Medicare's Rx for Change: No Spoonful of Sugar

Mike Hennessy
Published: Tuesday, Apr 12, 2016
Mike Hennessy

OncLive Chairman,
Mike Hennessy

The ongoing value transition got a bit more real in March when The Centers for Medicare & Medicaid Services (CMS) introduced a proposal for Medicare Part B drug payment changes that would even out the margins that physicians make on drug sales. Higher priced drugs would pay less, lower-priced drugs would pay more. For many physicians who are accustomed to a margin of 6% on drugs that can cost thousands of dollars, the idea of accepting 2.5%, plus a flat fee of $16.80, does not sit well.

Among the chief concerns expressed by opponents: CMS is putting cost-cutting ahead of a fundamental principle of personalized medicine—the right to choose which drug would be best for a particular patient. For its part, CMS is expressing no contrition. Not only is the agency giving the physician community just 60 days to respond, it contends that doctors’ prescribing choices will not be impaired by this new policy and, in fact, that the change will actually encourage doctors to prescribe the drugs they feel are medically most efficacious. CMS suggests that bigger margins on more expensive drugs only constitute a negative incentive to obey the Hippocratic Oath.

Patient advocates have long urged a reformation in the way Medicare pays for drugs, suggesting, in part, that CMS be allowed to negotiate with suppliers. This new proposal marks a swing in that direction with the formulation of several strategies, among them the test rollout of price-indication systems that would adjust payment according to efficacy. Drug-price referencing, in which payments are fixed according to drug category rather than average sales price, is also slated for testing in certain markets.

Physicians recognize the sweeping nature of some of these changes, and they have expressed regret that they were not more closely involved in the planning before this newest value deal was placed on the table. Read all about it in our cover story by Gina Battaglia this month in Oncology Business Management.

That lone wolf Peter B. Bach, MD, of Memorial Sloan Kettering Cancer Center, has spoken in favor of the CMS proposal and is spearheading a new drug price value initiative of his own, armed with several million dollars in new funding. We cover that one, too, as well as some of his concerns about inappropriate drug packaging that he alleges is a source of waste and inefficiency. Also on the value front, this month we inaugurate Value in Practice, a new feature in which administrators from independent practices talk about their encounters with the value transition and how they are making it work. Rapid change often cannot be executed with grace, but these administrators will provide insights on how it can be done.

And on a final note, in the same key, last month in Miami the newly established Institute for Value-Based Medicine conducted an inaugural, day-long workshop on value that included many leading physicians from the oncology-hematology sector. Tasked with the mission of helping the profession chart its way through the value transition, the Institute’s first project will be producing a white paper on the findings of that oft-lively workshop. I urge you to keep your eyes peeled for that. The place to look for it is among the pages of Oncology Business Management and at OncLive.com.


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