Medicare To Test New Doctor Payments for Drugs

The Obama Administration announced a pilot project this week to alter physician incentives for higher drugs through the Medicare Part B program. Part B reimburses doctors for drugs provided during outpatient hospital and physician treatment according to the average sales price of the drug along with a six percent mark up.

The new pilot programs will test several new approaches to decrease the incentive for doctors to choose more expensive medicines because they are reimbursed more by the federal government. In one test, the physician will instead receive a 2.5 percent markup and a flat payment per day of $16.80. In another, the drug’s effectiveness would be linked to the level of reimbursement.

Surging pharmaceutical prices over the last decade have resulted in increased Medicare spending. In 2014, Medicare Part D paid nearly $5 billion for hepatitis C drugs. Gilead priced its initial entry into this market, Sovaldi, at $84,000 for the treatment regimen. There have since been other entries into the market, including Gilead’s Harvoni. A report by the Associated Press put the figure for spending on the new hepatitis C drugs in 2015 at over $9 billion.

The cost of cancer treatment has also been spotlighted among rising drug prices. It generally costs more than $100,000 now for the drugs that are used to treat cancers. Physicians have strongly criticized the pharmaceutical industry in recent years for pricing the treatments at a cost prohibitive amount for most families in the United States.

The pilot programs will not do anything to reduce or prohibit high drug pricing, but will take aim at the financial incentive to doctors to prescribe them when other, more affordable, options are available. Medicare expects the pilot programs will be budget neutral.

This news isn’t particularly relevant to health care whistleblowers, because we don’t expect that this will lead to any False Claims Act cases. But as the fight against health care fraud works in tandem with the efforts to keep Medicare spending lower, it is something that we try to stay up to date on.