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HHS Reveals Drug Pricing Proposal

October 26, 2018—President Trump and Health and Human Services Secretary Alex Azar Oct. 25 announced an advanced notice of proposed rulemaking (ANPRM) to solicit comments on proposals to change how Medicare pays for some Medicare Part B drugs and biologics. 

The proposal would create an International Pricing Index (IPI) Model with the goal of more closely aligning U.S. drug prices with drug prices in other countries. Under the IPI model, prices for certain Medicare Part B drugs would be reduced based on a composite of international prices.  This reduction would be phased-in over five years. 

Additionally, Medicare would pay an alternative add-on payment for drugs based on a set payment amount and remove the current percentage-based drug add-on payments, which the agency believes incentivizes the use of higher-cost drugs. Hospitals and physicians would continue to receive payment for drug administration plus a new "drug add-on" payment. 

The IPI also would allow private-sector vendors to negotiate prices for drugs, take title of drugs, bill Medicare, and compete for physician and hospital business. The model under consideration would include physicians, hospitals, and potentially other providers and suppliers in selected geographic areas.

Based on comments received, a proposed rule may be issued in the Spring 2019 with the potential model to start in Spring 2020. The potential model would operate for five years, from Spring 2020 to Spring 2025.

HHS released a policy brief and fact sheet on the ANPRM.

Comments on the ANPRM are due Dec. 24.


Mary Mullaney
Director, Hospital Payment Policies
Telephone: 202-909-2084


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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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Jason Kleinman
Senior Legislative Analyst, Govt. Relations
Telephone: 202-903-0806