Medicare's plans to overhaul the way it reimburses doctors and hospitals for the more than $20 billion worth of outpatient drugs they administer each year has sharply divided the provider community. The fault lines roughly align with the stakes in the status quo.
The is intended to test the effectiveness of strategies that remove the profit motive from using more expensive drugs over cheaper alternatives.
Although some physicians would actually end up with higher payments, the plan would deliver a blow to those in a handful of specialties, particularly oncologists, ophthalmologists and rheumatologists, who earn substantial shares of their revenue from Medicare's longstanding method of paying them a drug's average sales price, or ASP, 6%.
“It's basic economics, if you look at oncology practices, the majority of the revenue is coming from drug sales,” said Neeraj Sood, director of research at the at the University of Southern California. “Doctors are human. The fact is, this model changes how much money they'll make.”
The first change that the Center for Medicare and Medicaid Innovation would test under the pilot would be to pay 2.5%, a flat fee of $16.80 (instead of 6%) on top of the ASP. That means reimbursement would go up for lower-priced drugs and down for expensive drugs.
The CMS estimated in the proposed rule (PDF) that Part B payments to medical oncologists—$1.2 billion in 2014, including the acquisition costs—would decline by 0.7%, compared with a 1.3% increase across all specialties.