MedPAC Begins Meeting With Another Discussion About Drug Pricing

The Medicare Payment Advisory Commission (MedPAC) begins its 2-day March meeting Thursday, and the first item on the agenda is a discussion about reference pricing and binding arbitration for Part B drugs in order to improve price competition and value.

The issue brief posted in advance of the meeting noted that MedPAC has previously recommended several improvements to payment for Part B drugs, including an average sales price (ASP) inflation rebate, consolidated billing codes for biosimilars and reference biologics, and a voluntary alternative to the ASP payment system that would use vendors to negotiate prices for Part B drugs.

It has also previously discussed modifying cost-sharing for low-income subsidy beneficiaries to incentivize the use of biosimilars, according to a transcript of the January meeting.

But other issues remain, the latest brief noted. Under the ASP payment system, a new drug receives its own payment rate based on its own ASP. But that does not induce price competition among single-source drugs with similar health effects, and a drug’s payment rate may not have any relationship to its clinical effectiveness.

Under reference pricing, a healthcare purchaser establishes the maximum amount it will contribute toward a drug’s price and often takes into consideration the minimum or median price of drugs in a therapeutic class. If a patient is prescribed a drug that is cheaper than the reference limit, the patient is responsible for a small co-payment. If the cost is higher than the limit, the patient pays a co-payment plus the difference in the prices between the limit and the product.

Binding arbitration focuses on expensive therapies with limited competition; under the system, an arbiter would set the price of a drug if negotiations between payers and the drug manufacturer collapse. The topic came up at the January meeting; Chairman Jay Crosson said that binding arbitration had been discussed as a recommendation for Part B, but could also potentially include Parts D and A.

At the January meeting, commissioners expressed frustration with continued high drug prices as well as the impact on expanding access to biosimilars. In particular, they focused attention on the role that rebates play, where pharmaceutical companies offer rebates on their products in order to make them the preferred formulary for pharmacy benefit managers.

One commissioner focused on “the failure in the United States of biosimilars.”

“In other countries, biosimilars are aggressively promoted by national systems and are in very wide use, said Commissioner Bruce Pyenson. “And various obstacles we've seen in the U.S. have been resolved. Yet issues that are not supported by the science are repeatedly brought up." Among them, he said, is the patent estate, which he said has turned into a “patent thicket.”

A failure to get biosimilars right in the United States will also destroy any hope of personalized medicine, he said.

MedPAC, an independent agency, is working on the recommendations it will make in its annual report to Congress in June.