Congress will need to use a multipronged approach to bring down prescription drug costs in the Medicare Part B program, members of the Medicare Payment Advisory Commission (MedPAC) agreed at their March meeting on Thursday.
MedPAC members discussed three draft recommendations being considered for inclusion in the commission’s June report to Congress. The recommendations addressed rising drug costs in Medicare Part B, which covers, among other things, the cost of drugs administered in a physician’s office. The three proposed recommendations were:
- Give the HHS secretary the authority to cap the cost of Medicare Part B drugs that were approved under FDA’s accelerated approval program, provided the drugs meet certain criteria
- Give the HHS secretary the authority to establish a single average sales price (ASP)-based payment rate for drugs and biologics with similar health effects
- Direct the HHS secretary to reduce add-on payments for Part B drugs paid based on ASP to improve financial incentives, and to eliminate add-on payments for Part B drugs based on wholesale acquisition costs
Members were generally supportive of the first recommendation. “I love it; I’m fully supportive of it as is,” said Commissioner Stacie Dusetzina, PhD, of Vanderbilt University School of Medicine in Nashville. But some members raised concerns about the criteria that the accelerated approval drugs would have to meet to qualify for the price cap, including any one of the following:
- The drug’s sponsor didn’t complete the postmarketing confirmatory trials by the deadline established by the manufacturer and the FDA
- The drug offers a clinical benefit that is not confirmed in the postmarketing trials
- The drug is covered under a “coverage with evidence development” policy
- The drug has a price that is excessive relative to the upper bound estimates of value
“I’m very worried about [the fourth] bullet,” said Commissioner David Grabowski, PhD, of Harvard Medical School in Boston. “What is value? … I’m also worried beyond just the squishiness of the issue, about the potential drag on innovation.”
The commissioners also discussed ways to reduce the add-on payments under Part B; for most drugs, doctors are paid an additional fee of 6% of the ASP to cover their administrative costs. However, concerns have been expressed that this formula gives clinicians an incentive to prescribe a higher-priced drug. Commission staff proposed a three-part structure for dealing with this issue, in which clinicians would be paid, for example, an add-on fee of 6%, 3% + $24, or $220, whichever is less.
Commission Vice-Chair Amol Navathe, MD, PhD, of the Perelman School of Medicine at the University of Pennsylvania in Philadelphia, liked that idea. He added that while he is “very, very supportive” of the recommendation, “it is very broad in the sense that we’re saying, ‘Reduce the ASP add-on.’ And I wonder if that’s insufficient — that doesn’t quite get us there because reducing the ASP add-on could just mean moving from the ASP plus 6% to ASP plus 5% or 3%, or something else like that.”
Instead, “we’re perhaps less worried about whether it’s $220 or $50 or 3% or 4%,” Navathe said. “What we’re more interested in is mitigating this ASP-plus-6% way of pricing that is inducing this distortion. And I think that’s not currently captured in the language of the recommendation.”
Commission member Greg Poulsen, MBA, of Intermountain Healthcare in Salt Lake City, Utah, agreed. “I have experienced the perversion that [ASP + 6%] creates among clinicians, and I would love to get rid of it,” he said. Noting that more expensive drugs often have higher inventory and other costs associated with them than cheaper drugs, Poulsen said he’d prefer to offer only the percentage-plus-flat-fee alternative, but “if we decide not to go down that path, and stick with the language and the examples that we have, I would still say that’s a big step in the right direction.”
However, he added, “I don’t think that the recommendations here will materially change our United States position relative to other countries … It doesn’t fix the problem. I think that we’re going to have to pick up the very unpleasant and unpopular idea of looking to international comparisons at some point in the future, and there’s no reason we should be paying X dollars more for a new drug than is paid in Sweden, Switzerland, Great Britain, France, or Japan.”
Commissioner Lawrence Casalino, MD, PhD, of Weill Cornell Medical College in New York City, agreed. “I don’t believe that the U.S. needs to finance the cost of pharmaceutical innovation for the world. And to a considerable extent, that’s what we’re doing,” he said. “And I do think it’s true that if the pharmaceutical companies couldn’t make quite as much on the price side of it, they would be tougher in their negotiations with other countries, with some success.” He recommended including the “rest of the world” issue in the June report.
Commission member Marge Ginsburg, BSN, MPH, of Sacramento, California, said she was “troubled” by the second recommendation in support of reference pricing for drugs and biologics. “I really do think it’s a problem, because I think every drug manufacturer will find variations in the health effects of their drug that will make reference pricing almost impossible,” she said. “I love the concept of reference pricing and I’d love to see if there’s a way it can be applied here, but I have to admit I’m really cynical about whether that is going to work in this whole area of medical care.”
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