Doctors' Prescribing Behavior a Small Part of Drug Cost Mess

Marcia Frellick

June 07, 2016

A nationwide experiment to see whether incentives will change physicians' prescribing behavior and reduce drug spending needs more input on study design and possible unintended consequences, says the author of a perspective piece in the New England Journal of Medicine.

In the article, published online June 2, Deborah Schrag, MD, MPH, chief of the Division of Population Sciences in the Department of Medical Oncology with the Dana-Farber Cancer Institute in Boston, Massachusetts, outlines concerns regarding the Centers for Medicare & Medicaid Services (CMS) plan to change the way it reimburses physicians.

CMS is experimenting with a new formula because it suspects that the current model of reimbursing at average sales price (ASP) plus 6% motivates physicians to order higher-priced drugs when a less expensive one would be effective.

Part B drug spending has doubled from $9.4 billion in 2005 to $18.5 billion in 2014, Dr Schrag notes.

Experiment Starts This Fall

In first phase of the experiment, scheduled for this fall, CMS will reimburse about half of all physicians under the current formula (ASP plus 6%). Physicians in the intervention group will receive ASP plus 2.5%, along with $16.80 per drug per day, regardless of ASP.

In the second phase, in 2017, both groups will randomly get reimbursement with or without additional value-based payment incentives.

Dr Schrag notes that "physicians are certainly not immune to economic considerations" but points to a bigger problem.

"The CMS experiment targets the margin physicians are paid to manage drug inventory (a small percentage of a drug's sales price) and not the more fundamental cause of excessive part B spending growth — manufacturers' drug pricing," she writes.

Physicians are concerned they will be under water — laying out more money than they get in reimbursement, Dr Schrag said in an audio interview accompanying the article. Sometimes they have to pay more than the average price for drugs and sometimes they purchase drugs but have no customers, or the drugs expire.

The greatest effect will be on hematologists/oncologists, who make up about 23% of Part B spending. Just 20 drugs accounted for 57% of the 2014 total cost, and 11 of those were for cancer, according to Dr Schrag. A previous Medscape Medical News story outlines likely winners and losers under the formula.

The proposed alternative formula will increase reimbursement for drugs that cost less than $480 per dose and decrease it for those that cost more.

Success depends on how much pricing is motivated by profit and how easily a lower-cost drug can be substituted, Dr Schrag writes. That could be problematic in oncology, for instance, where guidelines indicate little room for substituting lower-cost alternatives.

"I believe it should evaluate more than just the Part B bottom line — including care quality, access, and effectiveness," she says.

"This experiment may palliate, but will not cure, sky-high drug prices," she concludes.

Hundreds of physician and patient groups and policymakers agree and have appealed to CMS to scrap the experiment.

Gerald F. Kominski, PhD, professor in the Department of Health Policy and Management at the University of California Los Angeles Fielding School of Public Health, told Medscape Medical News he agrees with Dr Schrag's conclusion that drug pricing is the bigger issue, and one Congress has been unwilling to take on.

He says giving higher payment for prescribing lower-priced drugs is well intentioned and one of the few routes available because Medicare can't negotiate drug prices.

"We've got to begin building in incentives for providers to select lower-cost alternatives where appropriate," he said. "But it is unlikely to have much of an effect on cost savings," he said.

He says it is also unlikely to have much of an effect on physicians' income. "They're not getting very much of their payment from Medicare for prescribing drugs," he said.

Dr Kominski said Dr Schrag makes a valid point in that the proposed change comes amid other regulatory changes, such as the CMS Innovation Oncology Care Model and the Medicare Access and CHIP Reauthorization Act and the effects of each will be difficult to disentangle.

"I think experimenting with value-based incentives is where we need to go with the Medicare program and with health insurance in the United States," he said. "Medicare for 30 years has demonstrated a willingness to try to innovate in the way it pays doctors and hospitals and other providers."

Disclosure forms provided by the author are available with the full text of this article at Dr Kominski has disclosed no relevant financial relationships.

N Engl J Med. Published online June 2, 2016. Full text

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