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Post-Election, Part B Drug Reform Is Likely to Advance

Summary

Avalere analysis finds that most of the payment reductions from the proposed International Pricing Index Model for Part B drugs would affect oncologists, rheumatologists, and ophthalmologists.

While mid-term election outcomes will influence the congressional drug pricing agenda, the administration remains committed to advancing policies outlined in its drug pricing Blueprint through the regulatory process and its waiver and demonstration authorities. In particular, the recently proposed International Pricing Index (IPI) Model would introduce significant reforms to pricing, reimbursement, and distribution of drugs covered under the Medicare Part B benefit.

As currently proposed, Avalere analysis finds that more than 60% of the drug payment reductions from the proposed IPI Model would occur for drugs administered by oncologists, rheumatologists, and ophthalmologists. If the IPI index was constructed to include the 27 drugs highlighted by the administration for potential inclusion in the Model, then 20 of those drugs would see a price reduction averaging 42%, and the other 7 would receive no price reduction. Price reductions would range from 0% to 82% for the 27 drugs.

The Model features a combination of 3 concepts previously discussed by the Trump administration and organizations such as the Medicare Payment Advisory Commission (MedPAC), including:

  • International Price Referencing: Implement an International Pricing Index (IPI) to benchmark US drug prices to those of other countries
  • Elimination of Provider Buy and Bill: For providers and drugs included in the Model, eliminate provider purchasing of included drugs
  • Introduction of Third-Party Vendor: Leverage independent vendors to negotiate prices for certain Part B drugs and replace providers’ role in buy and bill

While several of these policy levers have been contemplated on their own, when combined they could have a multidimensional impact on the market. Accordingly, stakeholders will need to assess the interaction effects within the Model and potential spillover effects outside of the Model.

Several key outstanding questions and considerations regarding the IPI Model should be evaluated:

  • Model structure and evolution. Stakeholders should consider the potential evolution of the IPI Model over the 5-year proposed period (e.g., the set of drugs included, actual IPI target prices, changes in prices abroad), and the interplay with ongoing CMMI models (e.g.,Oncology Care Model)
  • Provider implications. The elimination of buy and bill for some products, coupled with reimbursement changes and the provider’s role in collecting patient cost sharing, may create “winners” and “losers” by provider specialty (and within specialties) and could affect provider prescribing incentives and finances. These effects are relevant to providers both in and out of the Model. Stakeholders should clearly understand the potential financial implications of the demonstration on providers and what it means for prescribing behavior
  • Vendor role and leverage. There may be differential considerations based on the participating Vendor entity or entities (e.g., GPO, wholesaler, Part D plan) and Vendor payment structure (e.g., potential for shared savings). A critical element to the proposed Model is the leverage of IPI Model Vendors to negotiate prices that are below Medicare reimbursement at IPI rates
  • Downstream and spillover implications. The Model could have downstream implications for other federal pricing and reporting programs (e.g., 340B Ceiling Price, Medicaid Best Price, etc.), and spillover effects on pricing and negotiations in other market segments (e.g., ASP-based payment in commercial markets)

Given the nature of the Advanced Notice of Proposed Rulemaking (ANPRM) and anticipated rulemaking timeline, the proposed Model is likely to serve as a starting point and may evolve over time—either the overall Model or specific elements. Regardless, enhancing management in Part B and reducing international price disparities will likely remain fundamental to the administration’s strategy.

For more on the IPI Model and drug pricing reforms, connect with Milena Sullivan.

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