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What the Administration Actually Can Do on Drug Pricing

The President’s budget makes clear for all to see that the Administration wants to do something related to drug pricing. Unfortunately for the Administration, most of their proposals require Congressional authority that have virtually no chance of passing this year.  Therefore industry stakeholders MUST be on high alert for actions the Administration might take where they already have authority.

The budget is chock full of proposals that would save billions of dollars, mostly funded by drug and biologic manufacturers.  Many proposals we have seen before such as (i) the Part D rebate proposal, (ii) moving Part B payments from ASP+6 to ASP+3, (iii) allowing government negotiation for high-cost drugs and biologics, or (iv) reducing the exclusivity period for biologics from 12 to 7 years.  These proposals all could have a tremendous impact on stakeholders, but it is extremely unlikely any of them could get through the current Congress.

Industry stakeholders would be well advised to focus on what the Administration can do without Congress.  The Affordable Care Act created the Center for Medicare and Medicaid Innovation (CMMI) and granted it omnipotence and omniscience.  Essentially, if CMMI thinks a policy idea could save money, they are empowered to implement it.

Last Friday, CMS posted an agency notice to contractors of the intent to test new payment methodologies through CMMI for Part B drugs.  Currently, Part B drugs are reimbursed under the ASP +6 regime.  CMS quickly pulled the notice from their website and have publicly retreated from the notion that any policy changes are forthcoming.  But due to the beauty or horror that is the internet, nothing every truly goes away.  When you look at the notice, CMS is not kidding.  While details are not absolutely clear from the notice, it certainly suggests CMS has put significant work into preparing to test new methodologies.

It’s hard to miss the big proposals in the budget with the big savings numbers attached.  But the far more interesting action is with CMS’s “now you see it, now you don’t” notice that could lead to real policy changes in 2016.

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