Value demonstration

Hurdles CMS must clear to test value-based schemes for Part B drugs

Acting Administrator Andy Slavitt is pitting CMS against oncologists, hospitals, the pharmaceutical industry and congressional Republicans with a proposal to conduct a massive, nationwide controlled experiment testing value-based payments for drugs provided through Medicare Part B.

The strength of the opposition to the proposed payment changes from oncologists and drug companies could not have surprised CMS, and the Obama administration has certainly come to expect a negative reaction by Republicans to any major healthcare initiative. Patient groups and Democrats might also pile on.

Slavitt acknowledged the challenge, and asked for constructive engagement rather than automatic opposition, in remarks last week at the PhRMA annual meeting.

"I've been around this town just long enough to know people are pretty good at killing things if they want to approach it reflexively," he said.

The CMS proposals are intended to reduce Medicare's costs for some of the top-selling biologics while improving outcomes for patients (see "Part B Targets," page 3).

They include some reforms that pharmaceutical industry leaders have advocated and are experimenting with on the private payer side, including outcomes-based payments, reducing or eliminating drug co-pays and indication-specific pricing.

The Medicare agency also wants to experiment with payment structures the drug industry considers toxic, notably reference pricing, which sets a maximum price for all drugs in a therapeutic class.

PhRMA, BIO and individual drug companies are already working to persuade Congress to block, cripple or delay the demonstration project.

The drug industry's response is muted compared to the uproar from oncologists who are apoplectic because CMS's proposed value-based payment experiments are predicated on slashing the add-on fees physicians receive for the administration of Part B drugs.

Influential Republicans, including Senate Finance Committee Chairman Orrin Hatch (R-Utah), House Ways and Means Committee Chairman Kevin Brady (R-Texas), and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.), have already expressed opposition to the plan.

Phase one

CMS plans to implement its Part B drug proposals in two phases. The first phase involves changing the formula for add-on payments that physicians and outpatient facilities receive for

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