After years of resistance, CMS is working on a plan to negotiate Part B drug prices, predicting large savings for its programs and patients as a result. The plan would also increase provider reimbursement on those drugs to make up for sequestration cuts.
In an pre-publication release of an Advance Notice of Proposed Rulemaking (ANPRM), CMS says it "intends to test whether phasing down the Medicare payment amount for selected Part B drugs to more closely align with international prices; allowing private-sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business; and changing the 4.3 percent (post-sequester) drug add-on payment in the model to reflect 6 percent of historical drug costs translated into a set payment amount, would lead to higher quality of care for beneficiaries and reduced expenditures to the Medicare program."
"Overall savings for American taxpayers and patients are projected to total $17.2 billion over five years," CMS said in a press release.
Traditionally CMS has refused to negotiate its drug prices. But when grilled on the subject during his confirmation hearings in January of this year, then-HHS Secretary designate Alex Azar said he favored negotiation “where we can do so [in a way that] preserves innovation, access to patients. I want to look at anything that’s going to help us with drug pricing.” Azar was confirmed on Jan. 24.
In August, CMS began allowing Medicare Advantage plans to choose drug prices between Part B and Part D plans. Azar announced then that CMS was "unleashing our Medicare Advantage plans to negotiate discounting on $12 billion of drugs."
The ANPRM proposes to test an International Pricing Index (IPI) model with the mission of "aligning Medicare payments for drugs with prices that are paid in foreign countries." A CMS study released concurrently with the ANPRM finds that "prices and reimbursement rates for Part B drugs are significantly higher for U.S. providers than purchasers outside the U.S."
The terms of the IPI model would be spelled out in a proposed rule expected in the spring of 2019, the ANPRM says and the model is expected to roll out the following year. But the ANPRM does reveal CMS expects the IPI to "set the Medicare payment amount for selected Part B drugs to be phased down to more closely align with international prices" and "allow private-sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business."
CMS is also considering making up for the difference between the 6% ASP (average sale price) payment on the books for Part B drugs and the 4.3% providers actually get due to sequestration cuts,in effect since 2013, on the theory that if providers were thus compensated "there would not be an incentive for use of higher cost drugs when an alternative is available."
In remarks tangentially related to the announcement, President Trump characterized the status quo as a conspiracy by foreigners to cheat American citizens ("For decades, other countries have rigged the system so that American patients are charged much more, and in some cases much, much more, for the exact same drug... It’s wrong, it’s unfair").
Formal publication of the ANPRM is expected imminently; after which comments would be due in 60 days.