The official journal of ISPOR, Value in Health, has released a report introducing a reimbursement strategy for costly Medicare Part B drugs that offer limited therapeutic benefits. The study identified these expensive drugs and assessed their therapeutic value. For drugs with minimal added benefits, the authors created a model to estimate potential savings for Medicare Part B in 2019 by implementing a domestic reference pricing policy. The policy involved setting reimbursement rates for expensive Part B drugs at the level of the lowest-cost comparator (Scenario 1) or at the weighted average cost of all comparators (Scenario 2).
According to co-lead author Kelly E. Anderson, Ph.D., this Scenario 1 policy, where expensive drug prices are based on spending for their lowest-cost comparator drugs, could have saved traditional Medicare over $2 billion in 2019. Alternatively, adopting Scenario 2, where prices are based on the weighted average of spending for comparator drugs, would have translated to $1 billion in savings.
The report highlights that the share of overall Medicare Part B drug spending attributable to expensive drugs increased from ~47% to ~60% between 2015 and 2019, even though only 1.3% of Part B beneficiaries used these drugs in 2019. Historically, the Medicare program has not negotiated the purchase price of Part B drugs and has paid clinicians based on the average sales prices of the drugs plus a percentage add-on payment, as well as a fixed fee linked to the infusion’s time and complexity. However, the Inflation Reduction Act creates an opportunity for the Centers for Medicare and Medicaid Services to establish the infrastructure for conducting comparative effectiveness assessments to support a domestic reference pricing policy. This pricing proposal could have saved traditional Medicare at least $1 billion in 2019.
The authors emphasize that this reference pricing proposal is distinct from others because it focuses on the most expensive drugs with minimal added benefits, addressing situations where price and value misalignment is likely. This approach offers an alternative to cost-effectiveness analysis for better-aligning drug prices and value in the U.S. healthcare system. While cost-effectiveness analysis remains important, considering alternative approaches for price-value alignment is politically viable.
Co-lead author Michael J. DiStefano, Ph.D., suggests that reference pricing based on added benefit assessments could be employed to tackle high drug launch prices and situations where competition has failed to reduce prices. The majority of total savings under both policy options would be for drugs in the category of ‘antineoplastic and immunomodulating agents,’ with estimated annual savings totaling $1.5 billion under the lowest cost comparator policy option and $729 million under the weighted average of comparators policy option.
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