Health Law Daily International pricing model would reduce federal, beneficiary drug spending
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Friday, October 26, 2018

International pricing model would reduce federal, beneficiary drug spending

By Patricia K. Ruiz, J.D.

CMS issued an advance release of notice of proposed rulemaking seeking public comment on options for testing changes to payments for separately payable Part B drugs and biologicals (drugs) under the International Pricing Index (IPI) model, which will explore ways to ensure that the Medicare program pays comparable prices relative to other economically similar countries. CMS will test whether certain changes would lead to higher quality of care for beneficiaries and reduced expenditures to the Medicare program.

Goals of IPI model. The Medicare program and its beneficiaries pay more for many high-cost drugs than other countries. The goal of the IPI model is to reduce Medicare program selected expenditures and beneficiary cost-sharing for separately payable Part B drugs, preserving or enhancing the quality of care for beneficiaries, and offering comparable pricing relative to international markets. It would also remove providers’ financial incentives to prescribe higher-cost drugs, minimize disruption to the current supply chain, and increase Medicare efficiency and value to reduce federal and taxpayer spending.

Comment sought on changes. Under the IPI model, physicians and hospitals in certain geographic areas will receive certain drugs from private-sector vendors. In addition to continuing to pay the Medicare drug administration payment, the model would pay physicians and hospitals a drug add-on amount to remove incentives to prescribe higher-cost drugs and create incentives to prescribe lower-cost drugs and reduce beneficiary cost sharing. Providers in non-model areas would continue to use the current buy and bill system to provide Part B drugs to patients and would be paid under current Medicare payment policy.

Among the changes for which CMS seeks comment are:

  • phasing down the Medicare payment amount for selected Part B drugs to more closely align with international prices;
  • allowing private-sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business; and
  • changing the 4.3 percent (post-sequester) drug add-on payment in the model to reflect 6 percent of historical drug costs translated into a set payment amount.

CMS also seeks comment on ways to assess the quality of care for the purposes of real-time monitoring of utilization, hospitalization, mortality, shifts in site-of-service and other indicators of patient access and outcomes. The IPI model would start in spring 2020 and operate for five years, until spring 2025.

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