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Second Opinion

Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

MedPAC Passes Medicare Part B Drug Pricing Recommendations

April 7, 2017—The Medicare Payment Advisory Commission (MedPAC) April 6 passed several recommendations to change Medicare Part B drug payment policy. The commission also discussed a variety of other Medicare payment issues, including converting Medicare fee-for-service (FFS) to a premium support program.   

The commissioners voted unanimously for the Medicare Part B drug pricing recommendations. This concluded MedPAC’s ongoing discussion on the topic from previous meetings [see Washington Highlights, October 7, 2016, November 4, 2016January 19, and March 3].

The recommendations center on improvements to the current Average Sales Price (ASP) system, implementation of a Drug Value Program (DVP), and a reduction to ASP add-on payments to further encourage DVP enrollment. The specific recommendations are as follows:

  • Require manufacturers to report ASP data for all Part B drugs and increase penalties for not reporting;
  • Reduce the payment rate for wholesale acquisition cost (WAC) priced drugs to WAC + three percent. Further reduce WAC add-on if ASP add-on is reduced to maintain parity between WAC-price and ASP-priced drug;
  • Require manufacturers to pay Medicare a rebate when their product’s ASP exceeds an inflation benchmark (e.g., Consumer Price Index for All Urban Consumer [CPI-U] or alternative). Exempt low and high-cost drugs under shortage (on a case-by-case basis);
  • Use a common billing code to pay for a reference biologic and its biosimilars to maximize price competition; and
  • Create and phase-in, no later than 2022, a voluntary DVP as an alternative to the ASP system that would allow vendors that contract with Medicare to negotiate drug prices. Reduce ASP add-on to encourage DVP enrollment.

 MedPAC staff also discussed the upcoming chapter on premium support in Medicare FFS, which is scheduled to appear in the June 2017 Report to Congress. MedPAC staff views this chapter as a resource for policymakers considering changes to Medicare’s current benefit structure. Commissioners engaged in a policy discussion on the impact of using premium support in Medicare and the potential financial impact on Medicare beneficiaries, particularly low-income beneficiaries.  

This summer, MedPAC will release a standalone report on regional variation in Medicare Part A, Part B, and Part D spending and service use that follows-up on a 2011 report. According to MedPAC staff, many of the findings are similar to the previous study’s recommendations, but there are some differences, including variation in medical service use has declined slightly, variation in the use of post-acute care services is lower, and high service use areas that had the highest medical service use declined (though still higher than the national average).

Contact:

Mary Mullaney
Director, Hospital Payment Policies
Telephone: 202-909-2084
Email: mmullaney@aamc.org

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.


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For More Information

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org