The laser-like national focus on reining in the cost of certain prescription drugs is beginning to produce thoughtful responses from all parties, although the pharmaceutical manufacturers may be less than enthusiastic about much of the activity.
Among the most ambitious: a proposed new rule by the Centers for Medicare and Medicaid Services that would test different ways of managing the cost of very expensive drugs based upon performance criteria. It targets drugs that are distributed either in physicians' offices or at hospitals, ones that tend to be expensive.
CMS wants to alter both the percent it pays out for Part B drugs for Medicare patients, and experiment with payments based upon "value-based purchasing tools similar to those employed by commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization."
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In other words, it'll pay more if the drugs meet certain objectives, less if they don't.
"We believe this model will further our goals of smarter, that is, more efficient spending on quality care for Medicare beneficiaries," CMS says in the summary of the rule.
CMS notes that payments for Part B drugs have doubled in less than a decade, from $11 billion in 2007 to $22 billion in 2015.
"This significant growth has largely been driven by spending on separately paid drugs in the hospital outpatient setting, which more than doubled between 2007 and 2015, from $3 billion to $8 billion respectively," CMS says.
Hence the new rule, designed "test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries."
The rule would reduce the percent Medicare pays, adding in a flat fee to be determined. Next, it would work with drug makers and insurers to set objectives for the use of the drugs, such as the reduction of hospitalizations or 30-day readmissions. Reimbursements would be based on outcomes — the value-based method so popular with healthcare cost cutters these days.
"These [value-based purchasing] tools have been used for years with positive results, and we believe that some of these successful approaches may be adaptable to Part B. We propose to apply one or more tools, such as indication-based pricing, reference pricing, and clinical decision support tools to Part B drugs. We will test whether the implementation of the tools affects expenditures and outcomes," CMS said.
"There is no perfect payment system, they all have upsides and downsides," Dan Mendelson of consulting firm Avalere Health, told NPR regarding the CMS proposal. "What we don't want to do is create a world where doctors only prescribe the cheapest stuff even if not in the interest of the patient."
The comment period for the rule is two months; the rule was announced March 8.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
