Medicare advisers eye binding arbitration to control drug prices

ROBERT KING  March 07, 2019 04:16 PM 

A key panel of advisers is considering recommending that Congress adopt binding arbitration for Medicare Part B drugs that have extremely high launch prices.

Several members of the Medicare Payment Advisory Commission (MedPAC) on Thursday favored suggesting a system where a neutral agent would decide on a price for drugs purchased under Medicare Part B if they meet certain criteria.

"We have to do something to slow these launch prices, so I think binding arbitration is a way to get that done so I want to push forward," said Warner Thomas, president and CEO of Ochsner Health System, a not-for-profit academic healthcare system in Louisiana.

Commission member Paul Ginsburg, director of the Center for Health Policy at Brookings Institution, also endorsed the practice but said it was also "potentially useful" for Parts D and A in Medicare.

He said that states have already pursued arbitration to combat surprise billing.

While MedPAC didn't adopt a specific recommendation for Congress on drug pricing, the panel's staff said the process could be similar to baseball's approach, where teams and players have a neutral arbitrator decide a salary dispute.

The neutral arbitrator or arbitration panel for Medicare would be selected by a nonpartisan agency. If a drug has limited competition or an exorbitant launch price, HHS would start the arbitration process, staff suggested.

The drugmaker would need to abide by the arbitrator's price decision for Medicare Part B providers and patients.

MedPAC only explored adopting binding arbitration for Part B, which covers physician-administered drugs, and not Part D.

The commission staff said drugmakers would participate in arbitration because theydo not want to lose out on Medicare's market size.

But some MedPAC members weren't ready to support the process and requested additional information.

Commission member David Grabowski, a professor of healthcare policy at Harvard Medical School, asked if the recommendation could include pre-negotiations between HHS and the manufacturer, a tactic that baseball teams and players use all the time.

The panel also discussed reference pricing, where a payer sets a maximum payment rate for a group of drugs with a similar health effect. The goal is to provide an incentive for a lower-cost alternative.

The Trump administration proposed an international pricing index model demonstration in October to set the price of Part B drugs to the price paid by countries overseas such as Germany or Japan.

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