CMS Drops Medicare Part B Drug Payment Pilot

Posted 16 December 2016 | By Zachary Brennan 

CMS Drops Medicare Part B Drug Payment Pilot

The Centers for Medicare and Medicaid Services (CMS) late Thursday decided to abandon a pilot plan that aimed to lower Medicare pharmaceutical spending.

The Part B Drug Payment Model, first unveiled in March, would have tested whether alternative drug payment designs will lead to a reduction in Medicare expenditures.

CMS said in a statement on Friday to Focus: "After considering comments, CMS will not finalize the Medicare Part B Drug Payment Model during this Administration... While there was a great deal of support from some, a number of stakeholders expressed strong concerns about the Model. While CMS was working to address these concerns, the complexity of the issues and the limited time available led to the decision not to finalize the rule at this time.”

Walid Gellad, co-director of University of Pittsburgh's Center for Pharmaceutical Policy and Prescribing, told Focus: "If doctors had been adamantly supporting this pilot, I think it could have materialized despite pharma opposition. But organized medicine (the AMA, every specialty society impacted by reduced revenue) was opposed, and I think that is an important part of this story. We also just ran out of time - there's a chance it would have been revised successfully if the election had gone differently."

Details and Concerns

The first phase of the program would have changed the 6% add-on to Average Sales Price (ASP) that CMS uses to make drug payments under Part B to 2.5% plus a flat fee (in a budget neutral manner).

The second phase would have implemented value-based purchasing tools like those used by commercial health plans, pharmacy benefit managers, hospitals and others that manage health benefits and drug utilization.

“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,” CMS wrote.

More than 1300 comments were submitted to the proposal’s docket, and as CMS indicated, many of them were negative. Pharmaceutical companies were united in their opposition to the pilot.

New York-based Pfizer said the experiment was “flawed in its design,” and “likely to have significant unintended consequences for patients facing serious and life threatening diseases, which CMS does not have an ability to monitor in real time.” The pharmaceutical company also said the program would “accelerate the shift to more expensive, hospital-based sites of care which will increase costs to the Medicare program and beneficiaries.”

Similarly, Indianapolis-based Eli Lilly said the proposal “exceeds CMS’ statutory authority. This proposal does not identify nor rectify any existing problem. Rather, it exposes providers to financial losses which would impede patient access to life-saving and life-changing Medicare Part B covered drugs.”

New York-based Regeneron also expressed concerns that CMS' proposal would “unduly incentivize use of off-label repackaged/compounded products over other FDA-approved products that are subject to comprehensive safety, efficacy, sterility and other handling standards. Patients and providers should have access to the full range of available safe and effective medicines, including where off-label use is appropriate.”

New Jersey-based Johnson & Johnson called the plan “too narrowly-focused on Part B drug costs and not patient outcomes.”

New York-based Bristol-Myers Squibb echoed its peers' negative stances, noting the proposal would "have a particularly negative impact on patients who require higher-cost drugs and biologics to treat critical illnesses such as cancer, rheumatoid arthritis, and rare diseases, without offering any safety net to mitigate the harm. As such, the Proposed Model should not be finalized or implemented in any manner but, rather, should be replaced with more thoughtful engagement with stakeholders on appropriate ways to incentivize greater value in the Medicare Part B program and further innovation in the therapies paid for by Medicare." 

But others seemed to think the pilot was worth giving a chance to succeed.

In a July JAMA viewpoint, Sham Mailankody of the division of hematologic oncology at Memorial Sloan Kettering Cancer Center in New York, and Vinay Prasad of the Knight Cancer Institute at Oregon Health & Science University, detailed how the program could work.

“In all cases, although the magnitude of incentive is decreased, in no case does the directionality change. In other words, physicians will continue to be incentivized to select the more costly option, but to a lesser degree,” they wrote.

Prasad told Focus on Friday via email: "It is a tragedy that CMS Part B experiments are being abandoned. I say experiments because all of these changes to Part B were meant to be studies of whether or not the intervention actually helped improve care and lower costs. Once again, the outcry about these Part B experiments was largely driven by entrenched interests, and they have succeeded in defeating it. It will be difficult to be able to rationally improve health care until policymakers and regulators can be free from commercial and personal financial bias."

Following CMS’ decision to scrap the plan, House Majority Leader Nancy Pelosi (D-CA) praised the move.

“While the proposed Medicare Part B demonstration had admirable goals, our Members raised a number of concerns, and we are pleased the Center for Medicare and Medicaid Innovation has decided not to move forward,” she said in a statement on Friday.

“Prescription drug costs represent the largest factor driving rising health care costs in America today. Congress must come together in a bipartisan way to address the soaring costs of prescription drugs in a way that supports the search for cures while ensuring that patients can afford these treatments,” she added.

Editor's Note: This article has been updated with comment from Gellad and Prasad.

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