Trump Administration proposes a new drug pricing plan

| November 12, 2018

Trump Administration proposes a new drug pricing plan

The Trump Administration recently issued what is called an “Advanced” Notice of Proposed Rulemaking (ANPRM) to consider changes to what and how Medicare Part B pays for physician administered drugs. Unlike a Notice of Proposed Rulemaking (NPRM), which is a formal proposal submitted for public comment, an ANPRM is a less-formal initiative intended to open a public dialogue about ideas the administration is considering.

Under this ANPRM, the Trump Administration is signaling its desire to dramatically reduce the amount of money the federal government – and Medicare beneficiaries – pay for physician-administered prescription drugs by linking these Medicare Part B payments to prices paid by consumers in other developed nations.

If this approach was adopted, the Trump Administration estimates it would save the federal government and Medicare beneficiaries more than $17 billion over the next five years.

Although this proposal would be exclusively applied to Medicare Part B, many health policy analysts believe it could easily find its way into how commercial insurance companies and Medicaid determine payments for physician-administered drugs.

According to the background information presented as part of this initiative, it is not uncommon for U.S. consumers to pay two and a half to three times as much for a drug as is paid for the same exact drug in other economically developed countries. Here is an example cited in a paper prepared by Health and Human Services officials.

Comparison of U.S. and International Prices for Top Spending Medicare Part B Drugs, U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation

Product U.S. Price (per gram) U.S. Price divided by Average International Price U.S. Price divided by Canadian Price
Xolair (omalizumab) $6,128 2.2 1.8


That’s why the Trump Administration is considering a proposal to link Medicare Part B payments for physician-administered drugs to the International Pricing Index Model. The proposal, if it moves beyond this discussion phase, would also change the way Medicare Part B pays the physician for the administration of these drugs.

Under the International Pricing Index Model, payments for Part B drugs would shift to align more closely with prices in other countries. Initially, the model would be tested in different regions of the country rather than nation-wide. Physicians practicing in the selected regions would be required to use the new model.

As part of this initiative, the Administration is also proposing to change the way Medicare determines how much it will pay physicians to administer these drugs.

Currently, physicians are paid an amount equivalent to 6% (technically 4.3% due to sequestration) of the Average Sales Price to administer certain drugs covered by Medicare Part B. Critics of this approach argue that it creates an incentive for physicians to order higher cost drugs because the higher the cost of the drug, the more money the physician receives to administer the drug.

The discussion draft would also create a new “middle man” who would actually do the drug purchasing on behalf of the government. This vendor could be, for example, a large health care provider organization, an existing Pharmacy Benefit Management Company or a Group Purchasing Organization. These vendors would then distribute the drugs to the physicians upon request.

Instead of each physician purchasing the drugs they needed for patients from the pharmaceutical company, the vendors would purchase drugs in bulk, securing potential volume discounts on behalf of Medicare and Medicaid beneficiaries.

The proposal envisions multiple vendors so that they would compete with one another for business to ensure best pricing is passed along to the consumer and the government.

Stakeholders wishing to comment on this ANPRM must submit their comments by Nov. 29.

Should this move forward, and CMS issue a formal NPRM, this will opened for public comments (normally 60 days).

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