Providers Not Using Part B Drugs to Add to Profit, Research Finds

The assumption that Medicare Part B payment rates lead providers to create higher drug utilization for costlier treatments in order to benefit from larger add-on payments is not correct, a recent white paper said. The paper from Xcenda, a part of AmerisourceBergen, also found similar results when looking at physician-administered drugs in the hospital outpatient setting.

The white paper, “Medicare Physician-Administered Drugs: Do Providers Choose Treatment Based on Payment Amount?” analyzed claims data for Medicare Part B fee-for-service beneficiaries receiving infused or injected drugs, such as biologics and biosimilars, in doctors’ offices for rheumatoid arthritis (RA), breast cancer, and non—small cell lung cancer (NSCLC) in an office setting.

This issue has arisen because of a criticism that the payment rate system, whereby rates are based on the average sales price (ASP) plus 6%, causes physicians to prescribe the most expensive drug in order to profit. If this were true, the authors wrote, one would expect to see this displayed across utilization patterns for drugs in these categories.

Using 2016 Medicare data, researchers calculated the average payment per administration and utilization at the provider level, weighted by the number of administrations and tested for correlation using Pearson’s correlation coefficient. They excluded the top and bottom 2.5% of providers to account for any outliers.

In looking at rheumatoid arthritis (RA), the analysis did not identify any evidence that higher payment led to increased utilization of certain RA drugs. In 2016, total Medicare payments for 7 RA drugs totaled $2.1 billion, representing 13.5% of spending for all Part B drugs ($15.5 billion in total). For every $1 increase in the average payment for a drug, the average administration count per provider decreased 0.002 in the physician office.

In total, changes and payment explain only 5% of variation for RA drug utilization in doctors' offices, suggesting that 95% of utilization comes from factors besides payment rates, the paper said.

The analysis was similar for breast cancer, for which 22 breast cancer drugs represented $0.8 billion in total Part B spending in 2016 (far less than RA spending).

And the results were similar for NSCLC, for which 16 drugs made up $0.9 billion in Part B spending in 2016. Again, there was not an identifiable correlation between 2012 and 2016.

For both breast cancer and NSCLC, the report said that less than 1% of the variation in utilization in can be attributed to payment rates.

Which drug to use to treat patients does not appear to be driven by payment rates, the report concluded. As such, policymakers should consider any evidence that attempts to connect payment to utilization carefully. Proposals based on the idea that payment rates influence how providers prescribe Part B therapies “may significantly overestimate anticipated savings from changes and reimbursement," the paper said.

In 2016, total Part B spending was $29.1 billion, and the Trump administration wants to shift some Part B coverage to Part D as part of its plan to reduce total drug spending.