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Medicare Plan Draws Calls for Marketing, Kickback Rule Changes

By Kerry Young, CQ Roll Call

June 1, 2016 -- Pharmaceutical industry giants, including Pfizer Inc., are seeking to influence an eventual overhaul of Medicare payments for prescription medicines.

The companies asked for revisions in several federal rules, including the anti-kickback statute and restrictions on marketing, if Medicare changes its system for paying for Part B outpatient drugs.  Johnson & Johnson, Merck & Co., and rival drugmakers asked the Centers for Medicare and Medicaid Services (CMS) to scrap entirely the plan that it unveiled in March to test alternative payments. They want CMS to start over and rework its ideas from the second part of its proposal, which focuses on pegging payments for medicines to judgments about how well they work for patients.

"Many biopharmaceutical manufacturers want to participate in value-based drug pricing arrangements with public and private payers, but are inhibited by several barriers which are well known," including the kickback law, wrote Kirsten Axelsen, vice president of worldwide policy at Pfizer Inc., in a May 9 letter to CMS.

Drugmakers appear to have accepted that they will eventually face the same kind of competitive demands from Medicare that they already do from private insurers, said Dan Mendelson, president of Avalere Health and a former health adviser at the White House Office of Management and Budget in the Clinton administration. "It's a shift that represents the changing markets in the U.S.," he said in a Tuesday interview with CQ HealthBeat.

For now, Medicare directly handles about $22 billion in annual purchases of drugs administered in doctors' offices. The program adds a premium of about 4.3 percent to the reported average sales price for drugs that are administered in doctors' offices and covered by Medicare's Part program. This includes many forms of chemotherapy and glaucoma treatments.

Insurers that administer Medicare's separate Part D plans oversee roughly $90 billion in prescriptions that people fill at pharmacies. These companies are expected to negotiate to get lower prices. 

Suggestions from Drugmakers

France's Sanofi, a maker of cancer drugs, said it "would be happy to discuss with CMS in more detail about how to promote better value in the Medicare Part B program" if the agency would withdraw its current proposal. Sanofi said CMS will need to address the challenge that federal anti-kickback law presents. There could be questions about how to account for some of the services that drugmakers would offer under a value-based plan, such a program to check on patients' health, wrote Edward Greissing, vice president for government affairs in North America for Sanofi, in a May 9 letter to CMS.

Drugmakers also argued that they would need more flexibility from the Food and Drug Administration (FDA) about promoting their products under a value-based pricing system. This appears to be part of a broader push to allow drugmakers to provide information beyond what the FDA approves in labels for drugs. 

"FDA has not provided formal guidance on the circumstances under which manufacturers may proactively share clinical and pharmacoeconomic information with payers or risk-bearing providers," wrote Bob Filippone, vice president of global public policy and government relations at Merck & Co., in a May 9 comment to CMS. "Many questions remain about the information manufacturers can share with providers and payers related to clinical and economic outcomes that is not in the product's FDA-approved labeling."

Merck and other drugmakers asked CMS to move slowly and consider taking small steps as it moves toward value-based pricing. Genentech Inc., a biotech pioneer, said its officials have worked with CMS and commercial insurers on value-based test programs for years. That's given the firm a broad understanding of the challenges in this approach, including those related to data collection, wrote Fritz Bittenbender, senior vice president for government affairs at Genentech, in a May 9 letter.

"Even sophisticated partners, who share CMS' goal of devising new and workable strategies for sustainable access, are rolling out these pilots out on a much smaller and more manageable scale than CMS proposes" in its Part B model, Bittenbender wrote.

CMS is likely to greatly scale back the first part of its Part B proposal, which would change some doctors' reimbursements for the drug they administer, Mendelson said. The second part may not advance at this time, but federal officials and lawmakers are likely to revisit this issue, perhaps in the next Congress, he said. There's great political pressure to address drug costs, and many elderly people are struggling now to pay their share for costly Part B drugs.

"The safe bet is always that it takes longer to shift off these things than you think," Mendelson said. "That said, there has been a lot of discussion about competitive markets" for medicines.

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