Conway Defends Scope of Drug Pricing Model

Tony Hagen @oncobiz
Published: Friday, Sep 30, 2016
Patrick Conway, MD

Patrick Conway, MD

When Sen. Robert Portman (R-OH) hears from his constituents about the Medicare Part B Drug Payment Model, they often express the concern that the CMS drug pricing experiment is going to undermine their ability to survive as independents. “We’ve lost over 50 practices going to the big hospitals. This will continue that and accelerate it,” he said during a hearing on June 28 of the Senate Finance Committee.

Patrick Conway, MD, acting principal deputy administrator and chief medical officer for CMS, responded that the demonstration drug pricing plan, which would raise payment for low-cost drugs and lower payment for high-priced drugs, is chiefly about improving outcomes. Some types of oncologists in certain areas would see overall reductions in payment, but the program is not designed to be an instrument for saving money for CMS, Conway said. It’s got more to do with removing the financial incentive not to prescribe cheaper drugs. He also said the drug payment model would not compromise access for patients in remote areas.

The proposed size of the pricing trial—75% of the Medicare Part B program—drew expressions of incredulity from Finance Committee members. Conway said such a large sample is essential to ensure reliable data is obtained.

Geographically, he said, there are three main concerns that shaped the planning for this foray into value-based payment. It is necessary to choose areas that encompass a sufficient number of practices. Second, practices must be evaluable for quality and savings improvements. Finally, it should be possible to make meaningful comparisons among areas. “We will look at the public comments and determine based on the criteria whether adjustments are needed,” Conway said.

Whereas phase I of the CMS plan, which would involve controversial changes in the average sales price formula for drug payments (Table), has already been robustly debated, less has been said about phase II, under which CMS would test various commercial drug purchasing and pricing


Table: Summary of the Proposed Drug Payment Model

ASP is average sales price.
VBP is value-based purchasing.
Source: CMS

methods it says have been used with success in the private sector and would help to coordinate spending with improved clinical outcomes.

“The goal for high cost and low cost drugs is that we’re paying appropriately for those drugs,” Conway said. “The current system does have a disincentive. We would want oncologists and others— rheumatologists, physicians, and clinicians—to prescribe the medications that they need us to pay and for the patient to receive the medicine that they need.”

Conway spoke extensively about phase II, discussing stakeholder commitment, the impact on the furtherance of precision medicine, CMS priorities for quality care versus savings, and access. Phase II would start no sooner than the beginning of next year and would take several years to fully implement, although it would run concurrently with the final years of the phase I portion, which is five years in total. Potential programs in the phase II portion include patient discounts and elimination of patient co-pays for Medicare Part B; nonbinding feedback for providers on clinical decisions and prescribing patterns; indication-based pricing; reference pricing, in which standard payment rates would be established for therapeutically equivalent drugs; and voluntary manufacturer price adjustments based on outcomes.

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