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Drug payments under Medicare Part B could be cut by reducing the administrative fees doctors get for dispensing medications in their office, the Medicare Payment Advisory Commission (MedPAC) said Thursday in its .

"Our work on Medicare spending for Part B drugs is driven largely by the growth in spending between 2009 and 2021," explained MedPAC executive director James Mathews, PhD, on a call with reporters. "Medicare spending grew an average of 9% per year over that time, with most of the spending growth attributable to the change in price for the drugs that Medicare pays."

The report made three recommendations for curbing Part B drug spending:

• For drugs that are approved by the FDA under an accelerated approval pathway, the HHS secretary could cap the prices that Medicare pays for drugs under certain circumstances. "These would include things like a drug has missed its deadline for confirmatory trials, or the confirmatory trials do not confirm the drug's purported effectiveness, or the drug is covered under a '' policy," Mathews said. "We would also recommend that the secretary be given the authority to cap payments for drugs covered under Part B if the price for the drug is excessive relative to its clinical validity."
• Congress could give the HHS secretary authority to use reference pricing. "Here we would establish a single payment rate for groups of drugs and biologics with similar health effects," he said. "This would serve to bring a greater competition to this space and over time will result in lower prices that Medicare pays."
• Medicare could change the current "ASP plus 6%" payment formula. Under the current formula, physicians who dispense Part B drugs in their offices are paid based on the drug's average sales price (ASP) plus a 6% administration fee, which means that the higher the ASP, the larger the administrative fee they receive. MedPAC recommended that the administrative fee be lowered as the price of the drug increases. "The goal is to make prescribers somewhat more sensitive to the cost of the drugs that they prescribe, and reduce the financial benefit of prescribing a higher-cost drug when a lower-cost drug is available and clinically appropriate to use," said Mathews.

At least one physician group was not happy with the proposal to change the ASP-plus-6% formula. "While we support efforts to rein in the cost of prescription drugs, we firmly believe that this policy would jeopardize provider practices and patients' health by reducing access to life-changing provider-administered therapies," Douglas White, MD, PhD, president of the American College of Rheumatology (ACR), said in a statement. "We urge Congress to address the high cost of drugs at the root cause, like the opaque pharmacy benefit manager business practices, and not at the expense of providers."

The 6% of the ASP add-on does not incentivize high-cost treatments, but rather offsets the costs of acquiring, storing, and administering treatments, the ACR said in the statement. "As written, MedPAC's recommendation would force providers to cut back on offering cutting-edge therapies or offer these medications at a loss, severely limiting patients' access to medication and threatening practice viability."

The report also addressed the issue of differing payment rates to outpatient physicians depending on whether a particular service is provided at a hospital outpatient department, an ambulatory surgery center, or a physician office. MedPAC recommended a "site-neutral" payment approach in which the payment is the same regardless of where the service is provided.

Initially, this change would be budget-neutral, so any savings gained by aligning the payments would be spent on other outpatient services that don't fall into the site-neutral category. "But over time, we are thinking that changing payment rates in a site-neutral manner would produce savings in the future by reducing the incentives for hospitals and health systems to acquire physician practices," Mathews said.

The report also addressed disparities in outcomes for Medicare beneficiaries with varying social risks. The MedPAC researchers looked at various outcomes for beneficiaries, including avoidable hospitalizations, avoidable emergency department use, and successful discharge to the community from skilled nursing facilities and home health agencies.

"What we have found is that low-income Medicare beneficiaries ... consistently have worse outcomes than higher-income beneficiaries," said Mathews. "And we also find that Black and Hispanic beneficiaries tend to have poorer outcomes than white [and] Asian American beneficiaries," even within the same income categories, he added.

The commission didn't make any firm recommendations on the issue but "we are discussing commission support for accounting for patient risk in quality payment programs," Mathews said. "We also are supporting the notion of publicly reporting provider quality data stratified by social risk factors, and we are starting to discuss the potential to include a measure of disparities in Medicare's quality payment programs."

In other MedPAC news, the commission announced on Wednesday in an email that Mathews will be stepping down from the executive director post at the end of August; he worked for the commission for 16 years, and became executive director in November 2017. "MedPAC and the country are much better off because of his service. Jim has been unbelievably dedicated to the commission and has been an exceptional leader," said Michael Chernew, PhD, MedPAC's chair, in a statement. "It has been a privilege to work with, and learn from, him. I will miss him on a personal and professional level."

Mathews' replacement will be Paul Masi, MPP, unit chief of Medicare Cost Estimates for the Congressional Budget Office.

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