Alternative drug payment models under Medicare Part B pilot dropped by CMS

In early 2016, the USA’s Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to test new models for the payment of drugs and biologics under Medicare Part B, according to McKenzie Cato and David Gibbons writing on Hyman, Phelps & McNamara on its FDA Law Bog (see their previous post here).

The current statutory payment methodology for most drugs under Medicare Part B is the Average Sales Price (ASP) plus 6%. The proposed five-year pilot program would have tested an alternative payment methodology of ASP + 2.5% plus a flat fee of $16.80 (Phase I) and the effect of four different value-based pricing methods (Phase II). The pilot was to have been conducted under the authority of Section 1115A of the Social Security Act, which authorizes CMS’s Center for Medicare and Medicaid Innovation (CMMI) to test innovative payment models to reduce program expenditures.

On October 4, the CMS announced, in a short Federal Register notice, that it has withdrawn the proposed rule. The notice states that the agency received 1,350 public comments and that “a number of commenters expressed concerns about the proposed model.” Because of the “complexity of the issues related to the proposed model design and the desire to increase stakeholder input,” the CMS decided to abandon the proposed pilot. The notice concludes with a statement about how the agency wants to “ensure agency flexibility” in re-examining these issues.