MedPAC Brainstorms Policy Options to Increase Medicare’s Ability to Negotiate Drug Prices and Considers Expansions of the Open Payments Program - McDermott+Consulting

MedPAC Brainstorms Policy Options to Increase Medicare’s Ability to Negotiate Drug Prices and Considers Expansions of the Open Payments Program

Summary and analysis of issues discussed during Day 2 of the September MedPAC meeting, including Medicare’s ability to negotiate drug prices and expanding the Open Payments program.

On September 11, 2015 the Medicare Payment Advisory Commission (MedPAC) concluded its September 2015 meeting. On this second day of the meeting MedPAC focused on how Medicare pays for drugs and payments to physicians and teaching hospitals from manufacturers. Highlights from the first day of the meeting are available here.

MedPAC explored both the magnitude of Medicare drug spending as well as the various payment methodologies within the Medicare program for drugs (including, bundled into the payment for the procedure, ASP +6 percent, capitated payments based on benchmarks and bids). In 2013, 19 percent of Medicare program spending was on drugs, of this 13 percent was on retail spending for prescription drugs. In contrast, retail spending for prescription drugs was 9 percent of national health expenditures. Commissioners agreed with the conclusion of the staff presentation that Medicare’s influence over drug pricing is limited. The commissioners’ discussion explored various policy levers that could increase the agency’s influence over drug pricing. Potential options that were raised include competitive bidding, an increase in the Secretary’s authority that would provide greater latitude for Medicare to negotiate in this area and limited antitrust waivers that would allow Part D contractors to come together to negotiate prices with manufacturers. While the focus of the discussion was on increasing the capacity of Medicare to negotiate for better prices, the issue of how prescribing patterns and utilization can drive prices was also discussed. Along these lines, the question if policy options that more appropriately incentivize prescribing physicians should be considered was raised. MedPAC will further explore these issues at future meetings during this report cycle.

MedPAC staff also provided results from an analysis of 2014 data from the Open Payments program. Open Payments is a publically available database of payments and other transfers of values made to physicians and teaching hospitals by manufacturers and group purchasing organizations. Open Payments was implemented in 2013, but back in 2009 MedPAC originally recommended to Congress that such information should be made publically available. In 2014 payments to physicians and teaching hospitals totaled approximately $6.5 billion with the vast majority (80 percent) going to physicians. When looking at general payments made to physicians (excluding research payments and ownership/investment interests), the top 5 percent of physicians accounted for 86 percent of total dollars and the top 10 percent accounted for 91 percent of total dollars. Orthopedic surgery was the top specialty accounting for 23 percent of payments, followed by cardiology and internal medicine each receiving 6 percent of payments. While no formal recommendations were considered, commissioners were supportive of expanding reporting requirements beyond physicians and teaching hospitals to other health professionals and organizations. There was also a discussion on the implications or impact of these payments. Commissioners asked staff to examine the relationship between physician prescribing behavior and payments they receive from manufacturers. MedPAC will continue to further explore these issues at future meetings.

The agenda and presentation slides are available on the MedPAC website. The next MedPAC meeting is scheduled for October 8-9, 2015.