The Centers for Medicare and Medicaid Services (CMS) plans to test new Medicare Part B payment strategies through a proposed model designed to improve how physicians and outpatient departments are compensated for prescription drugs. 

CMS noted that existing payment methodology can penalize providers for prescribing less-expensive drugs even when, based on the evidence, those drugs are as effective as or more effective than higher-cost drugs. Medicare Part B currently pays physicians a drug’s average sales price plus a 6 percent add-on. In a proposed change that could go into effect later this year, the add-on would be lowered to 2.5 percent and a flat fee payment of $16.80 per drug per day would be included. The flat fee payment would be updated at the beginning of each year based on the consumer price index. 

The model also includes several value-based pricing strategies that would not go into effect until the first of next year at the earliest. One strategy is to discount or eliminate patient cost-sharing to give Medicare beneficiaries better access to effective drugs. Another strategy involves indications-based pricing, in which payments for a given drug are based on its clinical effectiveness for different indications. 

Reference pricing is another of the proposed strategies. In this approach, Medicare would set a standard payment rate, or benchmark, for a group of drugs that are considered therapeutically similar. A fourth strategy is for CMS to enter into voluntary risk-sharing agreements with drug manufacturers that would tie price adjustments to patient outcomes.

The proposed model would run for five years. The criteria for success, according to CMS, are whether the model “reduces net Medicare spending, without limiting coverage or benefits, while maintaining or improving patient care.”

All providers and suppliers furnishing and billing for Part B drugs would be required to participate in the model, and all Part B drugs and biological treatments would be included, with limited exceptions. 

Public comments are being accepted through May 9.

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