CMS’s Proposed Rule on Part B Drugs Prompts Harsh Response from Oncology Groups

May 2016, Vol 6, No 5

The sharply worded scuffle over the recent Centers for Medicare & Medicaid Services (CMS)’s proposed rule about Medicare Part B payments showcases some of the strong opposing forces at play in the increasingly costly US healthcare system, and the reason why it has been almost impossible to arrive at effective changes.

The proposed rule for the 5-year Medicare Part B demonstration project was issued by CMS in March 2016, to determine whether alternative payment approaches for prescription drugs will lead to better value and higher quality care for patients. CMS announced that it would modify Part B drug reimbursement based on zip codes in certain regions.1

This project comprises a 2-phase drug payment model for Medicare Part B. In the first phase, the proposed rule involves a reimbursement reduction for prescription drugs from a 6% add-on to the average sales price (ASP) to a 2.5% add-on plus a flat fee of $16.80.1 In the second phase, CMS proposes implementing value-based purchasing tools for Medicare Part B drugs using value-based pricing and clinical decision support tools. The 60-day comment period for the demonstration project ends on May 9, 2016.1

Response from AARP

The American Medical Association has thus far remained silent about this project, but some groups, such as AARP, have voiced their support.2 AARP applauded CMS for trying to curb the spiraling costs of prescription drugs by testing alternative payment approaches.2

“It is just a demonstration program—they are trying to see whether these techniques work—and the opponents make it seem like it is a complete overhaul of Medicare,” Leigh Purvis, MPA, Director of Health Services Research, AARP Public Policy Institute, told Oncology Practice Management. “CMS’s approach seems like a very commonsense way of going about this, especially because these approaches are used in the private sector.”

ASCO’s Response

By contrast, the American Society of Clinical Oncology (ASCO) issued a statement from the new Chief Executive Officer Allen S. Lichter, MD, denouncing the project.3

ASCO “believes that it is inappropriate for CMS to manipulate choice of treatment for cancer patients using heavy-handed reimbursement techniques,” Dr Lichter said. “ASCO has long advocated for comprehensive payment reform to achieve high-quality, high-value care for every patient with cancer, and we hope the Administration will reconsider the narrowly focused proposal today’s announcement appears to pursue. Physicians did not create the problem of drug pricing and its solution should not be on their backs....The society will not yield in its push for a more rational drug reimbursement system and real payment reform.”

Community Oncology Alliance

Community Oncology Alliance (COA) also came out swinging with, among other swift salvos, a letter to Sylvia Burwell, Secretary of the Department of Health & Human Services, and Andy Slavitt, Acting Administrator of CMS.4 In the letter, COA President Bruce J. Gould, MD, decried the lack of consultation and evidence behind the proposed demonstration project, and the effect he and his colleagues believe the “inappropriate, dangerous, and perverse manda­tory experiment” would have on non–hospital-based oncology practices.

“CMS is proposing that the Medicare Part B drug reimbursement rate in at least three-quarters of the country be arbitrarily cut to ASP + 2.5 percent,” Dr Gould noted. “Factoring in the impact of prompt pay discounts and Medicare sequester cut, this would effectively result in drug reimbursement below ASP.”

Dr Gould added, “It is extremely disconcerting that CMS persists in its misguided focus of cutting drug and service reimbursements to community oncology practices while turning a blind eye to the unmistakable fact that the consolidation on our nation’s cancer system into hospitals—especially those with 340B discounts—is what is really costing Medicare, seniors, and taxpayers more for cancer care.”

Ted Okon, MBA, COA Executive Director, told Oncology Practice Management that the payment cut is technically not ASP plus 2.5% but rather ASP plus 0.86%. Mr Okon said that this is “because the 2% sequester will be applied. And the $16.80 flat fee is, in reality, $16.53. If the numbers look a little odd, it is because the 2% sequester cut is just applied to the 80% Medicare pays, not the 20% patient copayment.”

Overall, what “CMS is essentially saying with this is that oncologists are motivated by money; they are not motivated by doing the right thing for their patients,” Dr Okon said.

As evidence to the contrary, Mr Okon cited an April 2016 Milliman study.5 The study used claims data for Medicare and commercially insured patients from 2004 to 2014, and was commissioned by COA, with financial support from several pharmaceutical companies and Pharmaceutical Research and Manufacturers of America. The study yielded 3 important findings, including:

  1. The percentage increase in per-patient cost for Medicare fee-for-service and commercially insured patients is similar for patients with cancer and for patients without cancer
  2. The per-patient cost of chemotherapy drugs is increasing faster than other components of active cancer treatment
  3. The site of service for chemotherapy infusion has significantly shifted from physician offices to hospital outpatient departments.
“If you look at the shift in care from 2004 to 2014, if oncologists were really just doing this for money, then why would you have this constant shift of oncology practices being acquired by hospitals?” asked Mr Okon. “There are discounts of upwards of 50% for 340B hospitals, meaning you have a 100% markup on drugs, and hospitals are under no obligation to do anything with that money. It is big business—very profitable business. This is truly the pot at the end of the rainbow for hospitals.”

It Remains to Be Seen

Anticipating such criticisms, Patrick Conway, MD, MSc, Deputy Administrator for Innovation and Quality, and Chief Medical Officer at CMS, addressed these concerns in a telephone conference with healthcare stakeholders and press representatives.

“Nothing in this proposed test would tell doctors and other clinicians what to prescribe and when….This proposed model would reimburse all providers for the cost of every drug plus an add-on payment to cover administrative fees,” said Dr Conway. “I worked this past weekend caring for patients as a physician and did not think once about the reimbursement for drugs that I prescribed. That is what we want for all doctors, all the time.”

He added, “We believe that this model will maintain or increase patient access to all the medicines they need, and patients will benefit from better care and better value over time.”


  1. Centers for Medicare & Medicaid Services (CMS), HHS. Medicare program; Part B drug payment model. Proposed rule. Fed Regist. 2016;81:13229-13261.
  2. AARP. AARP supports CMS’ Medicare Part B demonstration project. Press release. March 23, 2016. Accessed April 8, 2016.
  3. Lichter AS. CMS proposal modifying ASP misses the mark when rational payment reform is needed. March 8, 2016. Accessed April 8, 2016.
  4. Gould BJ. Community Oncology Alliance letter to Mrs. Sylvia Burwell and Mr. Andy Slavitt. March 9, 2016.
  5. Community Oncology Alliance. Landmark study takes in-depth look at cost drivers of cancer care. April 4, 2016. 2016/04/04/landmark-study-takes-in-depth-look-at-cost-drivers-of-cancer-care.html. Accessed April 8, 2016.

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