CMS Addresses Senate Concerns on Part B Payment Proposal

July 05, 2016 10:02 am News Staff

Senators heard testimony last week about a CMS proposal to test a new model for Medicare Part B payments that would reduce the role a prescription drug's price plays in calculating how physicians are paid.

[Young boy getting vaccination in arm]

Under current policy, Medicare Part B typically pays physicians the average sales price of a drug plus an additional 6 percent. A proposed rule( would change that payment for most Part B drugs administered in an outpatient setting to 2.5 percent plus a flat fee -- initially, $16.80 per drug per day and then adjusted annually based on the consumer price index for medical care.

In addition, beneficiaries now pay as much as 20 percent in coinsurance toward medications. The proposed rule would reduce that payment, dropping it to zero in some cases.

Part B covers medications that are received by infusion or injection, typically in a clinician's office. It also covers some drugs obtained in a pharmacy, such as inhalation drugs and oral anticancer or antiemetic medications.

It's worth noting that because influenza, pneumococcal and hepatitis B vaccines are considered preventive services and are paid using a different methodology, the proposed rule would not apply to these vaccines.

Story Highlights
  • The Senate Finance Committee held a hearing about a CMS proposal for Medicare Part B that would reduce the role a prescription drug's price plays in calculating how physicians are paid.
  • Some senators were concerned that the change would limit patient access to drugs that have no generic alternative, but a CMS official said protections for patient access would be maintained.
  • The AAFP earlier supported the proposal, noting that pharmaceutical companies should be held accountable for improving quality and reducing costs.

Members of the Senate Finance Committee expressed concern during a June 28 hearing( that the test model could limit access to some drugs, noting that 300 organizations wrote in opposition to the proposal, largely out of concern that it could limit access to drugs that have no generic alternative. But a CMS official explained that protections for patient access would be maintained, and he said the agency will review the thousands of comments it has received about the proposal.

"We would want any doctor to prescribe the medication that their patient needs," CMS Acting Principal Deputy Administrator Patrick Conway, M.D., told the committee. "We believe this proposal maintains access."

He emphasized that CMS is prohibited from limiting any benefits to Medicare enrollees in any demonstration project as part of the Patient Protection and Affordable Care Act.

The AAFP earlier expressed support for the proposal, noting that in the transition to value-based payments, pharmaceutical companies should be held accountable for improving quality and reducing costs.

"Physicians, hospitals and other Medicare providers are aggressively pursuing value-based payment models, and it only makes sense that we would explore the applicability of these same ideas to the pharmaceutical industry," said AAFP President Wanda Filer, M.D., M.B.A., of York, Pa., in a statement released March 9.  

As Sen. Ron Wyden, D-Ore., said at the hearing, "So far, prescription drugs have been left out of the equation of paying for value rather than volume."

The proposal is intended to provide another incentive for primary care physicians to prescribe lower-cost medications that demonstrate the same clinical effectiveness as costlier drugs. It would test the establishment of a standard payment rate for drugs with similar therapeutic purposes. Physicians also would receive information about how their prescribing patterns compare with peers in their area.

"Under the current method (of payment), there is a disincentive to prescribe lower-cost drugs," Conway said.

Private insurers agreed to work with pharmaceutical companies to link patient outcomes to price adjustments for drugs. A final rule could be announced this fall.

Spending on Medicare Part B medications more than doubled from $9.4 billion in 2005 to $22 billion in 2015. Spending on Medicare Part D, which covers prescription drugs, is now $89.5 billion, but CMS has no proposals for Part D. Sen. Debbie Stabenow, D-Mich., said this is an area that officials should focus on.

"If the goal is to drive down prescription drug costs, are we focusing on the right part?" Stabenow asked. "Shouldn't we pay more attention to Part D?"

Additional Resource
Medicare Payment Advisory Commission
Report to the Congress: Medicare and the Health Care Delivery System, June 2015
Chapter 3: Part B Drug Payment Policy Issues(

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