The Congress should change Medicare’s payment for Part B drugs and biologicals (products) as follows:
- Modify the average sales price (ASP) system in 2018 to:
- require all manufacturers of products paid under Part B to submit ASP data and impose penalties for failure to report.
- reduce wholesale acquisition cost (WAC)-based payment to WAC plus 3 percent.
- require manufacturers to pay Medicare a rebate when the ASP for their product exceeds an inflation benchmark and tie beneficiary cost sharing and the ASP add-on to the inflation-adjusted ASP.
- require the Secretary to use a common billing code to pay for a reference biologic and its biosimilars.
- No later than 2022, create and phase in a voluntary Drug Value Program (DVP) that must have the following elements:
- Medicare contracts with a small number of private vendors to negotiate prices for Part B products.
- Providers purchase all DVP products at the price negotiated by their selected DVP vendor.
- Medicare pays providers the DVP-negotiated price and pays vendors an administrative fee, with opportunities for shared savings.
- Beneficiaries pay lower cost sharing.
- Medicare payments under the DVP cannot exceed 100 percent of ASP.
- Vendors use tools including a formulary and, for products meeting selected criteria, binding arbitration.
- Upon implementation of the DVP or no later than 2022, reduce the ASP add-on under the ASP system.