Stakeholders have mixed reaction to Part B drug test model

CMS’ proposed two-phase test model for Part B prescription drug payments—which would lower the percentage paid based on average sales price but add a flat fee and include value-based purchasing tools—has seen a mixed reaction from the industry.

One of the goals of the test model is to change how physicians and hospitals choose which drug to prescribe and encourage them to choose the drug that will be most effective for the patient, CMS says. CMS believes the current payment model can sometimes accidentally penalize physicians and hospitals for prescribing lower-cost drugs that are as good as, or better, for a particular patient as more expensive drugs. The proposed test would attempt to level differences in payment.

Critics include the Community Oncology Alliance (COA), a nonprofit advocacy group for community cancer centers. COA blasted the proposed rule, claiming the model would interfere with clinical decisions and adversely affect patients with complicated medical conditions such as cancer, immunodeficiency diseases, or hypertension. COA posted a draft open letter to Congress asking them to stop CMS from implementing the proposed test model.

However, the American Academy of Family Physicians (AAFP) released a statement in support of the proposed rule and test model. The AAFP notes that as value-based payment models are becoming the norm for hospitals and physicians, it makes sense to extend that same methodology to prescription drugs. The AAFP applauds the phase two strategies that would eliminate or reduce patient cost-sharing and goes on to say that it believes delivery systems should not favor one drug over another.

The reaction of each group is to be anticipated based on how the test model would affect their constituencies. “Overall, spending on drugs furnished in the office setting increases while spending on drugs furnished in the hospital setting decreases,” CMS says in the proposed rule.

While CMS expects aggregate payments to remain the same under the test, phase one of the model will shift some payments away from hospitals and specialties, including ophthalmology and oncology, that use higher-cost drugs to specialties, such as primary care, that generally use lower-cost drugs. Rural hospitals, however, will see smaller reductions than urban hospitals, according to CMS’ estimates.

The proposed model involves two phases of testing. Currently, Medicare Part B pays physicians and hospital outpatient departments the average sale price of a specific prescribed drug plus a 6% add-on.  In phase one, CMS would reduce the add-on payment to 2.5% for hospital outpatient departments and physicians participating in the test model and, instead of matching the average sale price of a specific drug, would pay a flat fee of $16.80 per drug per day. The flat fee would be updated at the beginning of each year based on the percentage increase in the consumer price index for medical care for the most recent 12-month period. Phase one would be rolled out no earlier than 60 days after the final rule is published, which would likely be some time in the fall of this year.

Phase two, currently scheduled to launch January 2017, would add a set of value-based purchasing tools to the test. These include:

• Discounting or eliminating patient cost-shares
• Setting benchmark standards for pricing of therapeutically similar drugs
• Risk-sharing agreements between CMS and drug manufacturers that link patient outcomes with price adjustments

A control group, selected based on geographic region, will continue to receive payment under the current model.

The test model is also an attempt to address the rising cost of prescription drugs. CMS estimates that Part B payments for separately paid drugs in 2015 were $22 billion, including cost-sharing, twice the amount paid in 2007 with an annual increase of roughly 8.6%. The rise in payments is mostly due to separately paid drugs in the hospital outpatient setting, according to CMS. In 2007, $3 billion in Part B payments were made for separately paid drugs in hospital outpatient settings, and in 2015 that amount more than doubled to $8 billion.

Public comments on the proposed rule will be accepted through May 9.