Life Science Compliance Update

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March 15, 2017

MedPAC Considers Revised Approaches to Part B Drug Payment

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In mid-January, the Medicare Payment Advisory Commission (MedPAC) met and discussed a revised approach to clinician payment for Medicare Part B drugs. Under the new approach, the average sale price plus 6 percent (ASP + 6) payment methodology would be changed to include a variety of reforms including consolidated billing codes, an inflation limit for price increases and additional manufacturing reporting of ASP. The Commission also discussed a parallel policy which contemplates the start of a bidding program for Medicare Part B drugs.

Staff Presentation

MedPAC’s staff presented a policy approach to Part B drug reform that mirrors the approach to Part B physician payment reform under MACRA. There would be two tracks for Part B drug reimbursements: (1) an updated version of the current ASP +6 payment methodology or (2) and updated version of the Medicare’s competitive acquisition program (CAP) that MedPAC staff refers to as the Drug Value Program (DVP).

ASP + 6 Redesign

The improved ASP system would: feature new requirements for manufacturer reporting of ASP data; modify the add-on payment for drugs during the period prior to ASP data becoming available; implement an inflation cap on drug price increases similar to the Medicaid program; and utilize consolidated billings codes. Further, the current ASP + 6 add-on payment would be phased down over time to encourage DVP enrollment.

DVP Program

The DVP program would be created from lessons learned from the CAP program and would give the Secretary authority to use private vendors to negotiate prices and offer providers shared savings opportunities. The DVP would: be voluntary; include multiple vendors; and allow providers to share in savings that Medicare received on the drug’s purchase price. The DVP will be different from the CAP because vendors would be able to utilize a formulary with an exceptions and appeals process. Further, drug prices would not be able to exceed ASP.

Commissioner Discussion

ASP Redesign

Commissioners were largely supportive of the ASP redesign, though several expressed reservations about specific components of the proposals. Commissioner Amy Bricker (Express Scripts) noted that manufacturers should not be offered Part B reimbursement if they did not report ASP prices. Commissioner Paul Ginsburg (The Brookings Institution) noted that the Commission needed to consider the effects of the sequester, while Commissioner Kathy Buto pointed to possible complications with respect to the inflation limit surrounding beneficiary cost sharing implications.

Some Commissioners expressed “severe reservation” about grouping drugs together under a billing code due to concerns over “practical challenges” for how the drugs would be classified and intense stakeholder pushback. Commissioner Bricker, however, felt that there should be no exceptions for the consolidated billing as there will always be winners and losers in any market. Most, if not all, of the commissioners seemed to agree that biosimilars could be grouped with their reference because the FDA decided that the drugs were not meaningfully different.

DVP Program

With respect to the DVP, Commissioner Jack Hoadley stated it would make sense to have only a few vendors so that they would be able to consolidate buying power and negotiate good prices. Commissioner Brian DeBusk, on the other hand, commended staff for leaving flexibility in the DVP program design to encourage a variety of entities to bid on being a vendor. Overall, the Commissioners were largely supportive of the DVP. They agreed that it essentially amounted to an early form of government negotiation for prescription drugs. Commissioner Pat Wang believes that the DVP is “very much worth trying to detail out.”

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