Medicaid Services (CMS) issued a proposal to implement a national demonstration program that would target provider reimbursement and fundamentally change the way Medicare pays physicians and hospitals for Part B drugs. The scope of what CMS is proposing is sweeping. If finalized, it represents a significant departure from the methodology and philosophy underlying Medicare’s current reimbursement system, leading to bigger questions about the most appropriate—and effective—way to curb drug spending.
CMS has broad authority under the Center for Medicare & Medicaid Innovation (CMMI), created by the ACA, to test different models that would improve quality and lower costs in the Medicare program. However, the agency seems to be pushing the scope of its authority, breaking from past demonstration programs to propose a mandatory model in which all Part B providers–hospital outpatient departments, physician offices, and pharmacies–would be required to participate.
The proposed Part B Drug Payment Model would consist of two phases in which providers would be divided into four groups: three experimental groups and one control group over a five-year period. Phase I would be implemented as early as August 2016 and would mandate that approximately half of all Part B providers would have their reimbursement rates reduced to ASP+2.5% plus a flat fee of $16.80 per drug per day. Importantly, Congressionally-mandated sequestration will continue to apply to payments made under the model. As a result, under the proposal, the experimental group’s actual payment rate will be ASP+0.86% plus $16.53 per drug per day. The remaining half, the control group, would continue to be reimbursed for Part B drugs at ASP+6%. The goal, which policymakers have discussed for sometime, is to eliminate financial incentives for providers to prescribe more expensive drugs.
The agency’s ambitious timeline calls for Phase II to begin as early as January 2017. Phase II would further divide the control and test groups—creating a four-arm control trial—and overlay a requirement to use value-based pricing (VBP) reimbursement strategies and clinical decision support (CDS) tools to produce Medicare savings. One (unlucky) group of providers will be subject to both the reduced ASP rate and the requirement to utilize VBP tools. These tools might include:
- Reference pricing: Medicare would set a standard payment for therapeutically similar products.
- Indications-based pricing: Payment would vary for a drug based on its clinical effectiveness for different indications.
- Voluntary-risk sharing agreements: CMS would enter into voluntary agreements with manufacturers to link health outcomes with payment.
- Discounting or eliminating patient coinsurance to encourage beneficiary use of high-value drugs.
Despite a preliminary list of potential tools, CMS failed to describe these VBP approaches in any meaningful detail, leaving many questions about how CMS will develop this methodology and how the agency will make determinations about high-value treatments.
Perhaps most unnerving, providers would be assigned to arms of the trial at random based on their geographic location in Primary Care Services Areas (PCSAs), which are clusters of ZIP codes that reflect primary care service delivery. Although CMS has structured Phase I to be budget-neutral for the Medicare program, among providers, there will be winners and losers: the program is designed to redistribute drug spending by increasing payments to provider specialties, such as primary care, that use relatively inexpensive drugs and decrease payments to hospitals and physician specialties, such as oncology and ophthalmology, that often use more costly drugs. Specifically, under the proposed model, the tipping point is $480–drugs that cost providers more than $480 per day on average would result in lower reimbursement, whereas products costing less than $480 per day would produce higher payments than what is reimbursed today.
The majority of drugs–7 of 10–that would make up the largest reduction in reimbursement are used to treat cancer. Moreover, many of these drugs do not have a lower cost alternative.1
ACCC Takes Action
On both policy and process, ACCC remains deeply concerned. Rather than working with cancer care professionals to build the infrastructure needed to define quality and value in their cancer programs, CMS has responded to a call for reigning in drug costs with a myopic focus on reimbursement. Our members have partnered with CMS on meaningful payment reform – including the most recent Oncology Care Model – and will soon be dedicating extensive resources to navigating a new, and complex, reformed physician payment system under MACRA.
Oncologists are ready for change, but CMS’ proposal reaches too far, too fast, with seemingly little understanding of the devastating impact this approach will have on community cancer care and patient access.
Early on, ACCC joined with 60 oncology stakeholder groups in a letter to CMS asking the agency to withdraw its proposal. On March 17 ACCC, together with more than 300 state and national organizations, sent a letter to Congress asking policymakers not to move forward with the CMS Part B Drug Payment Model proposal. We recently partnered with the Hematology/Oncology Pharmacy Association (HOPA), the Oncology Nursing Society (ONS), and the Association of Oncology Social Work (AOSW) to caution Vice President Biden about how the proposal would impede the goals of the Administration’s cancer Moonshot initiative.
CMS will accept comments on the proposal until May 9, 2016. ACCC will be submitting a comment letter and urges members to express their concerns to the agency.
Access ACCC resources related to this issue and learn more about our advocacy efforts here.
This post was updated on April 26, 2016.