WASHINGTON -- Doctors should get out of the business of making money off of providing prescription drugs to Medicare beneficiaries, Health and Human Services Secretary Alex Azar said Monday.
Currently, physicians who administer drugs paid for under Medicare Part B -- which covers drugs administered in the physician's office -- pay for the drug themselves up front and then are reimbursed at the average sales price plus a 6% markup. This system "gets into the notion of physicians or facilities making money off the arbitrage between acquisition price and reimbursement," Azar explained at a briefing with reporters following a speech he gave on President Trump's plan to lower the cost of prescription drugs.
Instead, the administration is proposing a "competitive acquisition program" for Part B drugs."The concept of the competitive acquisition program is not to have physicians take title to the medications they're administering, but rather, have a competitive program where those drugs would be purchased and the capital outlay would occur elsewhere," so the doctor doesn't have to buy the drug "and the physician is paid ... a fair, appropriate level of reimbursement for their services in administering the drug," Azar said.
The idea of such a program isn't entirely new. "We believe the market has developed sufficiently in terms of the power and scale of group purchasing organizations, specialty pharmacies, specialty distribution [companies] and pharmacy benefit managers that there are now plenty of players in the space compared to when this was tried over a decade ago," Azar said. The current players "could actually execute a program like this well, secure substantial discounts, and work effectively with physicians for whom the 'buy-and-bill' model doesn't make sense, and that's even assuming it's done as a voluntary program," he added.
The current Part B reimbursement system has other problems besides the physician purchase issues, Azar said. "Right now in Part B, essentially as soon as a drug is approved by the FDA, it's covered," Azar explained in his speech. "Medicare gets a bill for the drug, composed of the standard price plus a 6% markup, and we pay it. Compare that with the negotiation in Part D: Plans determine whether a drug should be covered or whether an alternative is superior. Plans negotiate discounts, rather than just paying full price."
"You can imagine what happens when you're developing a drug: It's often much more appealing for the drug to go into Part B than D," he added. And with doctors buying the drugs themselves and then awaiting reimbursement, there's another problem: "Some of the price tags are approaching half a million dollars, which is also an issue for physicians if they don't want to make that investment up front," said Seema Verma, administrator of the Centers for Medicare & Medicaid Services, at the briefing, during which public affairs representatives were also present. "[And] I don't think part B envisioned paying 6% on top of a half-million-dollar drug."
HHS officials also are considering moving some or all Part B drugs into the Medicare Part D program as a way of negotiating more competitive prices, Azar said. "One approach is to move them all [into Part D, but we are also] going to be conducting ... an up-to-date study of U.S. pricing and negotiations for Part B drugs, and we might highlight drugs where we are getting a worse deal compared to other industrialized nations," and maybe conduct a pilot program for purchasing those drugs.
Another possibility would be "to focus on classes where there are drugs within [parts] B and D with a high spend where it would be particularly fruitful to combine B and D to get rid of any perverse incentives around prescribing behavior," said Azar.
Azar's speech on Monday was a follow-up to remarks he gave Friday after Trump broadly outlined the administration's plan, which included four strategies:
- Increasing competition in the prescription drug marketplace
- Changing the way drugs are paid for under Medicare Part B
- Increasing incentives to lower "list prices" for drugs
- Changing the system of drug rebates
Azar used part of his talk on Monday to fight back against the perception that the administration was to allow Medicare to negotiate with drugmakers directly for lower prices for drugs used by Medicare beneficiaries.
"You've probably heard before that Medicare could save tons of money by negotiating directly for drugs," he said. "This just isn't true, and you don't have to take my word for it. The Congressional Budget Office found [several years ago] that the idea of direct negotiation would generate almost no savings. The same conclusion was reached by President Obama's Office of Management and Budget when it assessed the proposal in his budget."
"The only way that direct negotiation saves money is by doing something this administration does not believe in: denying access to certain medicines for all Medicare beneficiaries, or setting prices for drugs by ," Azar continued. "We don't believe either of these proposals would put American patients first. They would move us toward the kind of socialized medicine systems that have such a notorious reputation for poor quality and access."
Officials also were focused Monday on ways to increase generic competition for brand-name drugs. "In one of the most notorious examples, pharma companies use FDA safety rules or commercial distribution restrictions to block generic drug manufacturers from having access to samples of the branded drug," said Azar during his speech. "Those samples are needed to perform the testing that gets generic drugs approved, giving consumers safe and effective lower-cost medications."
"We know that certain brand-name manufacturers are abusing the system by blocking access to samples, and hiding behind FDA's rules when they do it ... FDA is going to begin publicly identifying drug companies suspected of engaging in these abusive practices."