CMS Announces Intent to Create a Model to Align the Cost of Medicare Part B Drugs to International Prices

On October 25th, President Trump announced CMS was releasing an advanced notice of proposed rulemaking (ANPRM) to create an International Pricing Index (IPI) payment model that would align Medicare’s payments for select Medicare Part B drugs administered in the office to similar prices drug manufacturers give other countries. CMS intends to test whether using the IPI would reduce expenditures for Medicare Part B drugs. CMS is seeking feedback on the ANPRM with a view to releasing a proposed rule in the spring of 2019 and beginning a five-year model in 2020. ASCRS and the Alliance of Specialty Medicine will be providing feedback.

The model would create a modified competitive acquisition program (CAP) under which Medicare would reimburse the CAP vendor for the drug at a target price set based on international prices. CAP vendors would supply Part B drugs directly to physicians, instead of physicians purchasing drugs from manufacturers or other suppliers.

In addition, the model would pay physicians and hospitals a “drug add-on amount.” The goals for the model add-on payments would be to hold healthcare providers harmless to current revenue to the greatest extent possible; create an incentive to encourage appropriate drug utilization; remove the incentive to prescribe higher-cost drugs; and create incentives to prescribe lower-cost drugs in order to reduce beneficiary cost sharing.

The ANPRM seeks input on potential modifications to the current +6% add-on payment of the included drugs’ average sales price (ASP). The ANPRM considers a modest increase in the alternative add-on payment – so that total payments to physicians and hospitals for the add-on would reflect the full 6% as opposed to the 4.3% currently being reimbursed due to sequestration. Since Medicare payment for the drugs would be to the model vendors, physicians participating in the model would no longer “buy and bill” Medicare for included Part B drugs. CMS is considering creating several alternatives to the add-on payment amount for model participants. The add-on could be established as a set payment amount per encounter or per month for an administered drug, which would not vary based on the price of the drug itself. CMS is considering whether to uniquely set the payment amount for each class of drugs, physician specialty, or physician practice (or hospital). The ANPRM seeks input on all these parameters.

CMS intends to begin the model in select geographic areas and mandate that physicians in those areas participate in the model. The model would initially focus on biologics and single-source drugs, which make up a high proportion of Part B drug spending. The ANPRM notes that the model only includes physicians and hospital outpatient departments, but asks whether other Medicare providers, such as ASCs, should be included.

CMS also released a factsheet on this ANPRM and a study on U.S. prices for Part B drugs compared to other countries. 

Additional information will be detailed in upcoming editions of Washington Watch Weekly. For questions, please contact Allison Madson, manager of regulatory affairs, at 703-591-2220 or