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Medicare Advisers Debate Proposals to Slow Rising Drug Costs

By Kerry Young, CQ Roll Call

October 6, 2016 -- An influential federal advisory panel on Thursday unveiled its latest views on slowing the rate of growth of Medicare's pharmaceutical spending.

The Medicare Payment Advisory Commission (MedPAC) is considering several options on drug reimbursement. These include reducing the roughly 4 percent premium that the giant federal health program pays for medicines provided in doctors' offices and then adding a flat fee to compensation. MedPAC also is looking at limiting future increases to an inflation rate for payments for these drugs, which are covered by Medicare's Part B outpatient care program.

Another option would be to drive down costs by grouping drugs with similar health effects in a common billing code. This might generate more competition for prices than maintaining separate codes for branded drugs and copycat versions of them, MedPAC staff said in a briefing document.

MedPAC will spend months refining its suggestions before releasing them next year as formal recommendations to Congress and the Centers for Medicare and Medicaid Services on drug spending. The panel on Thursday focused on Part B pharmaceutical spending, which doubled to $22 billion between 2007 and 2015, including copays from people enrolled in Medicare. MedPAC's aim is to curb rising spending, while maintaining people's access to chemotherapy and other drugs given in doctors' offices. 

"This set of tools has the potential to meet those goals," said Jack Hoadley, a MedPAC commissioner and researcher with the Health Policy Institute of Georgetown University, of the options discussed Thursday.

The cost of medicines is nearly certain to hold lawmakers' attention next year. Democratic presidential candidate Hillary Clinton already has presented several ideas for reining in price increases, including allowing Medicare to negotiate prices directly. Clinton and Republican candidate Donald J. Trump both call for allowing imports of cheaper drugs from abroad. 

MedPAC members on Thursday offered objections and tweaks to the commission's staff proposals, while broadly supporting their themes. The topic will be debated publicly again in January. Members differed, for example, on whether a consolidated billing code would result in greater use of copycat versions of costly biotech drugs.

Amy Bricker, a MedPAC member who also is vice president of supply chain strategy with Express Scripts, Inc., noted that brand-name companies are making generic versions of other companies' drugs. 

The Food and Drug Administration last month, for example, approved Amgen Inc.'s copy of AbbVie's blockbuster Humira rheumatoid arthritis drug. The FDA's first approval of a so-called biosimilar drug happened last year when it cleared a Novartis AG version of an Amgen drug.

Grouping branded and copycat biotech drugs for Medicare payment could disrupt the market at a time when the companies are in a transition to dual roles, Bricker said. They are trying to continuing to generate new medicines while building new businesses with copycat drugs.

"We are all anticipating a robust biosimilar category, but we're still not there," Bricker said. "In my opinion, it's just too soon."

Paul Ginsburg, a MedPAC member who is a researcher at the Brookings Institution and professor of health policy at the University of Southern California, disagreed. He said consolidated codes could actually encourage use of the copycat biotech drugs known as biosimilars.

"It seems to me that this is going to be a boon for biosimilars," Ginsburg said.

MedPAC on Thursday also discussed options for changing the premium paid to doctors on Part B drugs. The premium is designed to be a 6 percent premium to the reported average sales prices. The federal budget sequester cuts lowered this to about 4 percent. MedPAC suggested several options, including changing from the original 6 percent premium to a pre-sequester premium of 3.5 percent, plus a payment of $5 per drug per day.

Medicare already proposed a similar approach. Medicare's proposed model would switch some doctors from an actual premium of about 4 percent to less than 1 percent plus a payment of more than $16. Many doctors object, saying that they would lose money in the lower payment system and would need to refer patients elsewhere for treatment.

Another approach MedPAC considered Thursday would limit the growth of the current Part B drug payments to inflation. Drugmakers would have to rebate money if growth in prices exceeded an inflation benchmark, MedPAC suggested.

MedPAC will continue its discussion of drug pricing on Friday. It is slated to look at the use of copycat biotech drugs in the insurer-run Medicare Part D pharmacy plans.

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