07 Apr MedPAC April 2017 Report – Executive Summary

MedPAC Votes Major Changes to Part B Rx and Post Acute Payment Policies

April 7, 2017 On April 6th, 2017 the Medicare Payment Advisory Commission (MedPAC) voted on draft recommendations for Medicare Part B drug payment policies and a unified post-acute care (PAC) prospective payment system (PPS). The recommendations and discussion highlights are noted below. “Click here”(:http://www.medpac.gov/-public-meetings-/meeting-details/april-2017-public-meeting) to review meeting presentations.

Medicare Part B Drug Payment Policy Issues

• Part B drug spending was $26 billion in 2015 – up from $23 billion in 2014.

• The Commission voted unanimously to include the following package of recommendations in the June report to Congress:

1. Modify the average sales price (ASP) system in 2018 to:

• Require all manufacturers of products paid under Part B to submit ASP data, and impose
  penalties for failure to report;
• Reduce wholesale acquisition coast (WAC) based payments to WAC +3%;
• Require manufactures to pay Medicare a rebate when the ASP for their product exceeds the
  inflation benchmark, and tie the beneficiary cost-sharing and the ASP add-on to the inflation
  adjusted ASP; and
• Require the Secretary to use a common billing code to pay for a reference biologic and its
  biosimilars.

2. No later than 2022, create and phase in a voluntary Drug Value Program (DVP) that would have the following elements:

• Medicare contracts with a small number of private venders to negotiate prices for Part B products;
• Providers purchase all DVP products at the price negotiated by their selected DVP vendor;
• Medicare pays providers the DVP-negotiated price and pays vendors an administrative fee, with opportunities for shared-savings;
• Beneficiaries pay lower cost-sharing;
• Medicare payments under the DVP would not exceed 100 percent of ASP; and
• Vendors use tools including a formulary and, for products meeting selected criteria, binding arbitration.

3. Upon implementation of the DVP or no later than 2022, reduce the ASP add-on under the ASP system.

• If the following recommendations are implemented, MedPAC projects that program spending would have an estimated decrease of $250 million over one year and $1 billion over five years relative to current law.

• Several Commissioners, while ultimately voting to approve the overall package of recommendations, voiced concern over the binding arbitration component of the recommendation.

• Additional information regarding ASP inflation rebate, timing of the ASP add-on reduction, design options for binding arbitration under the DVP, among other items, will be included in the Chapter.

Implementing a Unified PAC Payment System

• Under a unified PAC PPS, payments would be based on patient characteristics; MedPAC believes this design feature would decrease incentives to treat patients with certain conditions over others.

• Responding to Commissioner inquiries from the March 2017 meeting, MedPAC staff investigated lowering the aggregate payments reduction by 5%, versus the 3% proposed in March. The staff found that even with a 5% reduction, the average payments would be 9% higher than the average cost of stays.

• MedPAC staff noted that the Centers for Medicare and Medicaid Services (CMS) could implement a PAC PPS as soon as 2021, but it is unlikely that a PAC PPS would be proposed before 2024.

• Commissioner Warner Thomas stated that he supported a quick implementation, but also suggested including the ability to pilot these models between now and 2021.

• The Commission voted unanimously to include the following recommendations in the June report to Congress:

1. Implement a PAC PPS beginning in 2021 with a three year transition;
2. Lower aggregate payments by 5%, absent prior reductions to the level of payments;
3. Concurrently, begin to align setting-specific regulatory requirements; and
4. Periodically revise and rebase payments, as needed, to keep payments aligned with the cost of care.

Download document here