On October 25, 2018, the Centers for Medicare and Medicaid Services (CMS) released an advance notice of proposed rulemaking (ANPRM) to solicit feedback on its newly proposed International Pricing Index (IPI) model for Medicare Part B drug reimbursement.  The IPI model will be tested by the CMS Innovation Center as a potential means to dismantle and replace the current buy-and-bill model and advance the Trump Administration’s agenda for drug pricing reform, as described in its May 2018 Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.  The framework of the IPI model is characterized by three components designed to achieve the following objectives:

  • Utilize private sector vendors to purchase and take title (but not necessarily possession) over single source drugs and biologicals (including biosimilars) and bill Medicare.  The vendors would then have flexibility to offer a variety of delivery options to ordering physicians.  This concept, which was inspired by Medicare Part D’s use of competing private-sector companies to facilitate the provision of Medicare-covered items and supplies, would leverage and improve upon the Competitive Acquisition Program (CAP) previously implemented in the mid-2000s.
  • Phase in, over a five-year period, a reduced Medicare payment for selected drugs based on a composite of international prices.  CMS would reimburse vendors for drugs purchased from manufacturers based on international pricing (except where the ASP is lower), as benchmarked against more than a dozen other nations with economies comparable to the United States that have significantly lower acquisition costs for physician-administered drugs.
  • Replace the percentage-based Part B add-on payment (i.e., ASP+6% (ASP+4.3% post-sequestration)) with a set payment amount, which would be based on 6% of a Part B drug’s historical drug costs.  Under the new model, physicians would continue to receive payment for drug administration.  Because physicians would be obtaining drugs from vendors, and no longer assuming financial risk, the add-on payment would be decreased to remove physicians’ incentive to prescribe higher cost drugs but be calibrated to hold providers harmless to the extent possible.

CMS plans to issue a proposed rule fully describing the IPI model in Spring 2019, with the goal of testing the model over a five-year period, from Spring 2020 to Spring 2025.  The IPI model would involve selected Part B-covered single source drugs and biologicals (including biosimilars) and would apply to all physician practices and hospital outpatient departments (HOPDs) in certain designated geographic areas.  Providers, beneficiaries, and drugs not included in the model will remain under the current Medicare Part B reimbursement system.

The ANPRM signals the Administration’s determination to dramatically overhaul the Medicare Part B drug reimbursement system through a new competitive acquisition program based on international pricing that would seek to reduce government and beneficiary costs while keeping providers revenue neutral.  While CMS appears committed to the general outlines of the IPI model, it has invited industry feedback on a wide range of matters pertaining to the configuration and details of each of the model’s components as well as certain quality measures that CMS will consider in assessing the impact of the model on beneficiary access and quality of care.  Stakeholders have until December 31, 2018 to submit comments on the ANPRM.

Epstein Becker Green (EBG) will be closely analyzing the proposed IPI model and related developments while working with its clients to assess its impact and formulate and advance new ideas to shape the model and its future implementation.

Back to Health Law Advisor Blog

Search This Blog

Blog Editors

Authors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Health Law Advisor posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.