The Alliance for Health Reform recently held a Congressional briefing about cost growth of pharmaceuticals in the Medicare program and strategies to better align incentives for prescription drug payment. The discussion provided context behind Medicare spending, the trends in prescription drug spending by the program, and potential policy initiatives to address rising costs. Experts in Medicare and drug pricing, including Dr. Mark McClellan, Dr. Gerard Anderson, and Dr. Laura Keohane, highlighted barriers to price solutions in the existing Medicare benefit and discussed various policy options to better tie drug payment to value. The discussion was moderated by Shawn Bishop of The Commonwealth Fund.
Presentations
Shawn Bishop delivered opening remarks, setting the context for prescription drug trends in Medicare, noting that Medicare coverage of prescription drugs was widely expanded as a result of the creation of Part D. According to Bishop, Part D cost growth was projected to rise faster than the other segments of Medicare, as it currently accounts for 29% of Medicare spending in the United States.
Dr. Keohane provided additional background on Medicare’s Part D benefit, stating that Part D spending has grown both at a per-enrollee and a program-wide level. She said that a variety of factors have contributed to this growth, including: introduction of high priced drugs into the market, the availability of competitors for certain drugs, formulary and network decisions made by Part D plans; and incentives contained within the structure of the Part D benefit itself.
Dr. Anderson focused on weaving payments for drugs into bundled payment arrangements. Referencing examples of existing initiatives, he said that the approach could be incremental, starting with bundled payment demonstrations for conditions that don’t use many prescription drugs and moving into conditions that have higher drug spending like chronic conditions.
Dr. McClellan noted that value-based payment for drugs could either be based on prior evidence of the drug’s effectiveness or payment could be linked to measures of quality and outcome. According to Dr. McClellan, the latter, “results based,” payment model has already started to gain traction, but has a host of implementation challenges. He noted the potential to integrate drug payment into alternate payment models, citing the CMS oncology care model as an example and that payment pharmaceuticals could be brought into new APMs in the same way specialty services are integrated into primary care ACOs.
Discussion
Doctors McClellan and Anderson had a bit of difference when it comes to the best way to limit costs for some of the highest price pharmaceuticals. Anderson indicated that the government could make purchasing decisions for a small class of expensive drugs based on a value metric, similar to those developed by the Institute for Clinical and Economic Review (ICER) or the National Institute for Health and Care Excellence (NICE). He noted that these metrics are already used in contracting for valuing drugs in the private sector and the controls would only apply to a subset of specific and expensive drugs.
On the other hand, McClellan felt as though a government entity dedicated to determining the price of the drug based on its value would be a difficult move politically, as there has been a lack of legislative proposals in that direction. He said that Part D plans already used measures of value to influence negotiations with pharmacies and manufacturers; however, Part D plans have not been on the hook for the brunt of the costs for expensive drugs, limiting their incentive to drastically lower the price. He believes an alternative could encourage plans to negotiate harder.
McClellan also emphasized the potential to add pharmaceuticals to alternative payment models, as it could be a more market-based solution as opposed to a government price control. If APMs were able to negotiate with the manufacturers to get a lower price or to share in costs and savings in similar ways that downstream providers can be incorporated into CMS’ newest episode payment models.
Additional documents, including source materials and offsite materials, can be found here.