CMS Proposed Rule Drastically Changes the Way Medicare Pays for Part B Drugs

 

The Centers for Medicare and Medicaid Services announced their proposal to test new Medicare Part B prescription drug models in an attempt to “improve quality of care and deliver better value for Medicare beneficiaries.” The proposal is part of the Obama Administration’s broader strategy to encourage better care, smarter spending, and healthier people by paying providers for “what works, unlocking health care data, and finding new ways to coordinate and integrate care to improve quality.”

The proposed rule proposes six changes: change the ASP, eliminate patient drug cost-sharing, provide evidence-based clinical decision support tools, pay for a drug based on its clinical effectiveness for different indications, set a standard payment rate, and allow CMS to enter risk-sharing agreements with drug companies based on outcomes.

CMS will be accepting comment on the proposed rule through May 9, 2016.

The Proposed Rule

The proposed rule implements a five-year Medicare Part B Drug Payment Model under the Affordable Care Act umbrella authority given to the Center for Medicare and Medicaid Innovation (CMMI) to test alternative payment and delivery models. The proposal includes aspects that address the Average Sales Price (ASP) add-on for Medicare Part B drugs, as well as aspects that seek to influence drugs’ actual ASP through the application of Value-Based Purchasing (VBP) strategies.

ASP Modifications

CMS proposes changing the statutory “ASP plus six percent” used to reimburse providers for Part B drugs to “ASP plus 2.5 percent, plus a flat fee payment of $16.80 per drug, per day.” This change would affect a broad definition of drugs, including Part B drugs, biologics, and biosimilars. CMS is confident that this change is “budget neutral,” which manes that “initial total payments under the model will be based on the most recently available calendar year claim’s total Part B drug payment amount for separately paid drugs and then updated annually.”

Any providers and suppliers who furnish Part B drugs included in the model would be required to participate, if they are located in the geographic areas scheduled for inclusion. Geographic areas would be based on Primary Care Service Areas, excluding Maryland. CMS is proposing that all 7,048 PCSA’s nationwide be randomly assigned to an arm of the model test, which will include a control arm (ASP plus 6%) and three model test arms (ASP plus 6% with VBP tools, ASP plus the flat fee with VBP tools, and ASP plus the flat fee without VBP tools).

CMS is proposing to include a majority of drugs paid under Part B into the model, typically the drugs that appear on the quarterly ASP Price Files. Excluded Part B dugs can be found on p. 22. Implementation of this first phase would begin in the fall of 2016, through no sooner than sixty days following a final rule’s display in the Federal Register. Phase II, discussed below, will begin no sooner than January 1, 2017, and may take several years before it is fully implemented. CMS’ goal is to “have both phases of the model in full operation during the last three years of the proposed five-year duration to fully evaluate changes and collect sufficient data.”

Value-Based Purchasing

CMS is proposing to implement VBP tools similar to those that are used by commercial plans, pharmacy benefit managers, hospitals, and other organizations in the business of managing health benefits and drug utilization. CMS proposes several different VBP tools that could be used in the Part B Drug Payment Model, and further proposes the testing of one or more of these tools during Phase II.

Reference Pricing

Under this tool, a benchmark is set based on the payment rate for the average price for drugs in a group of therapeutically similar drug product or some other threshold. Any version of reference pricing implemented would not permit balance billing of the beneficiary for any differences in pricing. CMS discusses this option on p. 51 of the rule.

Indications-Based Pricing

On p. 52 of the rule, CMS proposes this option, which entails varying prices for a particular drug based on its varying clinical effectiveness for different indications. CMS plans to used indicates based pricing “where appropriately supported by published studies and reviews or evidence-based clinical practice guidelines, such as the Institute for Clinical and Economic Review (ICER) reports.”

Risk Sharing Agreements

Under this plan, CMS would be allowed to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments. These agreements would tie the final price of a drug to results achieved by specific patients, instead of using a predetermined price based on historical population data. Any agreement would require a clearly defined goal. More information can be found on p. 54.

Eliminating Beneficiary Cost Sharing

CMS has proposed to waive beneficiary cost sharing from the current twenty percent in light of the incentive to encourage the use of high-value drugs. This means that the copayment associated with a HCPCS code could be reduced by CMS to a value less than twenty percent, and can even be waived completely in certain circumstances.

Clinical Decision Support (CDS) Tools

On p. 58, CMS begins a discussion of a two-component CDS tool that would support clinical decisions through education and provide feedback based on drug utilization in Medicare claims. This tool, according to CMS< would be completely voluntary and physicians would be given a choice about whether or not to use the tool, and how they would apply information from the tool to their practice.

Industry Reaction

As might be expected, PhRMA is less than enthused about this change, issuing a statement, “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.”

The American Society of Clinical Oncology also denounces the change, stating, “[It] is inappropriate for CMS to manipulate choice of treatment for cancer patients using heavy-handed reimbursement techniques,” the American Society of Clinical Oncology’s CEO Allen Lichter said in a statement. “Physicians did not create the problem of drug pricing and its solution should not be on their backs.”

A letter on behalf of more than sixty physicians and other signatories from the oncology community was sent to CMS Administrator Andy Slavitt. Another letter was sent to Sylvia Burwell, HHS Secretary. These two letters each urged CMS to reconsider this proposal.