5:34 PM
Nov 02, 2018
 |  BioCentury  |  Finance

Part B exposure

Why investors aren't worried about Medicare Part B reforms, at least not yet

HHS Secretary Alex Azar's proposed changes to Medicare Part B have put at least four large biopharmas at risk of substantial U.S. revenue losses. But the lack of market reaction and the views of VCs interviewed by BioCentury suggest stakeholders are skeptical the proposed modifications will become a reality.

On Oct. 25, the Trump administration proposed three major changes to the reimbursement system for drugs covered under Medicare Part B, which include products that are infused or injected under a physician’s supervision.

Instead of physicians and hospitals purchasing drugs and getting reimbursed their average sales price (ASP) plus a 6% payment for drug handling, Azar's plan would move drug purchasing to a third party and replace the 6% add-on with a flat payment that isn't tied to drug price.

It would also replace ASP with a price linked to an international pricing index (IPI), which could threaten future Part B revenues.

Under IPI reference pricing, a Part B drug would be reimbursed at a predetermined percentage above the average price of the drug across a group other Western nations.

The scheme would lower the prices of nearly all drugs covered under Part B, according to an HHS analysis that showed Medicare Part B pays 1.8-fold higher prices than the average price for the same...

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