GNYHA Comments on Medicare Part B Drug Pricing Model

January 14, 2019

GNYHA submitted comments last month on a potential Centers for Medicare & Medicaid Services (CMS) Innovation Center model to reduce Medicare Part B drug costs: the International Pricing Index (IPI) Model for Medicare Part B Drugs. CMS released information on the model in an advance notice of proposed rulemaking and will release an official proposal in spring 2019 for a spring 2020 model start date. GNYHA’s comment letter is attached.

Attributes of a Potential IPI Model

Approximately 50% of providers nationally would be randomly selected to participate in the five-year IPI model. CMS would select a subset of separately payable drugs under Medicare Part B (i.e., higher-priced drugs for which payment is not packaged with other services) to be included in the initial model and would likely add drugs over time.

Participating providers would no longer follow the current “buy and bill” system in which they purchase the drugs included in the model and bill Medicare for reimbursement. Instead, they would acquire the drugs through contracted vendors that would negotiate discounts with manufacturers, manage distribution, and bill Medicare. Participating providers would continue to bill beneficiaries for the cost-sharing amounts. CMS would replace the current average sales price (ASP) +6% reimbursement system with a pricing model based on an IPI phased in over five years. The IPI would reflect the average prices paid for the drugs in other countries, with the goal of reducing US prices to a more comparable level. The current value of the +6% would be converted to a flat per-case add-on payment to providers, which CMS believes would remove any financial incentives to utilize higher-priced drugs.

GNYHA’s Comments to CMS

In its comments, GNYHA supported the Administration’s efforts to curtail rising drugs costs but argued that the model’s structure could negatively impact hospitals through increased administrative burden and costs. Replacing the current buy and bill system would lead to additional costs for providers, who would need to implement new systems/processes while maintaining their current systems/processes for patients and drugs not covered by the model (e.g., commercially insured patients). GNYHA urged CMS to modify the IPI model to retain the buy and bill system and to push the start date to at least one year following the final rule’s release to allow providers time to make necessary changes.

GNYHA’s biggest concern is the IPI model’s adverse financial impact on providers participating in the 340B Drug Pricing program, given the program’s group purchasing organization (GPO) prohibition restricting some 340B hospitals from using GPOs to purchase covered outpatient drugs. GNYHA urged CMS to work with the Health Resources and Services Administration to ensure that vendors are not classified as GPOs, which could cause 340B hospitals participating in the IPI model to lose their entire 340B benefit, putting safety net hospitals and their patients at risk. GNYHA also encouraged CMS to make the IPI model voluntary to avoid these risks.

GNYHA addressed various other topics that need further clarification or raise concerns, including the effects on ASP for non-participants, potential barriers in access to care, drug wastage, drug manufacturer cost shifting, collection of coinsurance and potential Medicare bad debt, and whether/how CMS would achieve savings through Medicare Advantage.

Finally, GNYHA offered other reforms and supported some of the Administration’s current initiatives to increase competition among generic drugs and biosimilars, and to lower costs, including by addressing the Food and Drug Administration’s approval process, market exclusivity and intellectual property issues, and other barriers to commercialization. GNYHA also suggested simplifying the process for an interchangeable product designation to encourage a competitive and sustainable market.

Position Attachments