Medicare Part B mostly covers
hospital out patient expenses. There is a small cluster of drugs that Medicare Part B covers. One of those drug categories is injectable drugs. Medicare Part B has announced a major reform of how it pays doctors for injectable drugs.
Medicare is going to test new ways to reimburse doctors for medications, in hopes they’ll choose less expensive drugs.
The plan would alter Medicare Part B, which pays for medicines administered in doctors offices or outpatient hospital clinics — to eliminate incentives for doctors to use the most expensive drugs….
The program now reimburses the doctors or clinics for the cost of the medication plus a 6 percent fee. That means doctors and hospitals earn more money when they use pricier drugs….
The agency plans to test a reimbursement formula that would pay the cost of the drug, plus a 2.5 percent surcharge and a flat fee of $16.80.
One of the shining examples is a pair of drugs used to treat age related wet macular degeneration, an eye disease that leads to blindness. Avastin and Lucentis have been shown to have very similar results. Avastin costs around $50 a dose while Lucentis costs around $2,000 a dose. Under the current payment model, a doctor administering Avastin is paid $3.00. The same doc administering Lucentis to the same patient gets paid $120. There is a strong incentive to prescribe the more expensive drug. Under the new model, Avastin would lead to a payment of $18.05 while Lucentis would have a payment of $66.80. There is still an incentive to overprescribe Lucentis relative to Avastin but it is a much weaker one. And that incentive can be further wrung out as more of the Medicare population is moved into either Accountable Care Organizations or other value based payment methodologies are used.
Pharmacy Executive in November 2014 made a horrendously poor but facile argument that there were no financial incentives influencing prescribing Avastin versus Lucentis:
Alternatively, do ophthalmologists who administer Lucentis appear to be doing so because they are exercising medical judgment on a patient-by-patient basis and concluding that Lucentis is the best choice in certain instances?
To investigate these competing hypotheses, we focus on ophthalmologists who tend to use these drugs frequently, because these are the type of high-billing doctors that are the focus of the articles in the popular press. Specifically, we limit the data to ophthalmologists with 200 or more patients who received injections of these drugs over the course of 2012. 547 ophthalmologists meet this criterion and are included in our analysis. Across these high-volume doctors, 11% only administered Avastin to their patients, 19% only administered Lucentis, and 70% administered a mix of the two drugs to their patients—Avastin to some patients and Lucentis to others. This finding is certainly consistent with the second hypothesis above.
Splitting the prescribing universe into three chunks; Avastin only, both drugs, Lucentis only prescribers we can categorize them as very cost conscious, potentially cost conscious with a reflection that there may be clinical judgment occurring, and profiteering.
The entire goal of a payment reform is to eliminate or at least significantly reduce the motive and ability to profiteer. It is not to change the entire behavioral profile of a profession but to reduce the tail of providers that seem to be exploiting the system. If Pharmacy Executive was to run the same study with 2019 data, payment reform would be successful the 19% prescribing Lucentis decreased to a miniscule fraction and shifted to a mix prescription profile. The payment methodology still makes prescribing Lucentis more profitable than prescribing and administering Avastin but the gap is smaller and administering Avastin is not a guaranteed loss.
Most payment reform models will have an impact at the edge cases and not the middle cases. The savings and the behavioral changes that lead to better health at lower cost are more likely to come from trimming an extreme rather than moving the average case by a smidge.