The bigger question is whether HHS will need to get congressional approval in order to change the way that government pays for drugs in Part B. Under current law, the government pays full list price for those branded drugs — which are administered by physicians through injections or infusions — plus a 6 percent markup for physicians.
“Medicare, when it was set up, was built on the model which was essentially, ‘Tell us what it cost and we’ll pay you,’ … a cost-based reimbursement model,” which is why the government doesn’t negotiate prices under Part B, said David Hyman, a professor at Georgetown University Law School.
Medicare Part D drug plans were enacted as part of the Medicare Modernization Act of 2003 and were set up under a private market model in which pharmacy benefit managers can negotiate discounts.
“You can’t merge Part B into Part D in the big-picture sense of it without getting Congress to enact amendments to either of the pieces that adopt them,” said Elizabeth Mann, an attorney with Mayer Brown, who co-leads the law firm’s health-care practice.
Getting a bill passed to overhaul the program completely could be a tall order politically. However, the administration could make substantial changes to Part B through regulatory authority, according to Mann.
“CMS could write a set of regulations that I think permit the buying efficiencies of Part D to be made available in the Part B universe,” she maintained. “I think they could come up with any number of tools that would permit or require … (doctors) purchase (drugs) at the lowest-price seller. And the lowest-priced seller could be the Part D administrators.”
If it’s that easy, why hasn’t it been done before? Georgetown’s Hyman thinks it’s because such a move would likely go beyond the administration’s regulatory authority and would certainly be challenged in court.
“It will be much more straightforward and legally defensible to say ‘we’re going to do a demonstration on the following drug’ where we want to figure out whether this will actually work,” Hyman said. “You want to pick ones where you think you’d have an impact.”
He said the administration could set up a demonstration through the Centers for Medicare and Medicaid’s innovation center, targeting high-priced brand-name drugs in Part B that have lower-priced competitors, which are equally effective.
“That’s not just low-hanging fruit, but fruit that’s lying on the ground, waiting to be picked up,” he said.