U.S. Officials Evaluate Lowering Medicare Drug Costs

The Obama administration has put forward a test program, to see if cutting reimbursements for drugs administered by some Medicare doctors would encourage them to choose lower-cost, but equally effective, medications.

Medicare spends about $20 billion on Part B prescription drugs every year, but that’s just a fraction of Medicare’s overall drug spending — which totaled more than $140 billion in 2014.

For the time being, the issue of high drug prices — and national drug spending, which spiked over 12 percent in 2014 — has become a major focus for Democrats in this presidential election year.

According to Stephanie Armour of The Wall Street Journal, “The initiative is part of a strategy by the Obama administration and Congressional lawmakers to tackle health-care spending that is driven in part by rising prescription-drug prices, an issue that has loomed in the presidential race and ranks high among public concerns in polls. The administration has sought information on pricing from pharmaceutical companies and has been probing ways to help consumers keep their drug costs in check.”

As reported in the New York Times, Dr. Patrick H. Conway, a deputy administrator of the Centers for Medicare and Medicaid Services, said the government would test a half-dozen alternative ways of paying for drugs under Part B of Medicare.

In one proposal, Medicare would set a standard payment rate, or benchmark, for a group of “therapeutically similar drug products.” Pharmaceutical companies are conflicted over this idea, known as reference pricing, because, they say, patients with the same condition may respond differently to the same drug.

Under another proposal, Medicare would pay drug companies based on how efficient their treatments are with patients. Payment might be linked, for example, to the effectiveness of a drug in preventing heart attacks.

The next option would lessen or eliminate the patient’s share of the bill for Part B drugs. In the current system, beneficiaries are often responsible for 20 percent of the Medicare-approved amount for outpatient drugs under Part B.

Medicare can then provide feedback to doctors, informing them how their “prescribing patterns” compare with those of doctors in certain geographic regions or in the nation as a whole.

Under another alternative, Medicare would reduce the 6 percent add-on payment to 2.5 percent and pay a flat fee per drug on top of that.

Dr. Conway said the government was not infringing on the discretion or authority of doctors.

“Physicians and clinicians will make the prescribing decisions,” he said. “Nothing limits the ability of physicians to prescribe the most appropriate medications.”

Conway could not say how many of the 50 Million Medicare beneficiaries would be affected by the new methods of paying for prescription drugs. “Different methods will be tested in different parts of the country,” he said.

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