Conway Defends Scope of Drug Pricing Model

Oncology Business News®September 2016

Patrick Conway, MD, says 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.

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.

ASP is average sales price.

VBP is value-based purchasing.

Source: CMS

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 pricingmethods 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.

Statutory Authority to Cut Costs

“The second phase directly builds on what we’ve seen in the private sector or are hearing from the private sector about the desire to test value-based arrangements, such as outcomes-based pricing and other methodologies that incentivize higher value and outcomes,” Conway said. None of these things would happen without robust anticipation that includes feedback from multiple categories of stakeholder including patients and members of Congress, he added. This openness would build support for the program, he said, in response to Finance Committee queries. “At the end of the day, we know that broad input and transparent processes are critical to shaping this work. We now have innovation models in all 50 states—thousands of providers, millions of beneficiaries— and it’s deep engagement with the various participants. That’s the kind of engagement we want.”Conway said that although the drug pricing model is not designed to reduce spending on Medicare Part B, CMS does have statutory authority to pursue measures to trim expenditures as well as improve quality. “We actually focus on quality and patient outcomes first,” he said.

Sen. Benjamin Cardyn (D-MD) said he was concerned that budgetary pressures within CMS would “create well-intended programs to create savings, rather than well-intended programs to produce better outcomes. Dr. Conway, I take you at your word that that’s not the objective here, and we obviously will be watching this pretty closely.”

The drug pricing program comes at a time when precision medicine is showing more promise but also demanding more in terms of financial resources to realize its potential and enable physicians to demonstrate to payers that targeted medicine is worth the extra investment. Conway was asked by Sen. Ron Wyden (D-OR) whether or not the demonstration project would interfere with the process of raising oncology to the next level. “We think it very much aligns with precision medicine and supports precision medicine,” Conway replied. “For example, if you had a new therapy that generated significantly better outcomes for patients, and you’re paying based on outcomes and value, that actually supports paying for that therapy and the innovation and better patient outcomes it delivers. Similarly, for indications-based pricing, you can imagine that if you really tease apart for which patients is this therapy maximally effective and then pay appropriately for that, it really incentivizes precision medicine.”

Despite the phalanx of physicians who stand in opposition to the drug payment model, Conway said CMS actually has received positive feedback, too. He would not directly answer a question about whether CMS is considering scrapping the drug model idea, but stated instead that CMS remains open to feedback from the medical community and others. As for rural access to medicine and whether the drug demonstration would curtail that, Conway said, “We do not want to limit access, including in rural areas. We’re proposing a model that we think can support independent physician clinician practice, including rural and small practices.”

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