Witnesses before committee largely opposed to Part B drug model

The Medicare Part B drug pricing demonstration continues to prompt a variety of strong opinions. At the House’s Energy and Commerce Committee hearing regarding legislation that would prohibit further testing of the new prescription drug reimbursement model, H.R.5122, witnesses who expressed support for the pricing changes voiced their confidence in CMS and HHS but were met by those who vehemently opposed the matter. Some raised concerns that the pricing structure may limit the availability of drugs, while others noted that addressing the add-on price and the value based payments does not get to the root of the problem of rising drug costs: the manufacturer’s average sales price (ASP).


CMS created the Part B Drug Payment Model though a Proposed rule in order to address rising drug costs (see Will alternative drug payment models reduce Part B expenditures?, Health Law Daily, March 9, 2016). Currently, providers are reimbursed the ASP with a 6 percent add-on (ASP+6). HHS believes that there is little incentive under this reimbursement structure for providers to make cost-effective treatment decisions. The demonstration will proceed in two phases, beginning with switching some providers to ASP+2.5 percent, plus a flat fee. This would result in a smaller difference in the add-on payment. The second phase would result in value based purchasing (VBP) strategies, such as discounting patient cost sharing, indications-based pricing, and outcome-based risk-sharing agreements. Providers will be split into different groups based on geographic areas for the phases.

Witness testimony

At the hearing, Joe Baker, the President of the Medicare Rights Center, expressed support for the change. He noted that many of the beneficiaries his organization helps are concerned about affording their care. Rising costs have affected both beneficiaries and Part B itself. Medicare Rights particularly supports lowering or eliminating cost sharing for high-value medications in Phase II of the demonstration but gave some recommendations for particular actions it believes CMS should take, such as incorporating program evaluation surveys and working with interested groups when designing model communications.

Marcia Boyle, President of the Immune Deficiency Foundation, expressed extreme concerns about the demonstration’s impact on the availability of drugs for patients with primary immunodeficiency (PI). She noted that reimbursement for PI medications was significantly reduced by past legislation, which caused patients and pharmacies to experience extreme difficulties obtaining immunoglobulin (Ig). Patients lost access to Ig both in office and at home, resulting in hospital stays. In addition, specialty pharmacies already state that they are nearly underwater with the ASP+6 payment model. The foundation worries that the new payment structure will force stabilized patients to switch to a different product, negatively impacting their health, and will worsen the supply problem.

Similarly, the Dr. Debra Pratt, an oncologist representing a number of professional organizations, believed that the demonstration “will be devastating to the advancements made in our continued fight against cancer.” While there are many concerns among oncologists regarding the rising costs of care, Pratt believed that the demonstration lacked a patient-centered focus. She expressed disappointment in the agency’s suggestion that physicians are prescribing more expensive drugs for profit, and stated that the agency was incorrect in assuming that reducing Part B drug reimbursements would lower costs. Dr. Michael Schweitz, representing the Coalition of State Rheumatology Organizations, found the demonstration “misguided” and noted that the proposal does not impact the real problem: manufacturer ASPs. He emphasized that physicians do not make clinical decisions according to the add-on percentage, but noted that rheumatology practices will be hard pressed to absorb the cost reduction. He noted that patients will lose access to in-office infusion services that are vital to their care, and request that CMS withdraw the model.

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.