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The Health and Human Services Department released a report Thursday recommending changes to how the government pays providers for administering Medicare Part B drugs, but offered no concrete plans or next steps.
The report aligns with congressional Democrats’ planned actions on drug prices. Senate Finance Committee Chairman Ron Wyden (D-Ore.) has been working on a drug pricing bill designed to produce budgetary savings that can be applied to partially finance the $3.5 trillion health, education and social services proposal the Democratic majority aims to pass this year.
HHS largely defers to Congress in its report, but the department indicated it may consider new Part B payment models.
The current Part B payment system gives providers a financial motive to prescribe costly brand name pharmaceuticals instead of less expensive biosimilar medications, according to the HHS report.
Part B providers get paid 106% of the average sales price for administering drugs, which “creates perverse incentives for manufacturers to raise their prices and for providers to use higher-cost drugs and/or more drugs,” the report says.
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HHS reiterated its support for legislation allowing Medicare to negotiate drug prices for Part B and Part D, which congressional Democrats hope include in the legislative package.
That bill, combined with “enhanced incentives” for hospitals and physicians to administer biosimilars or other lower-cost drugs, would produce cost savings for beneficiaries and taxpayers, the report says.
Congress could modify provider payments or enact a “least costly alternative model” which would base Part B drug prices on the lowest-priced medicine that is clinically comparable, HHS advises in the report.
HHS may consider small-scale mandatory models that link prescription drug and biologic payments to factors such as improved patient outcomes, reductions in health disparities, affordability and lower overall costs, the department says in the report.
President Donal Trump’s administration also tried to remake Part B payments through its “Most Favored Nation” rule. The policy would have tied Medicare outpatient drug reimbursement to prices in other developed countries and would have paid providers a flat add-on amount for each dose of a drug instead of a percentage of the drug’s cost. President Joe Biden’s administration has proposed revoking the regulation, which providers hotly contested.
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