MedPAC mulls ways to cut Part B drug spending

Drugs
Drugs.

The Medicare Payment Advisory Commission (MedPAC) is pondering ways to combat escalating Part B drug prices.

Part B spending has increased 8 percent per year over the past five years, according to MedPAC. The increase in spending reflects an overall significant increase in drugs costs in the U.S. in recent years, particularly those with high sales volume. According to an analysis performed earlier this year, three-quarters of the medicines that had sales volumes of $1 billion or more a year increased prices at more than double the rate of inflation between 2009 and 2015. That has put pressure on hospitals, with many of them forced to take a multi-pronged approach in reducing their expenditures on drugs.

At MedPAC's Oct. 6 meeting, the organization's policy analysts presented several ways to potentially control drug costs.

One proposal was the use of consolidated billing codes. MedPAC officials noted that most single-source drugs and biologics have their own billing codes. By consolidating those codes drugmakers would be paid the same rate for similar products and “would be expected to generate price competition relative to separate codes,” according to a presentation put forth at the meeting.

Another proposal was capping inflation on the average sales price for drugs. MedPAC noted that between 2005 and 2010, price growth among the biggest-volume drugs was lower than inflation, but after 2010, all those drugs have exceeded inflation. Half of those drugs' cost bumps exceeded general inflation by 5 percent or more in the past year.

MedPAC proposed requiring manufacturers to rebate payments back to Medicare when their average sales price growth exceeds certain inflation benchmarks. The agency estimated the rebates would have totaled $750 million in 2014 and nearly $1.3 billion last year.

MedPAC also suggested proposals that including restructuring the competitive acquisition program, including vendors having a formulary in place for both doctors and hospitals.

The proposals are not binding and would likely require approval of both the U.S. Department of Health and Human Services and Congressional approval.

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