Controlling Prescription Drug Costs

Donna White

Donna White

By Donna White, Principal Consultant and Owner of Legacy Consulting Services and Legacy Billing Solutions in Montgomery, Alabama.

Last week, the Trump administration announced the first mandatory CMS pay model to reign in the cost of prescription drugs. This proposal from the Department of Health & Human Services is a two-step process.

One would be to decrease drug rates paid by Medicare Part B by indexing them to be in line with the lower prices paid by other developed nations. The other would be to change the way physicians are paid for administering drugs.

This would be a gradual shift for Part B Medicare payment on drugs, which would include cancer drugs and biologics. This would be a first for the U. S. Government. It may even open the door to comparable pricing for medical devices and other products.

As for the way physicians are paid, currently providers are reimbursed 6% on top of the average sales price of the drug. This didn’t encourage providers to control costs.

The new proposal would change how drugs are purchased. Rather than buying the drugs and then billing them under Part B, CMS itself would contract with private vendors and distribute the drugs to providers. According to research, CMS feels this will create more competition and a lowering overall of costs.

Providers would receive set payment amounts for both storing and the handling of drugs. CMS proposes that this will remove the financial incentive to prescribe higher-cost drugs.

The movement to this new pay model would be over 5 years and would apply to 50% of the country, which areas, however, we do not yet know. This model would also cover most drugs covered under Medicare Part B.

CMS notes that there will be every effort made to pursue and include provider feedback in the model’s final version. Political analysts believe that Democrats may be more willing to move in favor of this change than Republicans were of a previous Obama-era model that never came to pass.

What are your thoughts on this proposed model? Please leave comments below.

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