Vice President of COA Unpacks Effects of the Medicare Drug Price Negotiation Program in the Community

The Medicare Drug Price Negotiation Program is ongoing following the implementation of the Inflation Reduction Act (IRA), and several concerns have arisen as new policies have several consequences for community providers and practices, according to Debra Patt, MD, PhD, MBA, FASCO.

“The issue of the IRA is a very important topic as oncologists want to see the patients they serve have access to therapies, including new and innovative therapies [for] cancer [treatment]. Cancer treatments can be very expensive, [and] these cost reducing measures that have that intent have had some good consequences, such as the Part D out-of-pocket expenses [spending cap] for Medicare beneficiaries and that price smoothing. But there are some unintended consequences that harm access to patient care,” Patt said in an interview with OncLive®.

The Community Oncology Alliance (COA) released a letter detailing concerns on the consequences of the Medicare Drug Price Negotiation Program Draft Guidance for Initial Price Applicability Year (IPAY) 2027. Following completion of the negotiation of drug prices, practices will be able to acquire the negotiated drugs at or below Maximum Fair Price (MFP). However, providers will receive an add-on payment that will be based on the MFP, which COA noted will be significantly lower than the average sales price of the drug. Findings from an independent analysis estimated that oncology providers would receive a Part B add-on reimbursement at least 49.4% lower once the IRA was implemented.¹

In the interview with OncLive, Patt, who is vice president of COA, detailed several considerations with the new changes regarding Medicaid coming as a result of the IRA. Patt is also executive vice president of Texas Oncology and medical director for public policy for The US Oncology Network in Austin, Texas.

OncLive: What were the key takeaways from the Medicare Drug Price Negotiation Program Draft Guidance for IPAY 2027?

Patt: [Challenges with this new guidance include] administrative burdens associated with respective effectuation, financial risk associated with retrospective MFP effectuation, and some of the effects on oncology practices that are beyond cancer treatment.

What are some of the administrative burdens associated with the prospective effectuation?

If we are purchasing and getting paid for drugs separately because [the lower acquisition price is only] for Medicare beneficiaries, we’re going to need staff, space, and administrative staff to manage 2 separate sources of inventory. That’s both confusing and a hazard of additional staffing. It’s also not just space in our clinic because many of these new and novel therapies must be preserved at certain temperatures. They require refrigeration [as well as] certain preparation, and many of them are biologics. We would anticipate that [the] administrative burden of that duplicative inventory management is going to be costly.

How will community practices be affected financially by proposed changes?

A big issue that I’m concerned about is the financial risk associated with the retrospective MFP effectuation because of the time burden that we see. We know that providers [may face challenges] in the middle of operationalization of a negotiation process that takes place between manufacturers and the government; it can take 30 days for a plan to submit the necessary prescription drug event records to the manufacturer, and it may take another 14 days for the manufacturer to issue a refund.

Under this time frame, practices could be floating the difference between acquisition costs and reimbursement for up to 2 months longer than we do currently. These drugs are very expensive, and managing those accounts receivable on our books is a financial burden that costs us quite a bit of money.

In addition, COA did an analysis to suggest that add-on cost [reimbursement payment for oncology providers] is decreased by approximately 42% under this program. That’s what we can anticipate, and that add-on cost pays for a lot of unbillable services for Medicare beneficiaries. If this poses too much risk to community oncology practices at each site of service, because we’re each independent businesses, then it will be hard to keep our doors open for Medicare beneficiaries, and that poses a risk for them.

Are there any unintended consequences that are important to note?

As we think about some of the unintended consequences that don’t pertain to cancer directly, many of our pharmacies fill drugs for Medicare beneficiaries [such as ones] for diabetes, hypertension, cholesterol, or other [conditions]. As those drugs might be affected by the IRA, we’re going to be less likely to fill those medications as a service to our patients because of the increasing administrative burden and financial risk that it poses.

[There are] other unintended consequences that we observe too. Inclusion of a drug in the IRA as a list of the drugs that are being negotiated does not mandate their inclusion on a particular formulary. If you have a managed Medicare program that has a managed formulary, they might be making decisions about formulary inclusion that are irrespective of that negotiation; it may have to do with their own financial incentives or rebate structure. Their inclusion in the negotiation doesn’t mean necessarily that those drugs will be on [a] formulary.

I’ve also seen data about other unintended consequences. I saw that the administration announced a potential $6 billion savings. However, it’s my understanding that the increase in premiums to seniors and increase in out-of-pocket costs for part D will be an estimated additional $5 billion, so it’s unclear what the savings in the program might really be. That requires a deeper dive into modern costs of therapies and the expense to the total health care ecosystem.

What are important discussions going to center around in anticipation of the first cycle of negotiations for drugs covered under Medicare Part D becoming effective in 2026?

There are 2 things that are important for me as a community oncologist. One is, I would like for community oncology practices to be held harmless, for us not to be subject to the variability of the cost of acquisition of drugs and to the decreases that we’re seeing right now [with] the add-on fee because those things are necessary for us to deliver care. Some amendments have been proposed that provide stability in that arena, [and they] are an important priority for Medicare beneficiaries to continue to receive access to care in the community setting. Those are very important [and] that’s my top priority.

The second thing, and it’s more global, is when you have a structure of negotiation like the IRA and planned sun setting of patent protections [with the definition of qualifying single source drugs changing] more broadly, you reduce the financial incentive for manufacturers to develop follow-on indications for drugs. That can be a limitation for the development of small molecules and rare diseases.

As an oncologist, I want to see new and innovative therapies offered to my patients, and there could be a decrease in research towards those endeavors because if you’re a manufacturer and you’re thinking about calculations in your investments in research, you might feel like [it] poses too much of a risk to continue to invest in drugs that aren’t hitting the common cancers or that aren’t going to be approved for a large number of Medicare beneficiaries. Patients who have Merkel cell carcinoma or other [cancers] may not see follow-on indications because they’re rare diseases.

Reference

Community Oncology Alliance. Re: Medicare Drug Price Negotiation Program draft guidance. July 2, 2024. Accessed August 30, 2024. https://assets.mycoa.io/1720450300582_COA_CMS_IRA-DrugPriceNegotiation_Comments_7-2-2024-Final.pdf