PharmExec Blog

Medicare Data Raises Questions About Drug Costs

The recently released Medicare data on payments to individual doctors doesn’t provide specifics on prescription drug outlays, but opens the door to scrutiny of Medicare reimbursement for medicines delivered in physician offices, writes Jill Wechsler.

The Centers for Medicare and Medicaid Services (CMS) has released data on payments to some 880,000 healthcare providers who collectively received $77 billion in Medical Part B fee-for-service payments in 2012. It’s part of the government’s “transparency” campaign to better inform the public and healthcare entities about spending and costs in the delivery system. The American Medical Association blasted this “data dump” as likely to confuse the public and “destroy careers,” which may be valid complaints as journalists, analysts, and plaintiffs’ attorneys begin to troll the data set.

For example, the information indicates that oncologists and ophthalmologists received some of the highest reimbursement. And CMS notes that these specialty groups are heavy users of Part B-covered prescription drugs, which Medicare pays for as part of its fee to the doctor. The payment formula is set by law at 106% of the average sales price (ASP) for Part B drugs, the 6% intended to cover the cost of delivery, explained CMS principal deputy administrator Jonathan Blum in a press briefing. He acknowledged that the high payments to these providers reflect the high cost of many of the drugs they purchase and administer to patients. A logical question is whether this payment structure encourages doctors to prescribe more costly drugs.

For example, about 3300 ophthalmologists received a total of $3.3 billion for treating age-related macular degeneration, according to analysis by the New York Times. One explanation is that many of these heavy billers make extensive use of Genentech’s Lucentis for treating this condition, as opposed to off label use of Avastin, which is a fraction of the cost.

CMS hopes that disclosure of this payment information will help uncover fraud and waste, as might be the case with doctors ordering excessive numbers of tests or using pricey brand medications when less costly generics or alternatives are available. While it’s not fraudulent for doctors to prescribe expensive therapies for approved indications, this might fall under the heading of “waste.” CMS aims to “raise those issues” that drive Medicare costs, said Blum, and patient co-pays, which amount to 20% of the cost of Part B drugs.

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2 Comments

  1. Larry Shoemaker
    Posted April 24, 2014 at 3:03 pm | Permalink

    The brand vs generics argument. Cost vs benefit. Of course, CMS knows all, sees all. That’s why they know that generics work as well as brand drugs. Maybe. Are there guidelines for the use of generic or brand drugs; besides cost or “waste”? Might brand drug’s formulation differ enough to produce better (cost effective) outcomes?

  2. TD Fletcher
    Posted April 25, 2014 at 8:57 am | Permalink

    Larry I agree with your comments. Poor example of brand vs. generic (lower cost product)…, In this case Lucentis (“higher cost” branded) has the indication and Avastin (“low cost” alternative) is not indicated for macular degeneration. Although I am aware of the fact that healthcare providers routinely use products outside indication; none-the-less, it is frowned upon by the FDA. Unless the lower cost branded, generic, or in a biologics case, a biosimilar company wants to invest the money in gaining the indication, this argument is weak at best. Having said that, there are better examples to aid in the argument; yet there are still other factors outside indication, cost that come into play. Dosage = adherence, Formulation = reducing abuse potential, etc. In some cases, the “train has left the station,” and CMS better get on board quickly.

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