Medicare Part B has been a hot topic in Washington, DC, this summer with an increasing number of conversations about how the program works. Unfortunately, a common misconception keeps popping up regarding how Part B reimburses for medicines. Today, we’re debunking the myth and taking a deeper look at how private negotiation plays a role in determining what Part B pays for medicines.
As you may recall, typically, Part B medicines are administered by a physician in his or her office, whereas Part D medicines are picked up by the patient at the pharmacy counter. Although the program Medicare uses to reimburse for medicines under Part B is very different from the way medicines are reimbursed under Part D, that doesn’t mean there is no negotiation in Part B. It just means it occurs through different mechanisms. Under Part B, Medicare uses a public, transparent Average Sales Price (ASP) to set reimbursement rates. This price takes into account most rebates and discounts that purchasers negotiate with manufacturers, meaning Medicare patients and the government are benefiting from the discounts that are being negotiated in the commercial marketplace.
We looked at the most recent data for the top 25 medicines with the highest total spending in Part B in 2018 to see whether they were significantly discounted. We found the ASP reflected an average discount of more than 21 percent off the list price of a medicine, according to analysis of the July 2018 ASP Pricing File and 2018 Medispan files. And while insurers don’t always use savings from discounts and rebates on Part D medicines to lower what patients pay for their prescriptions (despite the fact that many patients are facing higher and higher out-of-pocket costs), the ASP system used in Part B does ensure these discounts are passed on to patients in the form of lower cost sharing.
Evidence shows the ASP system has worked well at controlling costs over the years and that it truly is market based. For 2018, CMS found the ASP payment amount for 11 of the top 50 medicines decreased, noting that “there are a number of competitive market factors at work – multiple manufacturers, alternative therapies, new products, recent generic entrants, or market shifts to lower priced products.” Additionally, the Moran Company found volume-weighted ASP for all Part B medicines in 2017 was well below the growth rate of medical prices overall.
As stakeholders debate potential reforms to Medicare Part B, it’s important to recognize the program’s effectiveness in ensuring patients have access to the treatments they need while managing costs through market competition.
Learn more about Part B at PhRMA.org/Part B.
Nicole Longo Nicole is senior director of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.