Here are five things managed care executives should know about the proposed plan.
Hanger
Cook
O'Neill
McCormick
Wilkinson
HHS has announced a new International Pricing Index (IPI) payment model that aims to reduce what Americans covered under Medicare Part B pay for prescription drugs. HHS projects savings for American taxpayers and patients to total $17.2 billion over five years.
HHS is accepting comments on the proposed rule until December 31, 2018, and plans to issue a proposed final rule in spring 2019. The plan is expected to roll out as a demonstration project in select areas of the country in spring 2020.
Here are five things managed care executives should know about the proposed plan.
Although participants would no longer purchase and bill Medicare for Part B drugs and biologicals, Medicare would continue to pay them for drug administration, Cook says. It would also pay an additional add-on payment for drugs and biologicals furnished to beneficiaries, though this payment amount would be intended only to cover lost revenue and limited administrative costs.
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Currently Medicare pays for Part B drugs based on the drug manufacturer’s average sales price (ASP) plus a 6% add-on; due to sequestration, the add-on is effectively reduced to 4.3%. Under the IPI model, when a drug’s ASP is higher than its international price, CMS will instead pay the lower international price (i.e., target price), explains Meagan O’Neill, manager, ECG Management Consultants, which creates strategies and solutions to transform healthcare. CMS will continue to pay an add-on per drug, although this will be a fixed amount rather than today’s ASP-based rate. CMS estimates this reimbursement change will reduce total Part B drug spending by approximately 30%.
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Phasing in of the target price would occur over the five years of the model, as a blend of ASP and the target price. For each calculation, if the ASP is lower than the target price for an included drug, CMS proposes that the model would set the payment amount to the ASP for that drug, McCormick says.
But Constance A. Wilkinson, a member of the national law firm, Epstein Becker & Green, points out that the proposed reform will be fiercely opposed by the physician lobby and the pharmaceutical industry. “In the past, these groups have prevailed in defeating similar reforms,” she says. In fact, CMS’ 2016 proposed rule on Part B payment models that included elements similar to the current proposal was subsequently withdrawn in the wake of significant Rstakeholder opposition. “Nonetheless, the growing popular support for drug pricing reform may enhance the administration’s ability to effectuate the proposed Part B modifications.”
If approved, Wilkinson says drug companies with branded drugs that are administered by physicians in the outpatient setting will see reduced revenues. “These reductions in revenue could impact manufacturers’ decisions to invest in research and development,” she says.
Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.
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