CMS proposes testing new payment model for Part B drugs

CMS proposed a test this week for a new Medicare Part B prescription drug plan that would replace its previous policy of paying physicians and outpatient hospital departments the average sales price (ASP) plus 6%.

The proposed model would pay providers the ASP plus 2.5%, along with a flat fee of $16.80 per drug per day. CMS intends to test whether this new model increases value to the program without sacrificing quality. The proposal is similar to recommendations the Medicare Payment Advisory Commission made to Congress last June.

For example, a drug that has an ASP of $10 would today result in an add-on payment of 60 cents. Under the proposed model, the combination of add-ons from the flat fee and ASP plus 2.5% would result in an add-on payment of $17.05.

Higher-priced drugs would instead see a lower payment under the proposed model. A drug with an ASP of $1,000 would currently result in an add-on payment of $60. With the proposed model, the total add-on payment would be $41.80.

CMS plans to update the flat fee each year by the percentage increase in the consumer price index for medical care over the previous 12-month period.

In addition to overhauling the payment model, CMS is proposing other changes to its Part B prescription drug model. These include:

• Allowing CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments
• Creating an online, evidence-based clinical decision support tool for providers and suppliers
• Discounting or eliminating patient cost-sharing
• Introducing indications-based pricing to vary drug payments based on clinical effectiveness
• Setting reference pricing to have a standard payment rate for a group of therapeutically similar drugs

CMS intends to test this model for providers in an as-yet-undetermined geographic area over a five-year period beginning in fall 2016.

The agency is accepting comments on the proposal through May 9. For more information, see the proposed rule, a related fact sheet, and CMS’ press release.