The Administration has been quite active recently in the drug pricing space. It has been a top story in the health policy world for the past several months. As such, two items of note caught our eye. The final submission of comment letters regarding the Administration’s international pricing model for Medicare Part B drugs and the recent court decision halting large cuts to the 340B program.
IPI Model
As we previously reported, the IPI model would allow private vendors to obtain drugs, distribute them to physicians and hospitals, and take on the responsibility of billing Medicare. Vendors would be able to aggregate purchasing, seek volume-based discounts, and compete for providers’ business, creating competition with one another. The IPI model would also change the way physicians and hospitals are paid: instead of the current percentage-based add-on payment, they would receive a set payment amount for storing and handling drugs that is not tied to the price of the drug.
According to reports, the plan would be phased in over a five-year period, would apply for 50 percent of the country, and would cover most drugs in Medicare Part B – including physician-administered medicines such as infusions. The model would correct existing incentives to prescribe higher-priced drugs and, for the first time, address disparities in prices between the United States and other countries. Since patient cost sharing is calculated based on Medicare’s payment amount, patients would likely see lower costs under the model.
Comment letters
As noted by others, there was strong pushback to the Administration’s IPI model. Groups including the American Hospital Association, American Medical Association, Community Oncology Alliance and others have criticized the plan in letters to Centers for Medicare and Medicaid Services administrator Seema Verma. Specifically, AHA says the proposal could undermine 340B hospitals, increase hospitals’ operational and regulatory burden, reduce reimbursements and increase vendor fees.
AMA, for its part, voiced concerns over administrative burdens and said the plan could reduce patient access. Meanwhile, the Community Oncology Alliance wrote that it has “serious concerns about its impact on cancer patient care and even its legality.” The American Academy of Neurology called upon HHS to redesign the model, saying that “[a]ny true demonstration project should be voluntary, small scale, and centered on the quality and value of medical care provided to patients … the AAN recommends that CMS scale back the size of the program until the evidentiary basis is established showing that the proposal to index Part B drug prices against international reference prices will reduce Part B drug costs, without negatively impacting patient care.”
Unsurprisingly, trade groups PhRMA and BIO aren’t big fans of the idea either, and they hit back at the IPI proposal immediately. In an October statement, PhRMA CEO Stephen Ubl said the administration “is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation.” BIO CEO Jim Greenwood said such a strategy “puts America’s patients last and diminishes their hope for a better future.”
Outlook is not good
As Medpage Today notes, there are some other problems. Stacie Dusetzina, PhD, associate professor of health policy at Vanderbilt University School of Medicine in Nashville, said the proposal isn’t “realistic.”
Regarding the changes to how physicians are paid for administering Part B drugs, Dusetzina noted that it “seems obvious” that the percentage-based payment (and the perverse incentives that come with it) “is not the best way to pay physicians for their services.”
But the Obama administration encountered “fierce resistance” from professional organizations when it attempted to change how physicians are paid for Part B drugs.
“I imagine the [Trump] administration would face similar hurdles,” she said.
The idea of involving a third-party vendor as a substitute for physicians buying and billing Part B drugs seems dubious, Dusetzina suggested.
“The vendor that they describe… sounds a lot like a [pharmacy benefit manager], which makes it unclear how much they will help reduce spending (versus adding additional administrative costs to the system),” Dusetzina wrote. While the concepts of the plan are “admirable” she wrote, the administration faces an “uphill battle” in implementing them.
340B
In the final days of 2018, a federal court granted the American Hospital Association’s Motion for a Permanent Injunction over CMS’ Medicare Part B reimbursement cut for 340B hospitals. The vehicle for that reimbursement cut was the 2018 Outpatient Prospective Payment System (OPPS) rule, and CMS’ existing authority to adjust OPPS drug reimbursement.
Mintz Levin published an interesting summary of the situation. In particular, this decision has significant ramifications for CMS. The agency “has theorized that its statutory authority to adjust prices in Medicare (and Medicaid) gives it broad discretion to devise ways to attack drug prices, including through proposed regulations involving drug advertising. While this ruling will certainly be appealed in the long term, and may even be stayed pending appeal, Judge Contreras’s opinion will give CMS pause in the short term. New regulatory proposals that attack drug prices may well leave CMS vulnerable to arguments that any major changes in the status quo are too extreme to be justified as ‘an adjustment.’”