Since 2005, Medicare Part B has successfully used a market-based reimbursement system to manage medication spending while also providing patients with access to the medicines they need. Medicare payment for Part B medicines is based on the medicine’s average sales price (ASP), which is updated and reported to the government on a quarterly basis. The ASP, which is the weighted average of all manufacturer sales prices and includes all rebates and discounts that are negotiated, allows the government and seniors to benefit from discounts negotiated on physician-administered medicines in the commercial market. In fact, an analysis found that the ASP reimbursement model saved the government and seniors a total of $132 billion in Part B medicine spending from 2005 to 2017.
Spending on Part B medicines is a fraction of total Medicare spending – less than 5% in 2019. Research has found the volume-weighted ASP for Part B medicines has remained steady year over year, suggesting that prices for these medicines are not a key driver of Part B program costs. Another reason for this is the increasing uptake in the use of biosimilars. From 2015 to 2020, the FDA has approved an increasing number of biosimilars for physician-administered medicines. A biosimilar is a type of biologic, which is a medicine made from living organisms through highly complex manufacturing processes. Physician-administered biosimilars are anticipated to save more than $100 billion in aggregate over the next 5 years.
It is often the sickest patients or those without other options who rely on Part B medicines. As such, it is critical that any changes to Part B preserve their access to these treatments.
Unfortunately, in the Inflation Reduction Act of 2022, Congress implemented price setting policies that change how doctors who administer selected Part B medicines are paid, making it even more difficult for them to furnish needed medicines to their patients. But the effects of these policies don’t just impact doctors. These changes mean that doctors may now not be able to afford to administer certain medicines, disproportionately affecting rural areas, potentially reducing access to treatments and forcing seniors to travel farther to get the care they need.
The Centers for Medicare & Medicaid Services (CMS) has also pursued coverage policies that restrict access to certain medicines in Part B. In April 2022, CMS finalized a national coverage determination (NCD) for certain new Alzheimer’s treatments. For the first time ever, CMS is forcing Medicare patients into highly restrictive research studies to gain access to these new Alzheimer’s medicines that have been approved by the U.S. Food and Drug Administration as safe and effective. With this coverage decision, CMS is standing in between doctors, Alzheimer’s patients and their caregivers, preventing them from deciding whether a particular FDA-approved medicine is the right option for them.
Medicare was created to provide access to treatments and care for our nation’s aging population, yet Congress and the administration have finalized policies that threaten that access.
Instead, policies are needed that modernize how Medicare covers and pays for medicines – but don’t put patient access to medicines at risk. For example, manufacturers could be required to provide an additional discount to Medicare, or a market-based adjustment, for prices that fall below the ASP. This change would allow the government and seniors to benefit from more of the savings already negotiated in the commercial market and could save some seniors hundreds – if not thousands – of dollars each year, without risking patient access to medicines.