CMS proposal for reference drug pricing raises concerns

Medicare's plans to reduce the cost of drugs dispensed in hospitals, doctors' offices and clinics is drawing significant opposition from the pharmacy sector, Kaiser Health News reported.

The Centers for Medicare & Medicaid Services' proposed demonstration project, which would go into effect in 2017, would tie Medicare Part B payments to how well drugs perform in terms of outcomes and patient care. The initiative would use existing data that private insurers already use to tweak their formularies and better control costs.

The proposal would also allow Medicare to set a benchmark or reference price that it would pay for all drugs in a specific category. Reference pricing has shown some promise in curbing other areas of healthcare delivery where costs have gone out of control, such as in joint replacement surgeries.

Hospitals have been feeling the pressure to contain rising drug costs. Some facilities have resorted to software systems that flag expensive drugs to physicians during the prescription process, trying to encourage them to consider less expensive alternatives. Other hospitals have resorted to staff pharmacists to meet with patients in order to better manage their medications, avoid readmissions and reduce overall costs.

Such an initiative could represent the "biggest nightmare" for the drug industry, Paul Heldman, an analyst with Heldman Simpson Partners, told Kaiser Health News. "Then the government would be making a decision that two products are similar and Medicare should reimburse at the rate of the lower-cost one," he said.

And some conservatives have also suggested that such an initiative would represent government intrusion into the making of clinical care decisions, according to Kaiser Health News.

To learn more:
- read the Kaiser Health News article