Medicare is proposing another initiative to change the way it pays for certain medications. In the wake of dramatic increases in drug spending and a ballooning population of retirees, the public health program is looking for new ways to keep costs down.
The new payment models will affect drugs administered at outpatient facilities, such as heavy-duty cancer treatments. Such drugs are paid for by Medicare Part B, not Part D, which relates to prescription drugs.
Currently, Medicare Part B pays providers the average sales price of the drug plus 6 percent. Now, it will instead pay providers the average sales price plus 2.5 percent, along with a flat fee of $16.80.
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"We propose the Part B Drug Payment Model as a two-phase model that would test whether alternative drug payment designs will lead to a reduction in Medicare expenditures, while preserving or enhancing the quality of care provided to Medicare beneficiaries," said a memo from the Centers for Medicare and Medicaid Services announcing the initiative.
The idea is that if the payment model is based less on percentage, providers have less of an incentive to opt for the highest-cost drugs.
"We intend to achieve savings through behavioral responses to the revised pricing, as we hope that the revised pricing will remove any excess financial incentive to prescribe high cost drugs over lower cost ones when comparable low cost drugs are available," said the memo.
CMS conceded, however, that it did not have an estimate for how much money the project will save.
A second phase of the program, which will start next year, will include a variety of different payment approaches, including tying reimbursement to the effectiveness of the drug.
Unsurprisingly, there are a few groups that are not happy about the proposed new rules, which will now be subject to a two month comment period from stakeholders seeking to alter the proposal.
In a statement, Pharmaceutical Research and Manufacturers of America, the drug industry trade group, called the current payment model "effective" at controlling costs, and suggested the proposed change could harm patients.
"Proposing sweeping changes to Medicare Part B drug reimbursement without thoughtful consideration and stakeholder input is not the right approach and puts Medicare patients who rely on these medicines at risk," it added.
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