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MedPAC Backs Moves to Restrain Growth in Medicare Drug Spending

By Kerry Young, CQ Roll Call

April 7, 2016 -- A panel of advisers to Congress on Thursday voted in favor of packages of recommendations intended to restrain growth in Medicare's drug spending, including moves to scale back a safety-net program for insurers and cut dispensing fees for costly treatments given in doctors' offices.

The Medicare Payment Advisory Commission (MedPAC) faced special challenges in creating recommendations on drug policy as part of a wide-ranging June report to Congress about the federal health program, said panel chairman Francis J. Crosson.

"We have much more complicated work to do" in this part of Medicare due to a lack of direct control over prices, he said.

Health insurers manage the Part D drug plans and negotiate prices with drugmakers. The program, Medicare's biggest drug expense, may cost an estimated $98 billion this year, up from about $84 billion in 2014. 

For the roughly $22 billion worth of drugs administered annually in doctors' offices through the Part B program, Medicare pays a roughly 4 percent premium to the average sales prices set by pharmaceutical companies.

Among the recommendations approved by MedPAC Thursday was a bid to lower over time what's known as reinsurance for Part D to 20 percent from 80 percent. This program was designed to aid insurers during the startup of Part D plans in 2006, providing a cushion for so-called catastrophic cases where a customer's spending on medicines crosses a set threshold. Last year, that was about $7,000.

MedPAC staff and members previously had questioned whether the current level of support for insurers who underestimate their Part D customers' needs is blunting their incentive to negotiate the best bargains on drug prices and take steps to encourage their members to use generic drugs.

The panel also offered a recommendation that could aid insurers in their negotiations with drugmakers. MedPAC suggested having Medicare remove two kinds of drugs, antidepressants and immunosupressants, from the classes of medicines that are required to be broadly covered, which limits insurers' ability to drive bargains.

This proposal drew an immediate protest from advocacy groups such as the Partnership for Part D Access, which includes medical societies and drugmakers Johnson & Johnson and Lundbeck among its members. In a Thursday statement, the group noted that a similar move to reduce the so-called protected classes had been proposed and defeated in 2014.

MedPAC members on Thursday also approved a recommendation to scale back on certain dispensing and supplying fees for the Part B drugs, with savings from this proposal estimated at less than $1 billion over five years.

Lawmakers are likely to pay heed to the recommendations on drug pricing in MedPAC's June report. Public concern is rising about the cost of medicine, with average 6.3 percent annual growth in prescription spending for the United States from 2015 through 2024, according to the Centers for Medicare and Medicaid Services (CMS).

Congress may eventually consider new laws to address this growth, although no major legislative action is expected before the November election. The Obama administration is looking to kick off a fairly ambitious test program for outpatient drugs in its final months. CMS last month unveiled a proposal for changing how Medicare pays for Part B outpatient drugs in much of the country through a test program. It's unclear whether CMS will be able to implement this plan, which drew significant opposition. 

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