Doctors squeezed by pay cuts for Part B drugs

Access and quality appear steady, but some physicians have decreased the amount of office-administered drugs they prescribe, a Medicare advisory panel finds.

By David Glendinning, AMNews staff. Feb. 19, 2007.

Washington -- Medicare's two-year-old reimbursement system for drugs administered in the doctor's office has saved the government money but has forced physicians to find ways to make up for lower payments, according to a recent Medicare Payment Advisory Commission report.

Since 2005, Medicare has paid for the relatively few drugs covered under Part B at 106% of their average sales prices. Before that, reimbursement for the cost of the drugs was based on average wholesale prices, which were often significantly higher than the amounts physicians paid to obtain them from manufacturers.

Doctors typically used the additional dollars gained under the old system to make up for historically low reimbursements for the separate cost of administering the drugs to patients.

Since the change to the new system, Medicare has spent less on chemotherapy and other Part B drugs. Even after accounting for increases in volume and transitions from older drugs to newer and more-expensive therapies, total spending on drugs alone dropped from $10.9 billion in 2004 to $10.1 billion in 2005, MedPAC said.

But MedPAC also noted that payments for administering the drugs increased when drug reimbursements dropped. Also, doctors have increased the volume of evaluation and management services, tests and other procedures they provide along with the medications. Despite spending less on drugs, Medicare in 2005 spent more on total charges to urologists, rheumatologists, infectious disease specialists and medical oncologists -- the four specialties surveyed by MedPAC.