Legislation intended to derail an Obama administration proposal for overhauling Medicare Part B would cost $395 million over 10 years, according to a new estimate by the Congressional Budget Office.
The analysis, which was released on Tuesday, suggested the actual cost could reach $1.1 billion, but that the difference would likely be offset by other projects that could later be implemented to reduce federal spending on prescription medicines.
The analysis, which was issued in advance of a final rule on the proposal by the Centers for Medicare and Medicaid Services, comes amid ongoing debate over the proposal.
The administration wants to encourage greater use of lower cost, but equally effective, medicines covered by the Part B program, which pays for injectable and infused drugs for the elderly. The move, designed to lower drug spending by reducing reimbursement fees for doctors, reflects growing concern over the rising cost of medicines, which is straining public health programs.
The administration hopes to lower its drug spending by reducing reimbursement fees for physicians. But ever since CMS unveiled its proposal two months ago, there has been a rising backlash from some lawmakers, physicians, patient groups, and drug companies, which argue that the initiative will ultimately harm patients and raise costs.
The first phase of what would become a five-year, national test involves altering the reimbursement formula for physicians. Physicians are supposed to be reimbursed the average sales price of a medicine plus another 6 percent, although budget sequestration changed that to 4.3 percent. CMS is proposing they be paid the average sales price, as well as 2.5 percent and a flat fee of $16.80.
As far as CMS is concerned, this would provide greater payments for lower-cost generics. The agency also maintains its plan will be budget-neutral, which is a way of saying it will not cost the government any additional money. Later, CMS plans a second phase involving some of the same tools, such as pricing based on a drug’s approved indications, used by commercial health insurers to lower drug costs.
So far, Republicans oppose the plan and Democrats appear to support the notion but have indicated some changes are necessary. The plan has also prompted opposition from physicians, who fear they will see lower revenue, and patient advocacy groups, although a recent analysis found most of the groups received funding from the pharmaceutical industry.
As we have noted previously, beyond a potential hit to revenue, drug makers see the proposal as a litmus test to demonstrate the political muscle needed to discourage other attempts to attack pricing. In particular, drug makers want to demonstrate there would be resistance to allow Medicare Part D to negotiate prices. The industry trade group filed these remarks to CMS last May.
Some consumer groups, however, back the proposal with few reservations. “The proposed rule would enhance the doctor-patient relationship by limiting the financial incentives to prescribe costlier treatments,” according to a blog post by Maura Calsyn, director of health policy at the Center for American Progress, earlier this year.