House bill would rein in Medicare payments for outpatient drugs

Payment troubles for affected physicians would be addressed simultaneously.

By Markian Hawryluk, AMNews staff. Dec. 3, 2001.

Washington -- Congressional leaders are floating a proposal to establish a new methodology for reimbursing for prescription drugs currently covered under Medicare Part B.

In a letter to Tom Scully, administrator of the Centers for Medicare & Medicaid Services, Reps. Billy Tauzin (R, La.), Mike Bilirakis (R, Fla.) and Jim Greenwood (R, Pa.) proposed requiring drug manufacturers to report a new average sales price, reflecting the true cost of purchasing the medications, including manufacturer-provided rebates, charge backs and other discounts to purchasers. Medicare reimbursement would then be based on this new average sales price.

"It will provide a much more accurate measure of health care providers' true acquisition costs, eliminate the perverse incentives that discourage price competition, and significantly reduce the opportunities that exist in the current system for gaming Medicare's reimbursement system," the congressmen said.

The proposed payment system would replace use of average wholesale price, which lawmakers and CMS have decried as a loophole costing Medicare billions of dollars and Medicare beneficiaries hundreds of millions in inflated co-payments.

While Medicare, as a rule, does not cover outpatient prescription drugs, except for about 450 drugs and biologicals -- mainly those that cannot be administered by patients themselves -- it paid almost $4 billion in outpatient drug costs in 1999. Eighty-two percent of that was spent on only 35 drugs, primarily cancer, inhalation therapy and oral immunosuppressive medications. The largest share was billed by physicians, mainly in the hematology-oncology, medical oncology and urology specialties. [...]