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Trump Administration Rolls Out Another Proposal to Lower Drug Pricing


October 26, 2018
On Oct. 25th, healthcare stakeholders did a collective gasp as the Trump Administration rolled out yet another effort to lower drug pricing—an advanced notice of proposed rulemaking (ANPRM). This conceptual approach combines 2 unlikely elements—the Competitive Acquisition Program (CAP) and international price benchmarks—into a pilot program run by the Center for Medicare and Medicaid Innovation (CMMI).
As President Trump spoke at the Department of Health and Human Services (HHS), policy experts scrambled to their inboxes to find the announcement (including a fact sheet) and ANPRM. With one ear to the speech and both eyes on the proposals, we jumped into action. There was some advance warning of where all of this might be going due to a report released earlier in the day by the Administration highlighting the differential between Medicare Part B prices and those paid by foreign markets.
As currently envisioned, the International Pricing Index (IPI) model would include the following components (the model affects only Part B drugs):
  • 1.   Reset Part B drug payment from average sales price (ASP) to a Target Price derived from the IPI
    • - For drugs whose ASP exceeds the international price, the Centers for Medicare & Medicaid Services (CMS) would apply a reference pricing methodology based on the established international benchmark
    • - The payment model would be applied to 50% of the country
  • 2.   Establish a CAP-like model using private-sector vendors to supply physicians, hospital outpatient departments (HOPDs), and other providers/suppliers
    • - Vendors would be paid the Target Price driven by the IPI instead of bid amounts; they would not operate formularies
    • - Would require mandatory participation of physician practices and HOPDs in selected geographic areas across the US; anticipate that selected geographic areas would   include 50% of Part B spending on separately payable Part B drugs
  • 3.   Establish an alternative to ASP add-on payments for drug administration
    • - Under the IPI model, Medicare would pay providers a drug-administration payment plus a “drug add-on payment” (non-participating providers would continue to be   paid based on ASP + 6%)
    • - Model participants would receive a set payment amount per encounter or per month for an administered drug; the set payment amount would be based on: 1) which   class of drugs the administered drug belongs to; 2) the physician’s specialty; or 3) the physician’s practice
    • - The final payment amount would be calculated annually based on the +6% of ASP revenue that model participants would have garnered without sequestration in the   most recent year of claims data
With this release, CMS is opening a comment process for stakeholders to weigh in on the potential parameters of the program. The comment period will stay open
through December 28. You can submit at www.regulations.gov.
This release is the first step in the process to get to a proposed rule next year. CMS has suggested a potential program start date of 2020. The model essentially imports international price controls with a focus on reducing Part B prices by 30%, which leaves little to no room for value-based considerations like outcomes-based pricing and/or indication-based pricing. Expect a significant, multi-stakeholder offensive to work to tame and potentially extinguish this proposed model.

Read the rule here.

Health Policy Weekly is written by Xcenda, a consultancy and business unit of AmerisourceBergen Specialty Group. Visit Xcenda’s online archive to access more health policy news.

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