CMS proposes alternative payment model for Medicare outpatient drugs

The Centers for Medicare & Medicaid Services (CMS) today released a rule to test models for how Medicare pays for prescription drugs provided in physician offices and hospital outpatient departments.

Medicare Part B currently pays physicians and HOPDs the average sales price of a drug, plus a 6% add-on.

CMS issued a factsheet on the proposal.  According to the factsheet, the model would test whether changing the add-on payment to 2.5% plus a flat fee payment of $16.80 per drug per day changes prescribing incentives and leads to improved quality and value.

CMS would update the flat fee at the beginning of each year by the percentage increase in the consumer price index for medical care for the most recent 12-month period.

The test would begin in late 2016. In addition, the rule proposes to add certain value-based pricing strategies no sooner than 2017. These include varying the payment for a drug based on its clinical effectiveness; testing a standard payment rate for a group of therapeutically similar drug products; allowing CMS to enter voluntary agreements with drug manufacturers to link patient outcomes with price adjustments; and discounting or eliminating patient cost-sharing to improve access and appropriate use of effective drugs.

The independent Medicare Payment Advisory Commission (MedPAC) described a similar approach in its June 2015 report to Congress.

CMS will accept comments on the proposed rule through May 9.