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New Payment Model Will Test High-Value Prescription Drug Use Under Part B

Surabhi Dangi-Garimella, PhD
CMS has announced its plans to evaluate a new value-based payment model for prescription drugs covered under the Part B program. This is yet another move by the federal body to ensure quality care for Medicare enrollees.
CMS has announced its plans to evaluate a new value-based payment model for prescription drugs covered under the Part B program. This is yet another move by the federal body to ensure quality care for Medicare enrollees.  

Medicare Part B covers prescription drugs that are administered in a physician’s office or hospital outpatient department, such as cancer medications, injectables like antibiotics, or eye care treatments. These drugs usually fall into 1 of 3 categories:
  • Drugs furnished incident to a physician’s service in the office or hospital outpatient settings
  • Drugs administered via a covered item of durable medical equipment
  • Other categories of drugs explicitly identified in the law
The new model being proposed will support clinical decisions as providers choose the drug that is right for their patients, the emphasis being on choosing the most effective or high-value drugs, and providing incentives/rewards for improved outcomes. Beginning late 2016, the proposed model will test whether changing the add-on payment to the average sales price from 6% to 2.5% plus a flat fee payment of $16.80 per drug per day changes prescribing incentives.

“First and foremost, our job is to get beneficiaries the medications they need. These proposals would allow us to test different ways to help Medicare beneficiaries get the right medications and right care while supporting physicians in the process,” said Andy Slavitt, acting administrator for CMS, in a statement. “This is consistent with our focus on testing value-based care models like we have been doing with physicians and hospitals in ACOs. Models like this one can help doctors and other clinicians do what they do best: choose the medicine and treatment that keeps their patients healthy.”   

CMS has proposed 6 alternative approaches on pricing strategies for Part B drugs that emphasize value-based purchasing. These include:

  • Providing incentives to choose high-value care. The proposed model would test whether changing the add-on payment to 2.5% plus a flat fee payment of $16.80 per drug per day changes prescribing incentives and leads to improved quality and value. The proposed change to the add-on payment is budget neutral.
  • Discounting or eliminating patient cost-sharing. This proposed test would decrease or eliminate patient cost-sharing to improve beneficiaries’ access and appropriate use of effective or high-value drugs.
  • Feedback on prescribing patterns and online decision-support tools. Creating evidence-based clinical decision support tools as a resource for providers and suppliers focused on safe and appropriate use for selected drugs and indications.
  • Indications-based pricing. Alter the payment for a drug based on its clinical effectiveness for different indications. For example, a medication might be used to treat one condition with high levels of success but an unrelated condition with less effectiveness, or for a longer duration of time. The goal is to pay for what works for patients.
  • Reference pricing. Benchmarking or setting a standard payment rate for a group of therapeutically similar drug products.
  • Risk-sharing agreements. This proposed test would allow CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments.
CMS plans to test the model for a period of 5 years, with the incentive and value-based purchasing tests fully operational during the last 3 years to monitor changes and gather enough evidence. Success of the model will be gauged based on net reductions in Medicare spending without compromising on coverage or benefits, while maintaining or improving patient care. CMS will launch a concurrent real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures.

 “These models would test how to improve Medicare beneficiaries’ care by aligning incentives to reward value and the most successful patient outcomes,” said Patrick Conway, MD, MSC, deputy administrator for Innovation and Quality and chief medical officer of CMS, in a statement. “The choice of medications for beneficiaries should be driven by the best available evidence, the unique needs of the patient, and what best promotes high quality care.”

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