Last night, Politico reported that CMS was officially dropping efforts to finalize the Medicare Part B Drugs Payment Model (or Part B Drug Demo). The announcement, to us anyway, was the inevitable end for a proposal that was poorly researched, ill-concieved, and politically reckless.
The Part B Drug Demo was, at least in theory, designed to "do something" about drug prices, serving as a legacy item for the outgoing Obama administration and a platform on which a Clinton Administration could build drug pricing policy. Unfortunately, phase one of the proposal would have cut reimbursement for Part B drugs from ASP plus 6 percent (4.4 percent after sequestration) to ASP plus 2.5 percent (0.9 percent after sequestration) plus a flat fee of $16.80. The drugs most affected were for the treatment of cancer, macular degeneration and rheumatoid arthritis. While larger research universities may have been able to overcome the price cut through new, negotiated prices with manufacturers//distributers, smaller, community practices would not. It was that constiuency that offered the most strident objections backed by the pharmaceutical industry.
Yesterday's announcement comes as little surprise to us. In May the White House's Office of Management and Budget established a 2019 date for finalization of the proposal. That move was dismissed by CMS. “Folks, we haven't announced or signaled anything." said CMS spokesman Aaron Albright on Twitter. CMS, apparently had forgotten that Agriculture Secretary Tom Vilsack had termed OMB "God on earth." In October, however, CMS Acting Director Andy Slavitt was walking back the schedule. Yesterday's announcement completes the pivot OMB began seven months ago.
The, now official, demise of the Part B Drug Demo is a huge win for PhaRMA. They had defined success as complete defeat of the Demo and were not willing to be satisfied with even a much reduced proposal. The victory is an important one as the Trump administration has signalled some interest in addressing drug price growth - albeit in a pretty non-specific, 140 character way. Republicans, who have historically been a tad bit more sympathetic to PhaRMA than Democrats - though most of the time it has been hard to discern much of a difference - have grown weary of defending the industry in the face of public relations disasters like VRX and MYL.
The politics and policy of drug pricing will continue to be a hot debate - an inevitible result of the ever increasing role drug costs play in the national health care expenditures. The Part B demo win means that PhaRMA will continue to have a seat at the table and to quote former PhaRMA President and CEO, Billy Tauzin, not "be the meal."
Call with questions. We are open 24/7/365
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans