Trump administration faces uphill battle in convincing provider skeptics to back new drug pricing plan

Drug prices
The Trump administration should expect some blowback from providers on its new plan to lower Part B prices. (Getty/Tero Vesalainen)

The Trump administration’s plan to bring down prices in Medicare Part B has drawn skepticism, including from providers who helped sink a similar proposal from the Obama White House. 

The Department of Health and Human Services unveiled a new payment model called the International Pricing Index (IPI) on Thursday, saying it will lower Part B costs by aligning them with the prices paid in other countries. Medicare, at present, pays the average sales price for drugs, plus a 6% add-on fee to the provider, in Part B. 

The Obama administration attempted a similar effort in 2016, lowering the add-on fee to 2.5% with an additional flat payment of $16.80 per day per drug. Both demonstrations had a similar goal in their fee reforms: eliminate incentives for providers to prescribe high-cost drugs to bring in greater reimbursement. 

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

It pulled the plug in December of that year after significant backlash from providers and drug companies. 

HHS Secretary Alex Azar likened the current payment structure to a “blank check” and in a speech at Brookings Institution on Friday said it’s crucial to address these “perverse” incentives. 

RELATED: The challenge of designing new payment models for prescription drugs 

However, the IPI approach differs from the Obama-era demonstration, he said, as it maintained a “buy-and-bill" approach instead of shifting ownership of the medications to independent vendors. 

“It actually risked putting some practices underwater in the purchase of these drugs,” Azar said. “It basically just took revenue from docs, without touching the underlying issue of out-of-control prices and foreign free-riding.” 

Despite those assertions, the proposal is likely to face a similar response from providers. Initial statements from some major industry groups were tepid, with both the American Medical Association and American Hospital Association praising HHS for taking on drug prices broadly but saying they would wait-and-see how the changes take shape. 

The Community Oncology Alliance, though, said in a statement that the “notion that physicians and oncologists, in particular, practice medicine driven by financial incentives is not only false, but highly offensive.” 

Oncologists, who work in a specialty that relies heavily on Part B drugs, played a key role in killing the Obama era attempt at Part B reform

RELATED: Trump targets Medicare, PBMs in plan to lower drug prices 

“Every decision made, and every drug prescribed, is for the good of patients and the patient-specific clinical situation, often driven by well-established, evidence-based clinical guidelines,” COA said in the statement.  

“Numerous independent studies have shown that the incentive of reimbursement rates does not change oncologists’ prescribing patterns,” the group added.

Rheumatologists, another specialty that is intertwined with Part B, also warned about the harm that the policy could cause patients. The American College of Rheumatology said HHS should focus “on the players that control drug pricing” and not penalize Medicare patients. 

COA and the academy both said they would submit comments formally on HHS’ notice on the plan. 

“We must strongly warn policymakers that even well-intended policymaking can backfire and result in the unintended consequences of harming patients, increasing costs and limiting access to care,” COA added. 

Will this plan hurt providers’ bottom lines? The jury is still out 

Part of the hesitancy on the part of groups like AHA and AMA is because the department’s notice hasn’t fully fleshed out the elements that most directly impact them: changes to the fees they earn in prescribing Part B drugs. 

Azar has asserted multiple times since the policy was unveiled that it would not negatively impact doctors or hospitals and that providers could come away earning more. Though the current payment rate is average sales price plus 6%, the fee is truly closer to about 4% due to budget sequestration, he said. 

So, HHS wants to restore the fee to a full 6%, but not peg it to the varying drug prices themselves. It’s exploring options to accomplish this, including a flat rate per encounter or per month, and wants to hear from doctors on what could work best. 

“We recognize that changes to this system have to work for the doctors who help care for the patients who need these drugs,” Azar said. 

Lindsay Bealor Greenleaf, director at ADVI, told FierceHealthcare that the potential for lower reimbursement in this area in tandem with proposed changes to coding in the physician fee schedule could be a significant hit for independent practices, especially those offering costly specialty care like oncology. 

The variability of pricing in Part B can be crucial to some of these specialty practices as they try to stay afloat, she said. 

"Besides the notion of tying drug prices to what's going on in other countries, the other big issue in today's announcement [is]: How is all of this going to impact the independent practices?" Greenleaf said.