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International drug pricing model concerns oncologists, others who work with Medicare consumers

Physicians are not incentivized to prescribe more expensive prescriptions, Community Oncology Alliance says.

Susan Morse, Managing Editor

Healthcare organizations that represent patients who rely on Medicare Part B drugs have told the Centers for Medicare and Medicaid Services they are concerned over its proposal to save money on drug costs through an international pricing index model.

CMS is considering issuing a proposed rule this spring on the IPI model for prescription drugs covered under Medicare Part B. The model would start in the spring of 2020 and operate for five years, until 2025.

CMS intends to test whether phasing down the Medicare payment amount for selected Part B drugs would more closely align international prices.

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International pricing comparisons show that Medicare, as well as American consumers, pay the highest brand name drug prices in the world.
CMS's proposal would allow private-sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business. And CMS is proposing changing the  statutorily mandated add-on payment to the average sale price of drugs from the 4.3 percent done under sequestration to 6 percent.

The Community Oncology Alliance strongly urged CMS Administrator Seema Verma not to move forward with what it called a mandatory, national experiment on patient care.

The COA said it has serious concerns about the impact of the IPI model on the care received by patients with cancer, the impracticality of its design and its legality.

AARP told Verma it is concerned by the lack of detailed beneficiary protections in the model.

While more study is needed, AARP said it believes the current methodology would influence providers to use more expensive drugs over less expensive alternatives. This is because an add-on payment of 6 percent for a more expensive drug generates more revenue than 6 percent of a lower priced drug, AARP said.

The largest factor contributing to the growth in Medicare Part B drug spending is the increase in the price Medicare paid for drugs, AARP said.

COA said it is false that oncologists' decision-making is driven by financial incentives.

CMS said over the course of the model it would monitor and evaluate the impact on beneficiary access to drugs, program costs and the quality of care for beneficiaries.


In 2016, Medicare Part B and its beneficiaries spent over $29 billion on prescription drugs, and Medicare Part B drug spending has increased by an average of 9.5 percent every year since 2009, according to AARP figures.

Beneficiary cost-sharing under Part B is 20 percent with no out-of-pocket limit, leaving some older adults and people with disabilities with out-of-pocket costs that can reach $100,000 per year or more, AARP said. Meanwhile, the median annual income for Medicare beneficiaries is approximately $26,000 and one in four have less than $15,000 in savings.

A substantial portion of anticipated drug price increases are attributed to higher-priced, newer therapies, according to 40 percent of 27 HMOs, PBMs and hospitals surveyed by investment management firm Cowen.

Those surveyed believe brand drug acquisition costs per unit will increase by 3-4 percent annually over the next three years, compared to 3-6 percent forecasted last year. Generic drug acquisition costs per unit are expected to increase 1 percent or less annually over the next three years, versus last year's 2 percent forecast.


COA said it is developing alternatives to the model. There's an oncology care model and OCM 2.0, a next-generation, more universal oncology payment model, it said.

AARP recommends that CMS establish a transparent, comprehensive, and publicly available monitoring process for the duration of the IPI.


"The IPI Model as proposed is an experiment on cancer patients in the context of a mandatory, national model that COA is against for a host of reasons elaborated on in our comment letter to CMS," said Ted Okon, executive director of COA.

"While we anticipate the proposed model will help reduce prescription drug prices and costs and encourage prescribing that ultimately benefit Medicare beneficiaries, we encourage the agency to carefully monitor for unintended consequences that may increase costs or create access barriers," said David Certner, legislative counsel and legislative policy director for Government Affairs, AARP.

Twitter: @SusanJMorse
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