CMS To Announce Proposed Rules To Reduce Medicare Reimbursements for Certain Cancer, Respiratory Medications

CMS officials on Tuesday are scheduled to announce proposed rules that would reduce Medicare reimbursements to medical specialists for about 30 of the most expensive oncology and respiratory drugs that are administered in doctors' offices, the New York Times reports. The proposed reimbursement cuts are expected to save Medicare $16 billion over ten years by reducing the current reimbursement rate for some medicines by as much as 89%. Most of the drug reimbursement reductions will involve drugs that have generic versions. The changes are expected to decrease Medicare oncologists' average revenue by 8%. Medicare will increase for one year its service payments to specialists and also pay a 6% surcharge above the new price of the drugs. The change will also impact patients, who pay for 20% of the prices that physicians charge for the drugs (Harris, New York Times, 7/26). The changes are based on a new price-reporting system established under the Medicare law. The payment system will base reimbursements to physicians for medications administered in hospitals or physicians' offices on the "average sales price" of the medication, rather than the "average wholesale price" currently used, the Wall Street Journal reports (Lueck, Wall Street Journal, 7/27). The proposed changes are based on a continuing Government Accountability Office survey that aims to determine the actual price physicians pay drug manufacturers for drugs. Doctors typically negotiate lower-than-wholesale prices with drug manufacturers. According to Medicare data, 70% of oncologists' income is derived from the difference between their Medicare reimbursements and their actual spending on drugs, the Times reports. Medicare officials plan to conduct additional price surveys and will release a final price list in November that will take effect in January. Until the end of the year, Medicare will continue to use the average wholesale price to reimburse physicians for drugs (New York Times, 7/27).

The reduced payments will include an estimated 7% cut in what Medicare next year will pay for Amgen's Epogen and Johnson & Johnson's Procrit, two anemia treatments that are oncologists' highest revenue drugs. In addition, patents next year expire for several other drugs provided by oncologists, including Bristol-Myers Squibb's Taxol, Novartis' Aredia and GlaxoSmithKline's Navelbine. Medicare is expected to reduce payments for those drugs by 81%, 72% and 21%, respectively. Officials estimate that urologists' drug revenue will decrease by 36% and rheumatologists' revenue will be reduced by 6% because of similar Medicare reimbursement adjustments. The issue "will prompt a flurry of lobbying" before final drug prices are announced, according to the Journal (Wall Street Journal, 7/27).

The proposed reductions are expected to "raise an outcry among cancer specialists and some drug companies," the Times reports (New York Times, 7/27). Some doctors acknowledge they have been overpaid for drugs, but they note that they have been underpaid for practice and administrative expenses and contend that the adjustments do not do enough to address that issue. The American Society of Clinical Oncology has requested that Congress freeze payments at current levels until various agencies complete studies of the new pricing system; however, chances of such a move occurring are "dim," according to the AP/Atlanta Journal Constitution (Sherman, AP/Atlanta Journal Constitution 7/27). Some physicians have said they will stop providing care for Medicare patients if the price cuts are made permanent. ASCO President David Johnson said, "We believe that there is potential that the changes may have a really dramatically negative impact on our ability to deliver care in ways patients are accustomed to" (New York Times, 7/27).