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Obama Medicare Imitative Seeks New Pay Scale for Drugs –Some Specialties Crying “Irresponsible”

April 6, 2016 // News

doctor-medicine-pills-prescriptionIn a move that some physician groups are calling irresponsible, the Obama Administration unveiled a Part B. Medicare initiative to seek new avenues for the payment of outpatient drugs to doctors and hospitals. Hundreds of groups including consumers and drug manufacturers have called for the withdrawal of the initiative.

Eliminate Profit Motive?

Every year, more than $20 billion in drugs are administered to patients on an outpatient basis. The goal of the five year plan is, in part, to determine whether or not the profit motive is the factor driving higher cost drugs to be prescribed over less expensive drug options.

What is at Stake?

A large portion of the revenues for many specialties come from Medicare’s current payment arrangement in which providers purchase medication and are reimbursed the cost of the drug (average sales price, or ASP) plus an additional six percent. Oncologists, rheumatologists, and ophthalmologists are among the specialties who earn a large portion of their revenue from the current method. The new plan looks to continue to pay the ASP but would lower the percentage to 2.5% plus a flat fee of $16.80. Some specialties, such as family and general practice physicians will see their drug payments increase – 44% as estimated by CMS – because they typically prescribe less expensive drugs.

Who knows better?

Doctors who oppose the measure feel that the physician is the one who should determine the precise drug that will offer the patient the maximum benefit instead of the government regulating that a generic brand drug must be prescribed.  Five of the most costly drugs prescribed in 2014 were to fight cancer, rheumatoid arthritis, and macular degeneration. Not surprisingly, drug companies will take a hit in revenue under the proposed model.

Where and When?

Different strategies will be tested in different regions beginning in the last quarter of 2016. In 2017, additional measures are expected to be tested including varying payments based on the clinically proven effectiveness of a drug and agreements with drug makers to link pricing with effective patient outcomes.




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