CMS tests new model to lower cost of prescription drugs

To lower prescription drug costs and to give physicians incentives to prescribe lower-priced drugs, the Centers for Medicare and Medicaid Services on Tuesday said it will test a new model lowering the 6 percent add-on payment to 2.5 percent, including a flat fee per drug.

The new model also would include a fee of $16.80 per drug, per day on top of the 2.5 percent add-on fee paid by Medicare to healthcare providers.

In making the proposal, CMS is following a recommendation made to Congress in June 2015 by the Medicare Payment Advisory Commission, according to Patrick Conway, acting principal deputy administrator and chief medical officer for CMS.

[Also: Prescription drug spending spikes 12 percent, reaching nearly $300 billion]

MedPAC said the existing 6 percent add-on created incentives for providers to use higher-priced drugs, and Conway said it is CMS's hope that by lowering the incentives it will discourage that.

"The penalty for choosing the lower-priced drugs is the reimbursement is less," Conway said.

Conway said he's heard doctors are under pressure to choose the higher-priced drugs, which have a greater reimbursement rate.

"Our goal is to support physicians delivering higher quality care to patients," Conway said. "There is nothing in the proposed payment model stopping them from prescribing exactly what they think patients need. Nothing in the proposed test tells doctors what to prescribe."

Currently the system has a perverse incentive structure, Conway said.

The current Medicare Part B drug payment methodology can penalize doctors for selecting lower-cost drugs, even when these drugs are as good or better for patients based on the evidence, according to CMS.

CMS said it 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.

Prescription drug spending and pharmaceutical price increases have recently come under fire in Congressional hearings.

Drug spending in the United States was about $457 billion in 2015, or 16.7 percent of overall health spending, according to a CMS. The Medicare Part B spend for that year was $20 billion on outpatient drugs administered by physicians and hospital outpatient departments, CMS said.

The proposed test would go into effect in regions nationwide later this year. Some areas will see no changes, Conway said. All providers and suppliers furnishing and billing for Part B drugs would be required to participate in the model, although not all would be part of each test.

The change would be budget neutral, according to CMS.

The proposed rule will be open to a 60-day comment period. CMS is accepting comment through May 9.

Medicare Part B covers prescription drugs that are administered in a physician's office or hospital outpatient department, such as cancer medications, injectables like antibiotics, or eye care treatments.

The average sales price for drugs under Part A is $5, and for Part B it's $100. Today, a drug in Part A is paid at $0.30 above the price of the drug and Part B at $6. Under this proposal, Medicare would pay Part A at $16.93 above the average sales price and Part B at $19.30.

The proposed rule announced Tuesday also seeks comments on testing six different alternative approaches for Part B drugs.

For 2017, CMS proposes to add a value-based purchasing model for commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization.

The test will discount or eliminating patient cost-sharing to improve beneficiaries' access and appropriate use of effective drugs.

The 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, CMS said. Examples could include best practices in prescribing or information on a clinician's prescribing patterns relative to geographic and national trends.

This proposed test would also 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.

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The drug will be reimbursed at a higher rate when it is used for the most effective treatment, according to Conway.

This proposed model would test the practice of setting a standard payment rate--a benchmark--for a group of therapeutically similar drug products.

This proposed test would allow CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments.

CMS would conduct a complete evaluation of the proposed model, which would run for five years, with the goal of having the incentive and value-based purchasing tests fully operational during the last three years to evaluate changes and collect sufficient data.

As with other evaluations, the criteria for a successful model will be whether it reduces net Medicare spending, without limiting coverage or benefits, while maintaining or improving patient care, CMS said.

CMS plans to implement a concurrent real-time claims monitoring program to track utilization, spending and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures.

Twitter: @SusanJMorse