Senators oppose Part B Drug Payment Model with a letter

CMS should immediately withdraw its Part B Drug Payment Model, according to a letter fourteen Senate Republicans sent to the agency on April 28, 2016. The letter warns CMS that its demonstration—which is designed to test alternative payment models for drugs furnished under Part B—would “severely disrupt care for vulnerable beneficiaries.” The opposing senators’ letter expresses concern that the payment model’s reduction in drug payments could reduce beneficiary access to drugs and decrease the quality of care.

Part B drugs

CMS announced the Part B Drug Payment Model in a March 11, 2016 Proposed rule (81 FR 13230). The demonstration is authorized by the Center for Medicare and Medicaid Innovation (CMMI), created by Section 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Traditionally, Part B pays physicians and hospital outpatient departments the average sales price (ASP) of a drug, plus a 6 percent add-on (ASP+6). Based upon concerns that the ASP+6 model does not adequately incentivize physicians to choose the lowest cost therapy to effectively treat a patient, the Part B Drug Payment Model seeks to test a new model through a two phase demonstration (see Will alternative drug payment models reduce Part B expenditures?, Health Law Daily, March 9, 2016).


The first phase, scheduled to begin within 60 days of the rule’s finalization, would replace the ASP+6 payment with a drug payment of ASP+2.5 percent, plus a flat fee of $16.80. CMS hopes that by reducing the add-on payment, providers will be incentivized to provide less expensive drugs. In the second phase—starting January 1, 2017, at the earliest—CMS would use value-based purchasing (VBP) tools to pay for certain Part B drugs.


The senators’ letter cautions that the ASP payment reduction could harm beneficiaries by creating a reimbursement environment where some providers’ drug acquisition costs exceed the Medicare payment amount. The letter suggests that such burdens would be most significantly experienced by small and rural providers. The senators expressed greater concern over the VBP phase of the demonstration, asserting that the ideas “are numerous, complex, and not sufficiently vetted.” In addition to the senators’ opposition, over 300 physician-, pharmaceutical-, and patient-centered groups sent a letter to Congress asking lawmakers to ask CMS to withdraw the rule. The groups’ letter echoes many of the worries set out by the Republican senators. Calling the initiative “misguided and ill-considered,” the groups warned that the CMS plan could force beneficiaries to switch away from appropriate treatments.