CMS Proposes New Payment Program to Lower Medicare Drug Costs

The Centers for Medicare & Medicaid Services (CMS) announced an experimental initiative to test new ways to pay for certain prescription drugs, in an effort to lower patient costs and reward doctors for choosing the most effective treatments for their patients.

Under the current physician payment model, there are weak incentives for physicians to choose low-cost therapies that treat patients effectively, as doctors and hospitals are usually reimbursed based on the average sale price of a drug and an add-on payment of 6 percent. “We’ve heard from oncologists that there’s pressure to choose the higher-priced drugs even when there’s a lower-priced drug available,” said Patrick Conway, MD, MSc, the chief medical officer at CMS. “Doctors want to prescribe medicines without worrying about finances.”

CMS will start with Medicare Part B drugs (including oncology medications, injectable antibiotics, and eye-care medications) that are administered in physicians’ offices and in the hospital outpatient setting. Prices for these drugs can range from $9,000 to $100,000 per month, and federal officials have estimated that Medicare Part B spent $20 billion in 2015 for prescription drugs administered in these settings.

One component of the new proposal involves reducing or eliminating patient cost-sharing for Part B drugs to improve beneficiaries’ access to and to encourage the use of the most effective drugs. Beneficiaries are often responsible for 20 percent of the Medicare-approved amount for these drugs.

Additional components of the proposal include:

  • Reducing add-on payments from 6 percent to 2.5 percent plus a flat $16.80 payment
  • Evaluating doctors’ prescribing patterns to create decision-support tools to assure that they provide patients with the safest and most appropriate drug choices
  • Varying payment for drugs depending on the effectiveness for different conditions
  • Reference pricing, or setting standard prices for similar classes of drugs
  • Risk-sharing agreements based on outcomes, which would allow Medicare to forge agreements with drug manufacturers to link improved outcomes with drug prices

CMS is accepting comment on the proposed rules and several alternative payment approaches for Medicare Part B drugs through May 9, 2016.

For more on this proposal and ASH’s perspective, visit ASH’s Policy News page.

Source: CMS news release, March 4, 2016.