Costs and Coverage Challenge Medicare Drug Plans - Pharmaceutical Executive


Costs and Coverage Challenge Medicare Drug Plans

Pharmaceutical Executive

Fixing Part B

Offsetting Drug Costs
Medicare spends about $20 billion a year on drugs administered by doctors, but that could soar with approval of more high-priced therapies for cancer and other critical diseases. Fears of unsustainable program costs thus is focusing policy makers on use of particularly high-cost therapies to treat cancer, autoimmune disorders, and chronic kidney disease, such as the 55 high-volume therapies that account for most Part B spending, as documented in another GAO report.

This finding was discussed at a June hearing by the House Energy & Commerce Health subcommittee, along with proposals to fix some of the anomalies in the Part B drug reimbursement formula, now set at 106 percent of average sales price. Physicians complained about losses due to the practice of including prompt pay discounts in rate calculations, plus the half-year lag for CMS to update prices, which leaves providers holding the bag for months. The current sequestration process, with its 2 percent across-the-board cut in Medicare funding, has generated ever louder protests from oncologists, who claim they're losing so much money that they will have to send more patients to hospital clinics for treatment. And that's much more costly for Medicare and often more difficult for patients.

Separately, CMS has proposed to slash reimbursement for kidney dialysis centers by 9.4 percent next year. That means a 12 percent cut in rates for Epogen and other drugs administered as part of kidney dialysis treatment. These reductions come on top of the 2 percent sequester reduction, plus the prospect of additional adjustments in CMS' base payment for these drugs to reflect lower recommended dosages.

Most damaging for pharma, though, is CMS denial of coverage for a new therapy altogether. Eli Lilly was rocked last month by a CMS draft proposal to authorize only coverage with evidence development (CED) for Lilly's Alzheimer screening product Amyvid. That means providing the PET imaging drug only to Medicare beneficiaries who enroll in clinical trials designed to produce more evidence that this type of diagnostic screening is worth the money. Lilly and Alzheimer patient groups are lobbying hard for CMS to be more generous in its final reimbursement decision this fall, warning that restricting coverage could "stifle future innovation aimed at improving diagnosis" of this serious condition.

Jill Wechsler is Pharm Exec's Washington correspondent. She can be reached at


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