Proposed Model to Drive Down Prescription Drug Costs – the potential impact on providers and hospital billing

A recent proposal from the Department of Health and Human Services (HHS) is aimed at reducing prescription drug costs paid under Medicare Part B.  The proposed pricing model would gradually shift Part B payments for delineated outpatient drugs to international prices in late 2019/early 2020, starting with providers in randomly selected geographic areas.  In addition to the price shift, the proposal changes how doctors and hospital outpatient departments are reimbursed for the drugs.  Under the International Pricing Index Model, physicians and hospital outpatient departments would not buy or bill for the delineated Part B drugs.  Instead, the Centers for Medicare & Medicaid Services would contract with private sector vendors to procure drugs and distribute to providers. The proposal would allow for providers and GPOs to compete to be vendors. The objective of this model is to create competition for provider business allowing for aggregate purchasing and volume-based discounts.  Providers would receive a set payment for storing and handling the drugs; the intent being to remove any incentive to prescribe a higher cost drug.

According to HHS, the proposed model outlined above would save Medicare and beneficiaries over $17.2 billion over a five-year period.  HHS is seeking comment on the proposed program to integrate into the final model.

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