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From Health Law Daily, December 16, 2016

CMS withdraws controversial proposed Part B drug price reduction demonstration

By Kayla R. Bryant, J.D.

The Medicare Part B demonstration project, intended to reduce drug expenses, has been withdrawn due to significant criticism from all sides. The project stemmed from concerns that doctors were rewarded for prescribing more expensive drugs, contributing to the phenomenon of rising drug prices. The negative response from physicians, pharmaceutical companies, members of Congress, and industry stakeholders to the Proposed rule (81 FR 12230) was swift.

Proposal. Under the project, CMS would have implemented a new model that would have provided a flat fee plus a 2.5 percent add-on for drugs, as opposed to the current 6 percent add-on to the Average Sales Price (ASP) (see Will alternative drug payment models reduce Part B expenditures?, March 9, 2016). The second phase of the demonstration would have implemented a value-based purchasing (VBP) tool. The proposal stemmed from concern about the significant increase in add-on payments when providers prescribed brand name drugs versus generic drugs.

Criticisms. The backlash following the proposal contained several different criticisms. Congress believed that the demonstration was an overreach of agency authority. Cancer providers were worried about the sizable decrease in Part B payments, which help doctors cover the costs of essential services that are either not covered or inadequately reimbursed. Some believed that patients would be directed to higher-cost treatment facilities that would actually increase Medicare costs. Many patient advocates cited safety concerns, believing that quality and availability of care would suffer under the program.

Withdrawal. HHS cited the complex issues and limited amount of time to implement the program as the reason for the withdrawal. Representative Nancy Pelosi (D-Calif) found the project’s goals "admirable," but was pleased with the decision to halt the program and hopes that bipartisan congressional efforts will address increased drug costs. Representative Fred Upton (R-Mich) also found the withdrawal to be good news, calling the program a "harmful Medicare experiment."

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