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FAH Comments on International Pricing Index Model ANPRM

December 21, 2018 | FAH Policy Blog Team

Category: Pharmaceuticals

Today, the FAH commented on the Administration’s International Pricing Index Model for Medicare Part B Drugs Advance Notice of Proposed Rulemaking (ANPRM).  The ANPRM signaled the Administration’s interest in testing an Innovation Center model which would dramatically change the manner in which Part B drugs are priced, acquired and paid for in the Medicare program.

Under current regulation, separately payable Part B drugs are reimbursed at Average Sales Price (ASP) plus a six percent add-on.  Under the current framework, hospitals and physicians acquire the drugs and then bill Medicare for payment.  As described in the ANPRM, HHS is considering a mandatory demonstration in certain unspecified geographic areas where HHS would contract with certain vendors to supply these Part B drugs to hospitals and physicians.  Under the model, the vendors, instead of hospitals and physicians, would acquire and bill for the specified Part B drugs.  HHS contemplates single source drugs and biologicals being tested first.  Vendor payment would no longer be calculated as ASP plus six percent but rather would be set through a calculation that, relying on a benchmark of international pricing for those drugs, would move payment closer to the lower, international payments. 

In responding to the proposal, the FAH stated its support for CMS’s goals of reducing Part B drug costs for Medicare beneficiaries, maintaining financial stability and reducing burden for physicians and hospitals, and addressing the disparity in drug prices between the U.S. and other countries. However, the FAH conveyed its concern that the system CMS is planning to implement will be highly disruptive to the current Part B drug distribution system and will be more burdensome, rather than less burdensome, to the hospitals and physicians that will be mandated to participate in the model. Further, the FAH noted its concern that the model may increase international prices rather than lower U.S. drug prices and potentially increase US prices for physicians and hospitals not within the bundle.

Should the Administration proceed with the model, it will likely issue a Proposed Rule some time next year at which point the FAH will evaluate it and submit comments.

The FAH’s comment letter can be viewed here