Medicare Proposes Mandatory Part B Drug Payment Demonstration

On March 8, the Centers for Medicare & Medicaid Services (CMS) announced a proposed Part B drug payment model designed to test whether alternative drug payment designs will lead to a reduction in Medicare expenditures. The Part B drug payment model would include all Part B drugs and, like the recently launched Medicare hip and knee bundled payment model, would be mandatory. 
CMS proposes to launch the Part B drug payment model in two phases: 
  • Phase I would reduce the add-on percentage to the average sales price (ASP) for Part B drugs. Current payment is ASP plus 6 percent. Under the model, the add-on would be reduced to 2.5 percent plus a flat fee of $16.80 per drug per day administered. This proposal does not incorporate the current congressionally mandated 2 percent Medicare sequestration, which would further reduce the new proposed add-on to 0.86 percent plus the flat fee. Phase I would be implemented in the fall of 2016. 
  • Phase II would incorporate a value-based purchasing (VBP) component to the model that is not well-articulated in the proposed rule. 

An initial analysis found that Phase I would result in a redistribution of Medicare dollars with physicians who prescribe drugs with an ASP of lower than $480 experiencing the greatest benefit and physicians who prescribe drugs with an ASP of greater than $480 experiencing overall reductions. For Medicare beneficiaries, the proposed changes would result in increased cost-sharing for lower priced drugs and decreased cost-sharing for higher priced drugs. 

Under the proposed model, providers and suppliers of Part B drugs would be randomly assigned based on geographic area to one of three test arms or a control group. The test arms would be (1) a modified ASP payment amount, (2) use of value-based tools or (3) both a modified ASP and value-based tools. 

CMS's proposal has resulted in an outpouring of opposition from the physician community, as well as from Republican congressional leaders, who have criticized the lack of transparency and stakeholder involvement in the development of the proposed payment model. 

ASNC is reviewing the proposed rule and will submit comments by the May 9 deadline. Watch for updates in Imaging Insights and on  

The following other components of the program pertain to nuclear imaging. 

Contractor-priced drugs, including those that do not appear on the quarterly national ASP price file, would be excluded from the model. Certain radiopharmaceuticals furnished in physicians' offices are contractor priced; however, CMS proposes to give contractors the authority to use the modified add-on percentage for contractor-based claims. For example, if a contractor currently pays the wholesale acquisition cost (WAC) with a 6 percent add-on under current authority, then the add-on could be decreased to correspond to the payment model.  

Stress Agents
Included in the payment model would be all nationally priced drugs with ASP, WAC and average manufacturer price (AMP) payment amounts that are on the quarterly price file. This means that stress agents would be implicated in the model. 

Summary of the Proposed Model 

Phase 1: ASP + X 
(no earlier than 60 days after display of final rule, Fall 2016)
Phase 2: VBP 
(no earlier than January 2017) 
ASP + 6% (control)…. ASP + 6% (control)
ASP + 2.5% and Flat Fee Drug Payment ASP + 6% with VBP tools 
  ASP + 2.5% and Flat Fee Drug Payment
  ASP + 2.5% and Flat Fee Drug Payment with VBP tools