The Grinch who Stole Medicare

December 7, 2018

In a storyline reminiscent of holiday favorite “The Grinch,” the Trump administration seems to be using the season of giving to plot the theft of something Americans hold dear – seniors’ Medicare, in this case.

The administration’s risky Part B experiment aims to reduce the discrepancy between what the United States and some other countries pay for prescription drugs.  The vision is simple. The United States will calculate what foreign countries pay – using an “international pricing index” – and then demand comparable prices.   

The experiment would run through the Centers for Medicare and Medicaid Innovation.  It would target Part B drugs – those injected or infused by a physician to treat conditions like cancer or rheumatoid arthritis.  And it would last for five years, from 2020 to 2025, in selected geographic regions that represent half of Medicare Part B spending.

There are just a few problems to consider.

First, foreign countries pay for their lower drug prices.  

True, the countries included in the international pricing index do often pay less for prescription drugs than Medicare does. But those countries also run a broad-scale system of metrics, regulations, budget thresholds and health care limits designed to control costs.  More often than not, patients pay the price in limited access.

Just consider the United Kingdom, one of several countries pegged for inclusion in the international pricing index.  Due to red tape and overregulation, it takes roughly 14 years for a cancer drug in the United Kingdom to go from getting a patent to becoming available to patients.  That includes an average of 16 months for the country’s cost-effectiveness “watchdog,” the National Institute for Health Care and Excellence, to appraise the drug.  For cancer patients, that’s just too long.

Meanwhile, NICE, as it’s called, approves coverage for only about one-third of innovative drugs that treat new cancers or take new approaches to existing cancers.  The reason for exclusions, overwhelmingly, is cost.

Importing foreign prices is either a mismatch of fundamentally disparate health care systems or a harbinger of things to come.  Neither bodes well for American patients.

Second, policymakers haven’t learned from past mistakes.  

The experiment hinges on private, third-party vendors who would use the international pricing index to negotiate with manufacturers – then have the drugs delivered to clinics and hospitals that need them.  As the administration envisions it, physicians could then wash their hands of the hassle of buying and billing for expensive Part B drugs themselves.

But the concept isn’t new.  It harkens back to an idea from 2006 known as the Competitive Acquisition Program.  Hardly “competitive,” that program fell flat when only a single vendor signed on to provide services.  

The concept also resembles a mainstay of commercial health insurance: pharmacy benefit managers.  These middlemen have become notorious for driving up list prices through their relentless push for higher rebates – only to pocket the savings rather than passing it along to patients.

In fact, cancer patients find the similarity downright frightening.  In a statement, the Community Oncology Alliance warned against “disruptive changes” proposed by the administration and alluded to “horror stories” from patients whose care has suffered at the hands of third-party pharmacy benefit managers.

Finally, the experiment’s impact on patients is broader than meets the eye.

As envisioned, the experiment will be mandatory for geographic areas that total 50 percent of Part B spending.  That could be a broad swath of the country. But, whatever its scope, the experiment’s impact will be even wider.  Because, like so many policy proposals, this one has unintended consequences.

The experiment will require lower prices for Part B drugs.  Those lower prices will then drive down the drugs’ average sales prices, even outside the experiment.  Which sounds like a good thing, except that, while physicians in the experiment will earn a flat fee, reimbursement for physicians not participating will still be calculated based on the average sales price.  

In other words, physicians outside the experiment may see their reimbursement for Part B drugs drop, even while the price they pay for the drugs remains the same.  When cost exceeds reimbursement, some physicians will throw up their hands. Physicians with narrow profit margins, such as those in solo practice or in rural areas, may be hit the hardest.  

This, in turn, means fewer physicians and fewer facilities where seniors can receive care.  That presents new logistical challenges for seniors, some of whom have limited mobility or depend upon others to take them to appointments.

And it’s worth noting that Part B drugs often treat complex or progressive conditions.  When challenges mount and care gets delayed, cancer patients may see their tumors grow. Arthritis patients may see their joints deteriorate.

But the story isn’t over.  Like the Grinch (and Ebenezer Scrooge…and George Bailey), administration officials have the chance to change course.  Through December 31, the Department of Health and Human Services will accept comments on the advanced notice of the proposed project, giving patients, physicians and advocates the chance to weigh in.   

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