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Obama administration to test new Medicare Part B payment policies

Industry News | Mar 11, 2016



Prescription drug spending has been a hot button issue these days. According to a report from the U.S. Department of Health & Human Services, prescription drug spending in the U.S. totaled $457 billion in 2015. Prescription drug costs have been rising quickly over the past few years. Between 2013 and 2014, they rose 12.6 percent.

"The affordability of prescription drugs is a huge priority for American citizens."

The HHS report predicted that between 2013 and 2018, overall prescription drug spending will rise an average of 7.3 percent per year. Not surprisingly, the affordability of prescription drugs is a huge priority for American citizens, something on which they want to see Congress and the president take action.

Now, action might just be taken. On March 8, the Obama Administration announced its plans to test new methods for paying for prescription drugs associated with Medicare Part B. Right now, the program is set up to incentivize doctors to select more expensive drugs, even when a cheaper drug would be equally effective in curing a patient. Under the current model, doctors and hospitals are reimbursed the sale price of the drug plus an additional 6 percent. This means that the more expensive the drug, the greater that additional 6 percent will be.

Dr. Patrick H. Conway, a deputy administrator of the Centers for Medicare and Medicaid Services, told The New York Times that there are several different models the government plans to try out in various areas across the U.S. One example, he explained, would be lowering the additional reimbursement percentage to 2.5 percent. Another possible model is to have Medicare determine what they pay drug companies based on the drugs' effectiveness.

Not surprisingly, the announcement has been met with a large degree of controversy.

Response to the administration's announcement
The Wall Street Journal explained that the pharmaceutical industry is firmly opposed to making changes to the Medicare part B payment structure. The CEO of the American Society of Clinical Oncology, Dr. Allen Lichter, told the publication that the Centers for Medicare and Medicaid Services should not be able to sway the choices doctors make.

"Physicians did not create the problem of drug pricing and its solution should not be on their backs," Lichter said in the Journal.

Conway, however, assured the Times that none of the models the government plans to test would take away power from the doctors to choose the best and most effective treatments for their patients. Because different models will be tested in different parts of the country, Conway could not comment on how many Medicare beneficiaries will see differences in their own prescription drug payments as a result of these tests.