by Robert King | Aug 20, 2019 10:55am
Medicare
could have saved its beneficiaries nearly $3 million a year if it adopted a
stricter policy for lower prices for Part B drugs, a Department of Health and
Human Services (HHS) watchdog found.
A
recent report from HHS’ Office of Inspector
General (OIG) that found the Centers for Medicare & Medicaid Services (CMS)
could lower reimbursements for physician-administered drugs in Medicare Part B
by changing the basis for price substitution. The report comes as CMS and HHS
are exploring several ways to lower Part B prices, including implementing prior
authorization and tying prices to those paid overseas.
CMS
reimburses a doctor or hospital for the average sales price (ASP) of a Part B
drug, plus an additional 6% of that price to the provider for storage and
handling. OIG is required to compare the ASP with the average manufacturer
price.
If the
watchdog finds that the ASP for a drug exceeds the average manufacturer price
by 5%, then HHS must substitute the ASP with a lower rate.
“Through
regulation, CMS outlined it would make this substitution only if the ASP for a
drug exceeds the [average manufacturer price] by 5% in the two previous
quarters or three of the previous four quarters,” the report said.
OIG
looked at drug utilization data for the fourth quarter of 2017 through the
third quarter of 2018 to account for the three-quarter lag between reporting of
pricing data and the application of price substation, the report said.
CMS
lowered the Part B reimbursement for 14 drugs after OIG’s analysis of 2017
data, saving Medicare $7 million over a year. But OIG said that Medicare could
have saved an additional $2.9 million a year if it changed the substitution
policy.
The
watchdog said price substitution policy should trigger if the ASP exceeds
the manufacturer price for a single quarter.
The
report’s recommendation comes as HHS has tried to find ways to lower prices on
Medicare Part B. Unlike Part D, there are no private plan negotiations to lower
prices. Medicare spent nearly $30 billion on Part B drugs in 2016, an increase
of nearly 13% from 2015, according to data from the Medicare Payment Advisory
Commission.
In
August 2018, CMS allowed Medicare Advantage plans to implement formulary
management tools, step therapy and prior authorization for Part B drugs. The new
change went into effect this year.
HHS and
CMS are also exploring a demonstration model that would tie prices paid for
certain Part B drugs to cheaper prices paid overseas. The International Pricing
Index project was announced last year but has yet to be officially proposed.
CMS
Administrator Seema Verma recently told reporters that the
demonstration was still a “top priority” for her agency but did not give a
timetable for its proposed rule.
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