Prospects Dim for Medicare Drug Reimbursement Cuts

M. Alexander Otto, PA, MMS

December 16, 2020

A proposal to lower Medicare Part B reimbursements for 50 physician-administered drugs and biologics to what drug manufacturers receive for them in other wealthy nations seems unlikely to take effect as planned on January 1, 2021. The proposal has been strongly opposed by the pharmaceutical industry as well as oncologists and other physicians who use the products most often.

At least four lawsuits have been filed in US district courts to block the move, including from Regeneron, manufacturer of the ophthalmic biologic aflibercept, the first agent on the list; the Community Oncology Alliance; the Biotechnology Innovation Organization, California Life Sciences Association, and Biocom; and Pharmaceutical Research and Manufacturers of America, the Association of Community Cancer Centers, the Global Colon Cancer Association, and National Infusion Center Association.

The proposal could hit oncologists/hematologists particularly hard because they are the primary prescribers of about 30 of the 50 agents on the list, including mainstay breast, lung, and prostate cancer treatments and newer immunotherapies. In its filing for injunctive relieve, the Community Oncology Alliance, a trade group for community oncologists, said the proposal exposes "the health and safety of cancer patients and other patients with potentially life-threatening diseases to real danger."

Hearings Are Imminent

Hearings on the proposal, which was published by the Centers for Medicare & Medicaid Services (CMS) on November 27 following an executive order September 13, are scheduled for coming days. The first hearing is scheduled for December 18.

Given the looming implementation date, judges are likely to rule quickly on the motions for injunctive relief, said attorney Rachel Sachs, a health law expert and associate professor at the Washington University School of Law, St. Louis, Missouri. The odds are in plaintiffs' favor based on procedural and Constitutional grounds. "It's extremely unlikely to survive" the legal onslaught, she told Medscape Medical News.

Among the many issues raised in court filings, the proposal was released as an interim final rule (IFR), meaning it would take effect outside of the usual process of proposed rule, comment period, revision, then implementation. The law allows for bypassing normal rule-making requirements with an IFR, but they are meant for emergency situations — several have been issued in response to the COVID-19 pandemic — and the government must be able to show that delay would be "impracticable, unnecessary, or contrary to the public interest," Sachs explained.

In contrast, some form of CMS's new proposal, dubbed the "Most Favored Nation" (MFN) model for drug reimbursements, has been under consideration by the Trump administration since 2018.

"The way the [Trump] administration rolled this rule out at pretty much the last minute opens them up to greater legal challenges than if they pursued more normal regulatory pathways, which they had the opportunity to do. They are attempting to implement this on a time frame that is unprecedented for as large a change as this is," said Juliette Cubanski, PhD, deputy director of Medicare policy at the Kaiser Family Foundation, San Francisco, California.

Reimbursement Less Than Acquisition Costs

In the proposal, CMS sought to offset the higher prices that pharmaceutical companies charge in the United States when compared with other developed nations — the prices are about double on average.

"One of the largest drivers of increasing Medicare spending is the growing prices for physician-administered separately payable Medicare Part B drugs, which have risen an average of 11.5% annually since 2015, with total spending of approximately $30 billion in 2019," the agency said in a fact sheet. This is due in large part to "lack of competitive market forces on Medicare Part B drug costs," it added.

The 50 agents covered by the new proposal are the ones Part B spends the most on, almost $3 billion in 2019 for aflibercept alone, followed closely by pembrolizumab, an immunotherapy used in many different cancer types.

A full list of the drugs and biologicals included in the proposal is on page 50 of the IFR.

CMS estimated that its move would cut reimbursements by approximately 65% once fully implemented in 4 years and save $87.8 billion over the 7 years of the proposed model, as well as reduce cost sharing for beneficiaries.

This model puts the onus on providers to negotiate down drug prices with companies to meet proposed reimbursement limits. However, if companies do not lower their prices, acquisition costs could be substantially lower than reimbursements.

Prescribers and their practices would either have to take the financial hit or stop offering the pharmaceuticals, in which case patients would have to do without, try a different option, or seek care elsewhere, including facilities excluded from the proposal: children's hospitals, critical access hospitals, cancer hospitals, federally qualified health centers, rural health clinics, and extended neoplastic disease care hospitals.

CMS estimates that in the first year of MFN reimbursements, 9% of beneficiaries would forgo MFN therapies, growing to 19% by year 3, figures that were included in cost savings estimates.

The reimbursement cuts are meant to motivate manufactures to lower prices, but "we have not seen this occur with similar efforts in the past, and drug prices have continued to rise," said American College of Rheumatology President David Karp, MD, PhD, in a press release. Many of the agents on the list are used by rheumatologists.

Under current policy, Medicare Part B prescribers are reimbursed manufactures' average sales price plus a 6% add-on. Under the new proposal, reimbursements would be pegged to the lowest price charged among nations of the Organization for Economic Co-operation and Development with a gross domestic product per capita of at least 60% of the US price. In addition to the United States, there are 36 other member countries, including Canada, the United Kingdom, Japan, and Germany.

To remove incentives to prescribe more expensive drugs, the 6% add-on would be replaced with a flat add-on payment per dose, pegged at $148.73 for the first quarter of 2021. There is a hardship exemption for providers if the reimbursement cuts are too drastic, but that involves a lot of paperwork.

M. Alexander Otto is a physician assistant with a master's degree in medical science and an award-winning medical journalist who has worked for several major news outlets before joining Medscape, including McClatchy and Bloomberg. He is an MIT Knight Science Journalism fellow. Email: aotto@mdedge.com.

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