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EXAMINING THE PROPOSED MEDICARE 

PART B DRUG DEMONSTRATION 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JUNE 28, 2016 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

ORRIN G. HATCH, Utah, Chairman 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

DANIEL COATS, Indiana 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

MARK R. WARNER, Virginia 

CHRIS CAMPBELL, Staff Director 

JOSHUA SHEINKMAN, Democratic Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, Committee on 

Finance .................................................................................................................. 1 

Wyden, Hon. Ron, a U.S. Senator from Oregon .................................................... 3 

ADMINISTRATION WITNESS 

Conway, Patrick, M.D., M.Sc., Acting Principal Deputy Administrator, Deputy 

Administrator for Innovation and Quality, and Chief Medical Officer, Centers for Medicare and Medicaid Services, Department of Health and Human 

Services, Baltimore, MD ...................................................................................... 5 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Conway, Patrick, M.D., M.Sc.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 31 

Responses to questions from committee members ......................................... 34 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 1 

Prepared statement with attachment ............................................................. 69 

Roberts, Hon. Pat: 

Letter to Chairman Hatch and Ranking Member Wyden from the AIDS 

Institute et al., June 28, 2016 ...................................................................... 77 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 79 

COMMUNICATIONS

Academy of Managed Care Pharmacy ................................................................... 81 

American Society of Health-System Pharmacists (ASHP) ................................... 83 

American Society of Retina Specialists (ASRS) .................................................... 85 

BioRx, LLC ............................................................................................................... 90 

The Center for Fiscal Equity .................................................................................. 94 

National Association of Chain Drug Stores (NACDS) .......................................... 96 

National Rural Health Association (NRHA) .......................................................... 99 

(III) 

(1) 

EXAMINING THE PROPOSED MEDICARE 

PART B DRUG DEMONSTRATION 

TUESDAY, JUNE 28, 2016 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Orrin G. Hatch 

(chairman of the committee) presiding. 

Present: Senators Grassley, Crapo, Roberts, Thune, Burr, Portman, Toomey, Coats, Heller, Scott, Wyden, Stabenow, Cantwell, 

Menendez, Carper, Cardin, Brown, Bennet, Casey, and Warner. 

Also present: Republican Staff: Brett Baker, Health Policy Advisor; Chris Campbell, Staff Director; and Jay Khosla, Chief Health 

Counsel and Policy Director. Democratic Staff: Elizabeth Jurinka, 

Chief Health Advisor; Joshua Sheinkman, Staff Director; and Beth 

Vrable, Senior Health Counsel. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM UTAH, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. All right, the committee will come to order. 

I would like to welcome everyone to this morning’s hearing that 

will allow the committee to examine the Obama administration’s 

proposed Medicare Part B demonstration. I would particularly like 

to thank Dr. Patrick Conway from the Centers for Medicare and 

Medicaid Services for testifying. 

Today’s topic is very important. The proposed CMS demonstration project would radically alter the ways in which Medicare pays 

for drugs and biologics, treatments that physicians prescribe and 

administer to patients in the outpatient settings that are covered 

under Part B. 

Typically, these are drugs and treatments that are given in a 

physician’s office or hospital. They are used to treat vulnerable 

beneficiaries who have serious medical conditions such as cancer, 

macular degeneration, rheumatoid arthritis, neurological disorders, 

primary immunodeficiency diseases, and a number of rare illnesses. 

From the day CMS made their proposed demonstration public 

this past March, I have made my opinion very clear. I believe this 

experiment is ill-conceived and likely to harm beneficiaries. It is an 

overreach on the part of CMS that, in my opinion, goes beyond the 

agency’s statutory authority, extends nationwide, and requires all 

Medicare Part B providers to participate. 

2 

And as we all know, the experiment would change the Part B 

payment system in two phases, both of which are very troubling, 

and that is putting it kindly. 

Given these inherent concerns, I would like to hear an explanation from CMS as to why they believe their new payment 

changes will not harm Medicare beneficiaries. So far what they 

have given us lacks any such explanation or justification. 

And that is not all that is missing from the elements of the demonstration that have been made public. Indeed, this proposal is 

troubling—and again, I am being kind with that description—not 

only for what is in it, but what has been left out. 

For example, with its proposal, CMS has not indicated the conditions for which the agency believes a physician has the option to 

prescribe a high- or low-cost drug that has the same patient benefit. In addition, CMS has not provided an analysis of how many 

physicians, including those in small and rural practices, would lose 

money purchasing needed drugs. They have not provided an analysis of how often physicians would have to refer beneficiaries to the 

less-convenient, more costly hospital outpatient setting. 

And CMS has not yet indicated how it will assess the impact on 

beneficiary access and quality, both during the course of the demonstration and the formal evaluation of it. 

Not surprisingly, the proposed experiment has been widely condemned by experts and stakeholders. Almost immediately after the 

proposed demonstration was released, we received a letter from 

over 300 stakeholder organizations asking for our help in getting 

CMS to withdraw the proposal. 

Now, these organizations included the Arthritis Foundation, the 

Caregiver Action Network, the Immune Deficiency Foundation, the 

Lung Cancer Alliance, and the National Alliance for Mental Illness. 

The organizations that have reached out with concerns about this 

proposal represent patients who suffer from the diseases treated by 

these drugs, including cancer, arthritis, mental illness, and HIV. 

They represent the physicians who treat the patients with these 

devastating conditions, including oncologists, rheumatologists, and 

ophthalmologists. 

I have also heard from my constituents in Utah. Many Utahans 

feel that the proposed demonstration would deprive them of the 

drugs that best treat their conditions and require them to have to 

travel great distances and incur significant additional expenses to 

receive the needed care. 

Obviously, Utah is not alone here. Patients and providers from 

virtually every State have weighed in on this matter, which 

prompted all of the Republican members of the Finance Committee 

to send a letter to Acting CMS Administrator Slavitt urging the 

withdrawal of the proposal. 

That is right. Fourteen Senators from the only Senate committee 

with oversight jurisdiction sent a detailed and thoughtful letter to 

CMS about their proposal. And how did the agency respond? We 

received what essentially amounts to a form letter thanking the 

committee members for sharing their views and noting that CMS 

will consider all public comments. 

It could not have been more dismissive in its tone. That is the 

level of attention and seriousness CMS ascribes to oversight from 

3 

Congress. And sadly, this is not an isolated incident. For 7 years 

now, the entire Obama administration has patronized, stonewalled, 

or flat-out ignored oversight efforts on the part of Finance Committee Republicans. 

Now, there are countless examples. Sometimes the agencies show 

disregard for the law, like when they refused to provide any meaningful response to numerous inquiries about illegal reinsurance 

payments issued under the so-called Affordable Care Act. And 

other times they discount our oversight role entirely, like when 

they denied Finance Committee staff access to last week’s Medicare 

and Social Security Trustees reports until the press conference putting the administration’s own misleading spin on the reports was 

well under way. 

Now, I have on numerous occasions during hearings like this and 

elsewhere, expressed my hope that the administration as a whole 

will change its ways and become more transparent. I have asked 

countless nominees that have come before the committee to commit 

to being responsive to Senators’ inquiries. Yet over 7 years, this unprecedented level of disregard has continued unabated. 

Given the short time left with this administration, I will not 

renew these calls for more cooperation and responsiveness today. I 

feel quite certain that there are no new improvements on the immediate horizon. 

However, given that we have a high-ranking administration official before us today, I hope that at the very least we can finally 

get some straight answers to the many questions raised by CMS’s 

Part B drug proposal. 

I note that our witness, Dr. Conway, stated in an early May 

interview on the proposed demonstration that CMS, quote, ‘‘will 

interact with Congress and take feedback and make adjustments 

as necessary.’’ 

And I do hope that our conversation today will be more consistent with that sentiment than the dismissive response letter 

shortly after that statement was made. The Senators on this committee and, more importantly, the constituents we represent, deserve at least that much. 

[The prepared statement of Chairman Hatch appears in the appendix.] 

The CHAIRMAN. With that, I will turn to Senator Wyden for his 

opening remarks. 

OPENING STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you very much, Mr. Chairman. 

Mr. Chairman and colleagues, what underlies this debate is, we 

are entering an era where there are going to be miracle treatments 

and there are going to be cures. There are drugs on the market and 

close on the horizon that were science fiction not very long ago. 

The question for me, the foremost question, is whether or not the 

American people are going to be able to afford these medicines. 

With business as usual, too many of these treatments are going to 

clobber too many family budgets and threaten health programs 

across the country. 

4 

And that was one of the big takeaways, colleagues, from the 18- 

month investigation Senator Grassley and I conducted on a bipartisan basis into the rollout of one blockbuster drug. It was a drug 

that treats Hepatitis C and had a list price of $1,000 a pill. And 

I think that this is going to be the pattern, colleagues, for years 

and years to come, absent reform: lots of cures and a big, big question mark when it comes to access and affordability. 

Now, the Hepatitis C drug that Senator Grassley and I did our 

bipartisan inquiry into is not the primary focus of today’s hearing. 

Today the committee is going to examine a demonstration project 

set to begin in Medicare Part B, which, of course, is the Medicare 

program that covers outpatient care. 

Part B pays for a small share of the drugs many seniors are prescribed, and the demonstration would affect the way those drugs 

are paid for. The demonstration has brought to the forefront additional major questions about how the country is going to address 

the trend of escalating pharmaceutical prices. 

The fact is, too many seniors are getting pounded today by prescription drug bills. In my view, there is an enormous amount of 

work that has to be done to guarantee that seniors have affordable 

access to the medications they need. 

In Medicare Part B, seniors are often hit especially hard because 

their share of drug costs is a co-insurance instead of a co-pay. That 

means rather than a flat, manageable fee, some older people face 

a huge burden, stuck paying a percentage of a drug’s total cost. 

I look at that burden the same way I look at the rising out-ofpocket costs for older people in Medicare Part D. So for Part D, I 

have proposed legislation that would establish an out-of-pocket cap 

to help protect older people. And in my view, this committee ought 

to take a close look at ways to make sure that seniors do not get 

pounded under Part B as well. 

There are important questions to be addressed with respect to 

this particular demonstration project. That is why all of the Finance Committee Democrats and I sent a letter in April to Andy 

Slavitt, the Acting Administrator of the Centers for Medicare and 

Medicaid Services, outlining the key concerns we had about the impact the project is going to have on patients. 

At their core, our concerns are about making sure that older people who are especially vulnerable have access to lifesaving medications. Protecting access is especially important in rural America, 

where seniors today so often face fewer choices and lower quality 

of care. 

It is extremely important as well that the project not result in 

patients being told that they have to go get treatment at the hospital, where treatment is often more costly and less convenient. 

Finally, our letter said that this demonstration project has to be 

in sync with the effort Medicare is making to move towards paying 

for treatment based on value, rather than volume. When you focus 

on the value and the efficiency of care, there is the potential to 

raise the quality of care for older people while saving money at the 

same time. 

So, Mr. Chairman and colleagues, I hope the committee will examine these issues carefully as it looks at the Medicare Part B 

demonstration. 

5 

I also want to thank Dr. Conway for joining the committee here 

as well. We look forward to his testimony and members having the 

chance to ask questions. 

Thank you. 

The CHAIRMAN. Thank you, Senator. 

[The prepared statement of Senator Wyden appears in the appendix.] 

The CHAIRMAN. Now I would like to take a few minutes to introduce today’s witness. 

Dr. Patrick Conway is here on behalf of the Centers for Medicare 

and Medicaid Services. Dr. Conway holds a number of high-ranking 

titles at CMS. In those positions, he has responsibility for overseeing health programs that provide services to over 100 million 

people. 

Two of his roles, overseeing the CMS Innovation Center and 

serving as the Chief Medical Officer, make him well-suited to testify on the agency’s proposed Part B drug demonstration. 

Prior to coming to CMS, Dr. Conway was the director of hospital 

medicine and associate professor at Cincinnati Children’s Hospital. 

Dr. Conway earned his medical degree from Baylor College of Medicine and completed his pediatric residency at Harvard Medical 

School’s Children’s Hospital, Boston. 

I want to thank you, Dr. Conway, for taking the time to appear 

here today. And we will be glad to take your statement at this 

time. 

STATEMENT OF PATRICK CONWAY, M.D., M.Sc., ACTING PRINCIPAL DEPUTY ADMINISTRATOR, DEPUTY ADMINISTRATOR 

FOR INNOVATION AND QUALITY, AND CHIEF MEDICAL OFFICER, CENTERS FOR MEDICARE AND MEDICAID SERVICES, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, BALTIMORE, MD 

Dr. CONWAY. Thank you, sir. 

Chairman Hatch, Ranking Member Wyden, and members of the 

committee, thank you for the invitation to discuss the Centers for 

Medicare and Medicaid Services’ initiative to improve how Medicare pays for Part B drugs to support physicians and other clinicians in delivering higher-quality care to beneficiaries in the Medicare program. 

We very much value the input and feedback that we receive from 

Congress and members of this committee, and we are carefully reviewing the comments we have received from you and the public. 

Part B drug spending has risen significantly over time, and CMS 

has heard from many stakeholders about concerns about access to 

and the cost and value of prescription drugs. To address these concerns, CMS issued a proposed rule to test a new model, with the 

aim of improving patient care and the value of Medicare drug 

spending. 

This proposal aligns with the CMS Innovation Center’s statutory 

goal to test innovative payment and service delivery models that 

reduce expenditures while preserving or enhancing the quality of 

care. The proposal is part of the administration’s broader strategy 

to encourage better care, smarter spending, and healthier people by 

6 

paying for what works and finding new ways to coordinate and integrate care to improve quality. 

CMS values public input and comments and looks forward to 

continuing to work with stakeholders through the rulemaking process in an ongoing manner to maximize the value and learning from 

the proposed model. 

We have received feedback from a wide range of stakeholders on 

several issues, including the size of the model, patient access in 

small practices in rural areas, and the importance of patient input. 

We are reviewing all comments closely to determine whether adjustments are needed. 

Our goal is to be responsive to the public comments and input 

from Congress. Under the current system, many Part B drugs, including drugs furnished in the hospital outpatient setting, are paid 

for based on the Average Sales Price, or ASP, plus a 6-percent addon payment. 

CMS’s proposed rule outlines a new Part B drug payment model 

that would test whether alternative drug payment designs may improve how Medicare Part B pays for prescription drugs and support 

physicians and other clinicians in delivering higher-quality care. 

Physicians can often choose among several drugs to treat a patient, and the current Part B drug payment methodology can create 

disincentives for doctors to select lower-cost drugs, even when these 

drugs are as good as or better for patients, based on the evidence. 

Among the approaches to be tested are the elimination of certain 

incentives that work against the selection of high-performing 

drugs, as well as the creation of positive incentives for the selection 

of higher-performing drugs, including reducing or eliminating patient cost-sharing to improve patients’ access and use of effective 

drugs. 

In the first phase of the model, CMS would test whether changing the current 6-percent add-on payment to 2.5 percent plus a flat 

fee of $16.80 per drug per day changes prescribing incentives and 

leads to improved quality and value. The flat fee is calculated such 

that it is budget-neutral in the aggregate. 

The second phase focuses directly on better outcomes and clinical 

indicators to improve the value of drug payments by utilizing 

value-based pricing tools currently employed by private health 

plans, pharmacy benefit managers, hospitals, and other entities 

that manage health benefits and drug utilization successfully. 

Ensuring beneficiary access to high-quality care and treatment is 

always at the forefront of CMS’s work. Under the proposed model, 

beneficiaries would still have access to the same drugs and would 

retain complete freedom of choice of doctors, hospitals, and other 

providers or suppliers. 

The proposed model would not affect drug coverage or any other 

Medicare benefits. It also includes a number of beneficiary protections. For example, the proposed model would include a new preappeals exceptions process, in addition to the standard appeals 

processes, that would allow the beneficiary, provider, or supplier to 

explain why Medicare’s value-based pricing policy is not appropriate for a given beneficiary and to seek an exception from the 

model’s value-based pricing approach under phase II. 

7 

In addition, CMS would closely monitor beneficiary access and 

health outcomes during the model. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs 

under the model. 

Millions of Americans rely on medications to manage chronic illnesses and to treat acute conditions. CMS is committed to ensuring 

that its beneficiaries have and maintain access to the high-quality 

treatments they need while pursuing better drug value. 

Moving forward, HHS and CMS are committed to listening to 

and working together with Congress and other stakeholders to advance ideas that improve access, affordability, and innovations so 

all Americans have access to the breakthroughs ahead. 

There are no easy answers to these multi-faceted challenges, but 

there is a significant benefit to all of us working together to find 

a solution. 

I appreciate the committee’s interest and look forward to answering your questions. Thank you for having me. 

[The prepared statement of Dr. Conway appears in the appendix.] 

The CHAIRMAN. Well, thank you, Doctor. I appreciate you appearing before the committee. And perhaps you can be of great help to 

us here today to understand some of these things. 

You know, some people feel that CMS intends to use the Innovation Center to undermine the successful Part D prescription drug 

program, perhaps by unilaterally waiving the provision that prevents the Federal Government from negotiating drug prices. Now 

clearly, such an undertaking would be a massive overreach beyond 

CMS’s statutory authority. However, as we have seen on a number 

of occasions, the Obama administration does not always feel bound 

by the clear limits that are provided in the statute. 

That being the case, I take the specific speculation about Part D 

very seriously. Therefore, I feel compelled to ask, is the Innovation 

Center working on any project or initiative that would allow the 

government to negotiate prices or on any other Part D change related to drug prices? And, as you are the head of the Innovation 

Center, I would like to have a direct answer on that, if I could. 

Dr. CONWAY. We have no Part D proposals at this time. We are 

constantly listening to and engaging with stakeholders across the 

health-care system. So we have payers, manufacturers, providers, 

others that bring ideas to us across health care, including in the 

drug space. 

We view it as our role to engage with those stakeholders, to listen to ideas, whether they come from Congress or providers or payers or others, so we engage deeply on our statutory mission, which 

is to engage in testing payment and service delivery models with 

a high likelihood of improving quality and maintaining or lessening 

expenditures. 

The CHAIRMAN. Well, Dr. Conway, my stated position, that CMS 

needs to withdraw this proposed Part B rule, is shared by many. 

Once again, over 300 stakeholder groups weighed in and called for 

the proposal to be withdrawn almost immediately upon its release. 

And without objection, the letter I referenced, signed by over 300 

patient provider organizations, will be included in this record. 

[The letter appears in the appendix on p. 71.] 

8 

The CHAIRMAN. In addition to these stakeholders, nearly 300 

members of Congress, Republicans and Democrats alike, have 

urged CMS to withdraw the proposal. 

Many of the 1,300 public comments that CMS received pointed 

out serious flaws. Considering all this backlash, I would say it is 

pretty obvious that if CMS moves forward with this experiment, it 

would be doing so against the interests and judgment of the vast 

majority of experts and policymakers in this field. 

Now, are you willing to acknowledge that there is widespread opposition and commit to withdraw this proposed rule? 

Dr. CONWAY. So we take the input from Congress and from 

stakeholders across the health system very seriously. That is why 

we proceeded through the rulemaking process, which is the most 

public and transparent of processes that we can engage in. 

We are reviewing the comments now and plan to make adjustments in the final rule. Currently we have over 1,300 public comments. We want to review those closely, carefully, and thoroughly 

so that we can be as responsive and thoughtful as possible to the 

public input and the input from Congress. 

The CHAIRMAN. Well, it seems that with this rule, CMS is operating under a premise that physicians are knowingly and purposefully prescribing higher-cost drugs when a lower-cost equivalent 

drug is available. 

Now, the agency’s view is apparently that most physicians’ clinical decisions are driven by maximizing profit instead of patient 

welfare. It seems to me that this is overly simplistic. 

Now, given that you are a doctor, can you tell us the specific type 

of prescribing changes that physicians are expected to make under 

the phase I payment scheme? And please, if you will, provide specific conditions and drugs, if you could do that for us. 

Dr. CONWAY. Yes. So I am a practicing physician. I think the 

vast majority of physicians make prescribing decisions based on patient interest. And I want to say clearly I would want every physician and clinician to prescribe the medicine needed for their patient. 

We believe this proposal allows that to happen, and we are looking closely at whether adjustments are needed, because access to 

medications, as you alluded to, is the first priority for CMS and for 

myself personally. 

In terms of the reason we proposed this test, the current system 

can have disincentives for physicians who may use lower-cost medication. So, for example, if a physician prescribes a $10 medication, 

the current 6-percent add-on is only 60 cents, and that may not 

fully cover the cost of acquiring and administering that medication. 

And so we are proposing this test to test a proposal that we 

think would remove some of the current disincentives in the system 

to allow physicians, clinicians, to make prescribing decisions without regard to financial incentives. And we clearly want physicians 

and clinicians to prescribe the medicines that their patients need 

and for patients to receive those medicines. 

The CHAIRMAN. Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

9 

Dr. Conway, let us go right to the question of prescription drug 

prices, because for so many older people, they just feel like they are 

getting hit by a wrecking ball. 

Medicare Part B drug spending more than doubled between 2005 and 2015, increasing from $9.4 billion in 2005 to $22 billion in 

2015. Now Medicare has, as you know, begun to move toward paying for quality and value, rather than the volume of services. That 

has been something that has been recommended for ages, and finally it is under way. But so far, prescription drugs have largely 

been left out of that equation, that move towards paying for value 

rather than volume. 

I have been working on these issues since the days when I was 

co-director of the Oregon Gray Panthers, and I think it is appropriate to ask now, if the issue of prescription drug prices is not addressed, aren’t the costs going to become increasingly unaffordable 

for older people, and really put at risk the Medicare guarantee? Because that is what Medicare is: it is a guarantee. 

Will these costs not put at risk the Medicare guarantee for future 

generations? 

Dr. CONWAY. Thank you, Senator Wyden. You correctly note the 

growth in Part B drug spending, and it has been over 8-percent 

growth, year on year, since 2007. 

I share your concern on access to medications. The current environment, as you noted, with co-insurance and the potential for 20- 

percent co-insurance, as you can imagine, for seniors on a fixed income—20 percent of a $10,000 drug or whatever the cost might 

be—can be a substantial financial hardship and can limit access to 

medications. 

We also did propose this test because we had not to date had a 

proposal directly in the drug space—paying for value. We do think 

paying for value is important, as you said, across the health system, including in the drug space. And so hence, we made this proposal. 

We have other proposals that include drugs as a part of the proposal, but we do think paying for value in drugs is important, similar to how it is important across our health system, whether it is 

hospitals, physicians, et cetera. 

Senator WYDEN. Does this threaten the sustainability of the program for future generations, absent some reforms? 

Dr. CONWAY. So the costs of the Medicare program have the potential to threaten the program, and drugs are a substantial part 

of that cost. 

And the reason I do this job, quite frankly, is I care deeply about 

the 55-plus million Americans in Medicare, including my own 

mother, and I want Medicare to be around for my four children. 

And I think we have to make major positive changes in delivery 

system reform for that to be the case. 

Senator WYDEN. Now, I appreciate the agency’s interest in looking at strategies to improve quality and value in all aspects of the 

health system, including prescription drugs. But one of the concerns that has been brought to members—certainly members on 

our side—is, especially in a rural area, a small rural area with not 

exactly a large practice, physicians can be put in a position where 

the cost of the drugs is higher than the Medicare payment. 

10 

So what we are getting told on our side is that it would not be 

possible to afford to provide the medications to the patients. 

I would be interested in your response to this, and also if, in responding, you could tell us what happens if that is the case, where 

the provider sends their patient to a hospital outpatient program, 

which means you have then higher overall costs for both the older 

people and for Medicare. Tell me your response to that. 

Because I know members on our side have heard that and have 

brought it up; we have all talked about it. I assume colleagues on 

the other side have as well. Your reaction to that? 

Dr. CONWAY. Thank you for the question. 

So we propose to include rural providers and small practices. 

However, we noted in the proposal concern about some of these 

issues about making sure that we have access both to medications 

and treatment while we propose these changes. 

We will look closely at the public comments and determine 

whether any adjustments are needed for rural practices or small 

practices. We are doing that review now, and the type of things we 

would look at include maintaining access to medications. 

In addition, we proposed a monitoring plan similar to what we 

have used in other programs, which can include real-time claims 

data monitoring. But we are monitoring for access, patient outcomes, and shifts in site of service. 

So we would monitor that, to see if we needed to make adjustments, both at the macro level in the policy, if you will, but also 

with an exceptions process where we could make adjustments down 

to the individual patient or practice level, if needed. 

Senator WYDEN. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Grassley? 

Senator GRASSLEY. I only have two questions, but before I ask 

those, Dr. Conway, I want to thank you for coming today. And as 

you have heard, there are many people concerned about this illconceived experiment. Additionally, the administration has not 

been responsive to congressional inquiries. 

In addition to the letter signed by every Republican on the committee, I sent my own letter to Secretary Burwell April 29th. I 

have not yet received an adequate response. 

In my letter, I asked for clarification on whether the proposal 

constitutes human subject research. I hope that you would expedite 

an answer to that. 

One question among the many concerns I have over this proposal 

is the result it will have on practices that are small, particularly 

in rural areas like most of my State of Iowa, or for those patients 

with rare diseases. 

First question: what safeguards does CMS have with regard to 

treating patients served by smaller practices, those in rural areas, 

and those with rare diseases? 

Dr. CONWAY. Yes, Senator, I share your commitment to small 

and rural practices. I grew up in a small town in Texas with a twoperson family practice caring for our family. 

We did propose to include rural and small practices, but we also 

noted in the proposed rule that we were concerned and focused on 

the access issues and that we would address access issues, if needed. So we sought comment about whether any adjustments or exVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 R:\DOCS\26393.000 TIMD
11 

clusions or other changes were needed either for small or rural 

practices. So we will assess the comments and determine whether 

any adjustments are needed. 

Senator GRASSLEY. Number two, we have heard from a number 

of groups that many patients’ and providers’ concerns in the proposal could have been avoided if patients had been included in the 

design of the demo at the front end. 

What plans have you put in place to involve small practices and 

rural and rare disease stakeholders in the future? 

Dr. CONWAY. Yes. So we proposed a process for phase II that 

would include input at multiple points, including patient input. We 

are looking at the comments now to determine if any adjustments 

or enhancements are needed for that process. 

To give you a tangible example, I personally met with 20-plus patient and consumer groups, and I do that routinely. That was about 

2 weeks ago. They gave input on this proposal and things across 

the Innovation Center. 

So that patient-consumer input is probably the most critical 

input we get into these models, because our focus needs to be on 

the beneficiary, on the patient, on the consumer, at all times. 

Senator GRASSLEY. Mr. Chairman, I will yield back my time. 

Thank you, Dr. Conway. 

The CHAIRMAN. Senator Stabenow? 

Senator STABENOW. Well, thank you very much, Mr. Chairman 

and Ranking Member. And, Dr. Conway, we appreciate your time, 

and we appreciate your leadership on so many issues that affect all 

of us and our constituents. I just want to underscore what has been 

talked about first and our ranking member talking about our letter 

that a number of us sent to you. 

I am concerned that the scope of the current proposal seems 

broader than is typical of a demonstration project, and just to underscore the concerns that have been raised about rural communities, I also share those. 

And I understand the proposal is intended to drive providers toward prescribing more generic drugs in order to produce cost savings, and I fully support that objective. 

But I think, as we look at those savings, there are other questions that I have about things that we should be focused on more 

in order to be able to do that. And so that leads me basically to 

questions in a broader sense. 

First of all, the Medicare trustees report released last week—I 

just want to underscore, I think for all of us—shows that once 

again Part B premiums could be impacted by new enrollees and 

those who are dual-eligibles, as we call them, those who both qualify for Medicare and Medicaid, a situation we will learn more about 

this fall as it relates to the Social Security cost-of-living adjustments’ impact on Part B. 

And so, the chairman and our ranking member, I know, will follow this closely. I am very concerned about what could happen in 

terms of seniors and unintended increases in premiums related to 

them. And so I just want to get that out there now, that this is 

something we need to be very involved in. 

And then another issue raised by the trustees report is really the 

big issue, which is Part D, which has been talked about. But as you 

12 

noted in your testimony, in 2015 CMS and seniors, through costsharing, paid $22 billion in Part B drugs and, according to the 

trustees report, nearly $89.5 billion in Part D. 

So if we are talking about the elephant in the room, the area 

where we should be most focused is on Part D in terms of the costs 

for seniors. Part D spending increased last year 8.3 percent, the 

year before, 8.6 percent. Part B, which we are talking about today, 

increased 2.4 percent. 

So when we are talking about 31⁄2 times more growth, this is, I 

think, the area we need to be focused on. 

So, Dr. Conway, if the goal is to drive down the prescription drug 

costs for seniors, for beneficiaries on the Medicare program in general, are we focusing on the right part when we say Part B, or 

should we not be paying more attention to Part D costs? 

Dr. CONWAY. Yes. So in terms of Part D, in the President’s budget there are a number of proposals for Congress to consider in the 

Part D space. We are open to ideas, including in Part D, at all 

times. 

We have had manufacturers come to us with ideas around Part 

D and value-based arrangements in Part D. Similarly, we have had 

providers—for example, in our next-generation ACO program—talk 

about how they want to bring in arrangements that are voluntary 

between the provider and Part D plans for a new payment model. 

So we are open to ideas from Congress, from you, Senator, from 

stakeholders across the health system, on ideas of what we should 

be doing in the Part D space as well. 

Senator STABENOW. Thank you. And just to underscore what our 

ranking member said—and he has been such a champion on these 

issues—I have heard from three constituents in the last few 

months that have had Hepatitis C. They were not sick enough to 

get their insurance company to pay for the expensive drug treatment, but they had insurance, so they did not qualify for charity 

care. 

Now, in one case we were able to help someone be able to get 

the medication that he needed, frankly, to cure his disease. But in 

the other two instances, that has not happened yet, and it is not 

a very good system when somebody has to call their U.S. Senator 

to intervene for them to get the medicine that they need to be able 

to save their life. 

And so this is a huge, huge issue, whether it is Medicare, Medicaid, private insurance. We have to do much better. And I hope 

we will be doing actually a hearing on Part D where the focus is 

on the costs and the areas with which I think seniors are most concerned. 

So thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Roberts? 

Senator ROBERTS. Yes, thank you, Mr. Chairman. 

I would like to ask unanimous consent that a letter here from 

over 20 patient groups—including the National Alliance on Mental 

Illness, the Arthritis Foundation, the Lupus Foundation of America, Veterans Health Council, and the AIDS Institute—to the Finance Committee, highlighting concerns in opposition to the demonstration project, be included in the record. 

13 

The CHAIRMAN. All right. Without objection. 

[The letter appears in the appendix on p. 77.] 

Senator ROBERTS. When this committee was debating the Affordable Care Act, I was concerned about several provisions that I believed would decrease individual choice and open the door to government rationing. 

There were four rationing bodies created by the Affordable Care 

Act. CMMI is one of those creations. And we have before us a proposed demonstration project or test, as the agency’s press release 

called it, which could disrupt care from some of Medicare’s most 

vulnerable patients. 

By the way, Dr. Conway, thank you for being here today. 

I want to first share with you some comments and questions 

from a couple of constituents in Kansas. Eileen of Overland Park 

suffers from hypogammaglobulinemia and lupus. She wrote to me 

asking, ‘‘Is anyone at CMS looking at the possible effect of such a 

demonstration on the people it will impact? Do any of them care 

that good, honest Americans will die without access to these treatments, or are they merely trying to save money by cutting costs? 

Their proposed actions will at least cause a degraded overall health 

outlook for many rheumatology, arthritis, and other patients and 

will certainly sign the death warrant for many patients like me.’’ 

Another constituent, Bradley from Wichita, wrote, ‘‘The CMS experiment is an intrusion on the close relationship our doctors have 

with patients and their clinical decision-making. This experiment 

will backfire, costing patients and taxpayers even more for cancer 

care.’’ 

Now, according to the statute, CMMI is to test innovative payment and service delivery models to reduce program expenditures 

while preserving or enhancing the quality of care. That is where I 

think we are running smack into trouble. 

How are you going to ensure that beneficiaries do not have trouble accessing appropriate and timely treatments in the setting they 

prefer? I give the example of a patient going to a rural oncology 

doctor in a rural area, sent to a hospital about 100 miles away. 

Is there any data indicating these proposed payment changes 

will improve quality of care or patient outcomes? 

Dr. CONWAY. Yes. So first, the goal of the Innovation Center is 

to improve quality, as you said, or maintain quality. And I will 

say—and this is what I have been doing for 20-plus years, both in 

the public and private sector—the paramount importance is improving quality and better patient outcomes. It also, as you said, 

is to maintain or reduce expenditures. 

In this specific proposal, we are proposing a value-based framework in phase II which, from the private sector, from private payers, from pharmacy benefit managers, from providers, has been 

demonstrated to focus on paying for value in medications. 

We are proposing to test that in Medicare Part B, and we believe 

it can maintain or improve quality. And that is our focus on the 

quality side of the equation. 

Senator ROBERTS. Well, on that issue—and pardon me for interrupting, but I have very limited time. Under the ACA, the Secretary is prohibited from using comparative effectiveness research 

findings in determining Medicare coverage. 

14 

However, in phase II, CMS plans to test paying for a drug based 

on how effectively it treats different conditions. Does CMMI believe 

it has the authority to waive this prohibition, or are you doing 

what you should not be doing? 

Dr. CONWAY. So in terms of the CMMI, or the Innovation Center, 

we are proposing to pay for value, which can be things like riskbased sharing arrangements based on outcomes. So it is consistent 

with the statutory authority to test new payment and service delivery models. 

I would highlight on CMMI broadly, we have thousands of providers in every State in the Nation engaged in delivery system reform. We have millions of patients who have received, in many instances demonstrated by independent evaluation reports, improved 

outcomes, improved care experience. And we can certainly talk 

about that more; I know we are tight on time. 

Senator ROBERTS. Thank you, Doctor. I appreciate that. Let me 

just say that you have said the public comment period for the proposed rule concluded on May 9th, and CMS is carefully considering 

all the public comments on this proposal that were received by the 

end of the comment period. You said, ‘‘We value public input; we 

look forward to continuing to work with stakeholders to maximize 

the value and learning from this model.’’ 

That is in direct conflict with the letter that we have here from 

32 patient groups that say there was a lack of stakeholder input 

from the beginning of this process and many of the problems with 

the demonstration could have been mitigated had patient groups 

been involved on the front end. 

I think what we have here is a failure to communicate. I remain 

gravely concerned about how this demonstration, or test, as the administration calls it, will impact patient access to care. 

I would like to reaffirm my request, as all on this side of the 

aisle have requested, that CMS simply withdraw this proposal. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Well, thank you. 

Senator Menendez is not here. Senator Portman, you are next. 

Senator PORTMAN. Mr. Chairman, thanks very much. And I appreciate you being here, Dr. Conway, and your service at Cincinnati Children’s where, as you know, my wife is very involved: 

vice chair and incoming chair of one of our great children’s hospitals. 

I wish I could say the same things about this proposal that I can 

about Children’s Hospital. I am concerned about it, and I am concerned about it for some of the reasons that have been stated already. 

And I want to ask you about one specific, deep concern I have 

about the specific proposal. First, it is called a demonstration, and 

yet my understanding is it is going to cover about 75 percent of 

Part B medications, which is hardly an experiment. The control 

group is 25 percent. 

And I was just looking through some of the correspondence that 

I have gotten, and letters and e-mails from some of my constituents. Tom Clark, his wife is a cancer patient. He is very worried 

about her ability to get her cancer treatments. 

15 

Barb E. writes me a long letter about her immunodeficiency disease and what is going to happen to her. She is applying for disability now. She is already having a tough enough time. She wanted to do her infusions at home; she fainted at home. She has to go 

to her doctor. She has told her if she goes to the hospital, it will 

be much more expensive and/or they will not be able to afford to 

provide it. So just a lot of deep concerns about it. 

The specific concern that I am hearing from Ohio is more about 

these community health centers and rural health centers. We have 

lost over 50 practices, physicians’ practices, as you know, because 

you have been in Ohio, going to the big hospitals. This will continue that and accelerate it. 

So I think this proposal, which is, again, not a demonstration— 

hardly, if it is 75-percent coverage—but is a wholesale change, is 

going to really dislocate a lot of the people I represent and cause 

a huge concern among some of these smaller practices that are already having a tough time making it in the current health-care environment with the Affordable Care Act. 

But let me ask you about something that concerns me about your 

specific proposal that perhaps you are not aware of. I assume if you 

were aware of it, you would not be doing it. 

But this is a revenue-neutral proposal, and so you cut reimbursement for some of these outpatient clinics we are talking about, 

some of these rural providers and so on, who are going to have a 

tough time making it. And you increase reimbursement in other 

areas in order to make it revenue-neutral. 

One of the places where you increase reimbursement, as you 

know, is with regard to prescription drugs that are used for pain 

management. And specifically, you have a dramatic increase in reimbursement incentives for the kinds of pain medication that are 

addictive and that are causing much of the problem we have now 

with this opioid epidemic that we have in Ohio and around the 

country. 

And let me give you some numbers on that, just in case you are 

not aware of it. But on the expected impact on interventional pain 

management medication, you are seeing an increase of 46.9 percent 

and 33.7 percent versus a cut on hematology/oncology drugs by 

minus .6 percent. 

So it is a dramatic increase, and I think the whole basis of your 

proposal is that, if the reimbursement is cut, there is going to be 

less utilization, right? That is part of how you are trying to save 

money. 

And on the other hand, you are increasing reimbursement at a 

time when I think there is a general sense in the administration, 

certainly at HHS—because we have worked with them very closely—that there is too much overprescribing of certain kinds of pain 

medication that are addictive, that are causing so much of the opiate crisis. 

The Comprehensive Addiction Recovery Act, which has passed 

the Senate by 94 to 1, deals with that overprescribing issue, including enhanced drug monitoring. I think there is generally a view at 

HHS that this is a problem. We work closely with them. Senator 

Whitehouse and I are the coauthors of that legislation. This seems 

to run counter to that. 

16 

So all the concerns you will hear from other colleagues, as you 

did from Senator Stabenow, Senator Roberts, and others about 

these providers, are of course concerns of mine in the fact that this 

is not a demonstration. 

But I have this bigger concern about the fact that under this proposed rule, which you say is to drive the prescribing of the most 

effective drugs, the reimbursement for these particular kind of 

opioids, this increase, could have a very negative impact and increase the problem with this opioid epidemic. 

For those who do not follow it closely, it is believed that four out 

of the five heroin addicts who are overdosing today—and 129 will 

lose their lives today, on average—four out of five of them started 

on prescription drugs. And often it was for pain medication; it was 

a prescription that they got because of a procedure. 

So could you briefly respond to that, Dr. Conway? 

Dr. CONWAY. Yes. Three quick responses. One, on the scope, we 

are evaluating the comments. We will determine whether adjustments are needed. Two, on the practice issue, overall it is budgetneutral, as you described. Overall, there is a slight shift in the impact tables towards the physician/clinician space. 

A specific thank-you for your focus on the opioid epidemic. As 

you know, for the first time in U.S. history we have ZIP codes in 

the U.S. where life expectancy is going down, and a large portion 

is driven by opioid issues. We will evaluate comments, including in 

specific classes of drugs. 

What you have named here is the fixed fee. Because the fixed fee 

is $16.80 as proposed, there are some very low-cost drugs, as you 

named, where the percentage increase looks large. So we will have 

to look at that specifically and determine across classes of drugs— 

and you named one—are any adjustments needed in the proposals? 

Senator PORTMAN. Just briefly—and I am sorry, Mr. Chairman— 

just one comment, if I could have an answer to this maybe in writing. 

Fentanyl is an example; it is a big problem right now around the 

country. It is believed that it is causing more overdoses in Ohio, 

by the way, than heroin is right now. It is a synthetic form of heroin. As I look at this, it receives a 2,000-percent increase in reimbursement under this model, Fentanyl alone. 

So again, I am very concerned that we are going to incentivize 

increased utilization, rather than the opposite. 

Dr. CONWAY. And that is from the fixed fee, but we can give you 

a formal answer to that. But it is from the $16 fixed fee. 

Senator PORTMAN. Thank you, Dr. Conway. 

The CHAIRMAN. Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman, and thank you, Dr. 

Conway, for being here. 

As many of my colleagues have pointed out, the lack of consultation with stakeholders is striking, and it further indicates not only 

the flawed nature of this demonstration, but of CMMI as an entity. 

But I want to draw attention to one section of CMMI’s authorizing statute which states that CMMI shall consult representatives 

of relevant Federal agencies. 

Now, we know at the Federal level there is HHS’s Rural Health 

Task Force, the HHS National Advisory Committee on Rural 

17 

Health and Human Services, and the newly created Rural Health 

Council, all dedicated to rural health policy. 

And I have also been told that CMS coordinates with HRSA’s Office of Rural Health Policy to, and I quote, ‘‘ensure that health care 

providers in rural America can function to the best of their ability 

within the boundaries of our statutory and regulatory frameworks.’’ 

So the question I have is, can you inform us as to whether 

CMMI, as it is statutorily required to do, consulted with these various Federal entities dedicated to rural health policy to ensure that 

what many of us believe is a flawed demonstration program would 

not adversely impact care delivery in rural areas? 

Dr. CONWAY. Yes. CMMI works closely across the Federal Government. This proposal went through the standard clearance interaction processes. And you mentioned the CMS Rural Health Policy 

Task Force that Mr. Slavitt and I established. We think that that 

is critical for rural issues. 

And as I noted earlier, we made a proposal in rural areas, but 

we also noted that we were focused on access in rural areas and 

access to medications. And so we are going to review the public 

comments now and determine whether any adjustments are needed 

in rural areas. 

Senator THUNE. Dr. Conway, could you detail the feedback that 

you received from these entities that I mentioned after this hearing, or provide the committee with any documents you might have 

regarding that input? 

Dr. CONWAY. Yes, we can provide input on the process. 

Senator THUNE. Good. Well, it would be nice to know if in fact 

those entities that I mentioned were in fact consulted and what 

their feedback consisted of. 

Dr. CONWAY. I understand. 

Senator THUNE. All right. It is well-known that not all drugs utilized for the treatment of cancer have cheaper alternatives. So the 

question is, how will beneficiaries who need these lifesaving treatments have better access to care when their best treatment option 

may force their provider into a situation where he or she can no 

longer afford to provide it? 

Dr. CONWAY. So we would want, and I would want personally, 

every doctor, including any cancer doctor, to prescribe the medicine 

that their patient needs. We believe this proposal maintains access 

through paying the Average Sales Price plus a 2.5-percent add-on 

fee plus a fixed fee. 

However, these are the type of comments that we would look 

closely at. If a physician or clinician could show that this is an access concern, in the comment period where we consider whether 

adjustments are needed, we would consider that. We also proposed 

an exceptions process where we proposed practices for patients 

where the proposal created an access issue, so we could make adjustments. 

Sorry to give a long answer on this one, but it is—I was asked 

earlier. I personally get e-mails all the time today from Medicare 

beneficiaries who cannot access their medications. 

As a practicing physician, I care about that deeply, and I want 

patients to have access to the right medicine. I want every patient 

18 

to get the medicine they need, and I want every doctor to be able 

to prescribe the medicine they need for their patients. 

And so those are the type of comments that we will look very 

closely at. 

Senator THUNE. Well, and I would just add too, if you have a provider who no longer is able to afford the drug and you have a senior who must receive treatment at a hospital’s outpatient department as a consequence of that, then how is that increased costsharing going to impact that patient’s ability to continue to receive 

the treatment? I mean, that is—— 

Dr. CONWAY. So we will review first of all what comments came 

in, but also if you think about a practice, I hope there are people 

in the practices looking at it across the board, as opposed to one 

individual drug. If reimbursement goes up for some oncology products in terms of the ASP formula that was proposed, that is obviously revenue to a practice. 

So we are going to look at overall access to medications in the 

aggregate from the policy and whether adjustments are needed. 

And then also in the specifics, MedPAC has also put out information on this and what different ideas they had and access numbers 

that they think are covered by different ASP plus 2.5, 3.5 permutations. So we will look at information from the public comments, 

most importantly, and also the public domain. 

Senator THUNE. Mr. Chairman, my time has expired. Thank you. 

The CHAIRMAN. Well, thank you. 

Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. Dr. Conway, very nice 

to see you. Thank you for joining us today. Thanks for your hard 

work and that of your staff. 

You have a tough job. You have a tough job, but we acknowledge 

that and admire the energy and intellect you bring to a very tough 

challenge. 

Dr. CONWAY. Thank you. 

Senator CARPER. Among the comments I have heard about the 

demonstration is, why is it so big? You normally think of demonstrations—we work with demonstrations across the Federal Government. I am an old Governor, and we always think of the States 

as laboratories of democracy. We try something out in a State, see 

how it works before we try to do it in an entire country. 

Why such a large, expansive demonstration, please? 

Dr. CONWAY. Yes. So first, it is a proposal, so we will seek comments on the scope, and many people have noted that. 

What we think about in terms of proposals is, first and primarily, the statutory mission, which is to propose models we think 

have a high likelihood of improving quality and lowering cost. 

Then on the geographic scope, we need to think about three 

issues primarily. One, that areas are big enough that most practices are going to be within an area, sort of the geographic size. 

Two, that it is evaluatable. So the goal is to evaluate models and 

determine whether they meet criteria in improving quality and 

lowering cost. So you have to have a sufficiently large sample so 

you can evaluate the model. 

And three, that you are able to have comparison groups so geography allows you to compare to other comparable geographies. But 

19 

we will look at the public comments and determine, based on those 

criteria and the public input, whether adjustments are needed. 

Senator CARPER. Thank you. 

My staff gave me a briefing. I am sure all of our staffs gave us 

briefings. They said—I just want to read you a short paragraph 

from a briefing memo my staff gave me. 

CMS expects—this is phase I, all right?—CMS expects this phase 

of the proposed demonstration project to incentivize physicians and 

health-care providers to select drugs of better value and lower cost 

for patients, leading to savings—something we are all interested in. 

Certain doctors, such as oncologists and rheumatologists, who often 

prescribe higher-cost drugs, will receive somewhat lower payments 

under this demonstration, while primary-care physicians who may 

prescribe lower-cost drugs will likely receive higher payments. 

Is that a correct assessment? Would you just talk about that? Is 

that correct? Do you want to modify that? What would you have 

to say about that paragraph? 

Dr. CONWAY. Yes, that is from the impact table, so it is correct. 

There are relatively modest—it was actually quoted earlier—adjustments for oncology and rheumatology. There are also adjustments up in the primary-care arenas. 

But we publish an impact table because we want to be transparent about the current proposal’s effects, and if adjustments are 

made, we would then publish a final impact table with the effects 

across practice types also: urban, rural, et cetera. These are the 

types of issues we care deeply about, and we want to be transparent. 

Senator CARPER. Last year the Medicaid Part B program spent, 

I believe, about $22 billion on prescription drugs. Does that sound 

about right? 

Dr. CONWAY. Yes. 

Senator CARPER. A cost shared by seniors, as you know—disabled 

individuals, taxpayers, and our government. Several drug companies have proposed value-based payment models to ensure that patients and Medicare are getting the best value and outcomes in return for a fair reimbursement. 

My question is, in the proposed Part B demonstration project, 

how is CMS to effectively evaluate value-based payment models for 

prescription drugs? And the second half of that is, is the first phase 

of the demonstration program necessary for advancing these alternative payment models for prescription drugs? 

Dr. CONWAY. Yes, so we proposed the two-phase approach. They 

are proposed as separate arms, if you will, of intervention. And yes, 

the second phase directly builds on what we have seen in the private sector, or are hearing from the private sector, about the desire 

to test value-based arrangements such as outcomes-based pricing 

and other methodologies that incentivize higher value and outcomes. Hence, our proposal. 

Senator CARPER. You have answered a lot of questions here 

today that you anticipated. Is there a question that you wish had 

been asked that has not been asked? What would be a good question, say, why did he not ask me that one? 

I see your staff writing feverishly behind you. 

20 

Dr. CONWAY. Yes, they probably will give a better answer later, 

and then I will feel bad. 

You know, I think, one, we have not noted that Congress wrote 

in the Innovation Center statute—and I will not get the statutory 

language exactly right—that we cannot limit any benefit to Medicare beneficiaries. And we are not limiting benefits to Medicare 

beneficiaries. 

I have said this, but to reiterate it, we care deeply about access 

to medications, innovation, and better health outcomes. The question we collectively have to work on is, how do we propose tests 

and models that help us achieve those outcomes? 

Sorry for the long answer, but about the current system today, 

I literally get contacted daily from beneficiaries who do not have 

access to a given medication or do not have access to care in a 

given area. 

So if we think the status quo is optimal, we are mistaken, and 

we need to test new payment and service delivery models to improve care for millions of Americans. And I think we are on a 

learning path today that is much better than it was 3 years ago. 

Senator CARPER. All right. Thanks so much. 

Senator WYDEN [presiding]. Senator Toomey? 

Senator TOOMEY. Thank you, Senator Wyden. 

Dr. Conway, thanks for joining us. Just a couple of questions. We 

are running well into the vote here, so I want to move quickly. 

I do want to go back to the scope issue, because it is something 

that is a concern raised by many of my constituents. And by my 

reading of the statute, the Affordable Care Act States that CMMI 

has the authority to test a model addressing, and I quote, ‘‘a defined population for which there are deficits in care.’’ 

But this rule would change the terms of reimbursement for 75 

percent of all docs who administer Part B drugs under the ASPplus-6 approach, and every single drug that is subject to the ASPplus-6 reimbursement, as I understand it. 

How could that be consistent with the congressional intent of a 

defined population? It just seems almost universal, which is not the 

same. 

How is it a defined population? 

Dr. CONWAY. So as you noted, the Innovation Center authority 

is to propose tests of new payment and service delivery models. 

You know, here we defined a population based on geography. We 

are looking at the comments now. 

The scope of that geography is a key issue that we will evaluate. 

Senator TOOMEY. But just so that I understand, it is true that, 

as I understand it, there are these different subsets that will undergo different experiments. But almost everybody is involved in 

this broader experiment to some degree. 

Dr. CONWAY. So the current proposal has three arms and therefore does have, as you noted, 75 percent approximately of the country in Innovation arms. We will evaluate the comments and take 

a look at key issues around the number of arms or interventions 

in the study and the geographic scope and whether adjustments 

are needed. 

Senator TOOMEY. Well, yes, I would just strongly urge you to 

focus on that particular issue. I was not here when the Affordable 

21 

Care Act was written, but I think a layman’s reading of a defined 

population suggests something much narrower than what is contemplated here. 

A second question I have for you goes to the purpose, as I understand it. At least one of the stated purposes is to make sure there 

is no incentive to drive a physician toward a more expensive alternative than some other alternative, which the current system 

seems to suggest. 

In its June report, MedPAC listed the 10 drugs with the highest 

Part B expenditures. Do you know how many of them had FDAapproved alternatives? 

Dr. CONWAY. I do not want to quote a number and be wrong. 

Senator TOOMEY. That is fine. The answer is zero among the top 

10. So it strikes me that clearly it is not the payment model that 

drives the docs to prescribe the 10 highest-expenditure drugs; it is 

the fact that there is no alternative. 

So if we were to make this change, is there a concern that it 

could create an incentive for physicians to experiment with off-label 

use for some purposes? Was that a consideration? 

Dr. CONWAY. So, a few comments. One, the proposal does not just 

focus on drugs where there are interchangeables, if you will; so for 

example, as you noted, interchangeable to generic. 

We are proposing to pay the Average Sales Price, which is the 

average cost of the drug, plus 2.5 percent, plus a fixed fee. We are 

going to look at the public comments to determine if there are adjustments that are needed in that formula, either overall or in certain settings. 

So the goal is, for both high-cost drugs and low-cost drugs, that 

we are paying appropriately for those drugs. The current system 

does have a disincentive that we have heard about from MedPAC 

and others on the low-cost drugs, where if it is a $10 drug and it 

is 60 cents, the real question is about whether it covers the cost 

of the physician or the clinician prescribing said medication. 

So we are trying to remove the financial incentive but still pay 

appropriately for the provision of drugs that you named or of other 

drugs. And we would want the oncologist or rheumatologist, physicians, clinicians, to prescribe the medicine that they need us to pay 

for and the physician—or the patient—to receive the medicine that 

they need. 

Senator TOOMEY. Thanks, Mr. Chairman. 

Senator WYDEN. I thank my colleague. 

Dr. Conway, we are at the point in the hearing where the choice 

is really for me to either filibuster until my colleagues get back or 

to offer a couple of additional questions. 

So I am going to opt for the second route and ask you about how 

this proposal interacts with other payment reform proposals. It is 

obvious that there has been progress made overall toward moving 

the health-care system to one that moves away from volume, that 

incentivizes quality and value. 

You all reached the target of making 30 percent of Medicare payments through alternative payment models. That is a plus—9 

months earlier than expected. And obviously, what is called the 

MACRA legislation—the Medicare access bill and the bill that had 

the critical program for kids—was passed last year to replace this 

22 

hugely flawed, what is called the SGR program, with a payment 

system that rewards doctors for providing high-quality, costeffective care to patients. 

Now, I have heard from some providers that the proposed Part 

B drug demonstration could unintentionally discourage participation in the new payment delivery and reform models, such as the 

Oncology Care Model and the alternative payment models incentivized by the major Medicare legislation. 

What would be your response to those concerns? And how do you 

envision making sure that this demonstration does not in any way 

discourage participation in these other model programs you all are 

looking at? 

Dr. CONWAY. Thank you, Senator Wyden. We think this proposal 

aligns with those programs. So, specifically to give you an example, 

the basic construct of MACRA—and we want to thank Congress for 

that—was to pay physicians and clinicians based on value, so quality resource use, clinical practice improvement, and use of technology. 

This proposal also aligns with paying physicians and clinicians 

based on value, so we think they would actually work well together. We also, through different methods of evaluating one model 

to a comparison group in another area where it is not, can estimate 

the effects of various models. 

But we think this Part B model will actually align with MACRA 

and encourage participation in these alternative payment models. 

I will not filibuster, but I do want to take the opportunity—— 

Senator WYDEN. Go ahead. 

Dr. CONWAY. You know, your leadership and this committee’s 

leadership on delivery system reform has been hugely important. 

The Care Choices model, where I was with the hospice and palliative care community on concurrent hospice and palliative care just 

a couple of weeks ago, was due to your leadership, and I want to 

thank you for that. 

Senator WYDEN. I thank you, Doctor. I think it would be very 

helpful if you could explain in something resembling English exactly how Medicare Care Choices works. Because this was something that I had really been dreaming would be done almost since 

those Gray Panther days. 

And as I understand it, what you all are doing with Medicare 

Care Choices is trying to make sure that eventually—because this 

is a big pilot now—every senior in America could have the opportunity to get hospice without giving up the prospect of curative 

care. 

And you are a physician, and a very skilled one. I gather that 

this also would make it easier for patients and families to time the 

kinds of choices they make so it is best for them. 

Could you explain how that works? 

Dr. CONWAY. You are correct. We are pilot-testing the ability for 

patients and families to choose concurrent hospice and palliative 

care with so-called curative care. It is actually in almost 40 States. 

And it allows for much more patient-centered choices. 

I will actually, if it is all right, use not my own words, but in 

that panel I had the pleasure of sitting beside Atul Gawande, who 

talked eloquently about the importance of this model and how it 

23 

was one of the biggest positive changes in palliative and hospice 

care in U.S. history. 

We will continue to modify and learn and refine, based on input 

from Congress and others, but it is a huge positive step. As a son 

and a physician, I have been through that with family members 

and patients, and it enables much more patient-centered choice. 

And probably the most powerful thing was, on the other side of 

me sat a gentleman whose wife passed away, and he said if this 

had been available for her, they would have been able to make better choices that would have more aligned with their goals of care. 

And at the end of the day, that is what it is about. It is about 

patients and families, as you know well. You have been a leader 

in making choices for them. 

Senator WYDEN. Well, keep me apprised on this. 

I want to recognize Senator Cardin. I just want it understood 

that that program, that program to provide more choices for older 

people, that was really born in this room. 

Because during the Affordable Care Act debate—my colleagues 

remember this discussion—we constantly heard this nonsense 

about how there were death panels. Well, there were no death panels. 

And now with Medicare Care Choices, it is very clear that older 

people are going to have a wide array of choices that allow them 

to choose what is best for them in line with their views about 

health and religion and morals and all of the other factors. I appreciate your taking us through it. 

Senator Cardin? 

Senator CARDIN. Thank you, Senator Wyden. And, Dr. Conway, 

thank you very much. 

I really want to drill down a little bit as to what your objectives 

are, particularly as you move towards the second phase of the demonstration. 

As I understand the first phase—and I was listening to Senator 

Portman’s questioning—it is revenue-neutral, which means you are 

going to have winners and losers. You have those challenges; I understand that. I understand what you are trying to achieve, and 

you are trying to do it in a way that uses current resources more 

effectively in dealing with the reasonable costs associated with administering these drugs. 

With the second phase, I am not quite as clear as to your objectives. Is it your anticipation that it will save projected costs? And 

if it is going to save projected costs, do you know the range that 

you are trying to get to in that second phase? 

Dr. CONWAY. Yes. We believe both phases have the potential to 

maintain or generate savings and improve quality for patients. 

And in the second phase, as we put in the proposal, we would 

come forward with, in the future, the specifics around drug classes 

and the various arrangements. We had different tools, so outcomesbased pricing, risk-sharing arrangements, indication-based payment. We would come forward with the classes and the proposals, 

would get patient input, consumer input, and input from Congress 

and others on those proposals. 

A tangible example that has actually come to us from outside 

CMS is entities that want to do risk-sharing arrangements, where 

24 

if a given drug may lower costs in the Part A and B space, we 

think about how that could have benefits across the health-care 

sector to improve quality and lower costs. 

To give you an example, we have lower cost-sharing for beneficiaries who are selecting certain medications as one of the proposed tools. 

So the goal here is to test an array of tools that have been used 

in the private sector to improve quality and lower costs, to test 

them in the Medicare Part B program. 

Senator CARDIN. We have seen in previous efforts to impose delivery system changes that are more cost-effective, give you better 

value, that the budget can prevent it from being implemented the 

way it was intended, because you need to produce a certain amount 

of cost savings, since everyone has to share in the realities of the 

budget. 

Do you build into this demonstration the confidence and credibility that you really are looking for value and not just to cut the 

cost issues here? 

Dr. CONWAY. Our statutory authority calls out both quality and 

expenditures, but we actually focus on quality and patient outcomes first. So when we think about new payment model tests, we 

lead with quality and patient outcome. 

So I think we would take that approach here as well, where our 

goal is to maintain access, to improve outcomes for patients, and 

then to either maintain or lessen expenditures. And the statute includes the provision, if a program improves quality and maintains 

its expenditures, that that can meet criteria for expansion. 

Senator CARDIN. And how do you intend to engage the stakeholders as you go through into the two phases here? 

Dr. CONWAY. So we are reviewing the comments now. But I 

would say the principles that we will try to put in place, which are 

true across the Innovation Center, are robust patient and consumer 

input into the models, input from providers and stakeholders 

across the health system, certainly input from Congress. At the end 

of the day, broad input and transparent processes are critical to 

shaping this work. 

I mentioned this earlier, but we now have innovations in our 

models in all 50 States, thousands of providers, millions of beneficiaries, and it is deep, deep engagement with the various participants. 

In our bundled payment model, our voluntary BPCI, Bundled 

Payment for Care Improvement model, 48 States and over 1,500 

hospitals, physician groups, and others, are redesigning care for patients and improving care and care coordination. So that is the 

kind of engagement we want. 

Senator CARDIN. Thank you. 

Thank you, Mr. Chairman. 

Senator WYDEN. Does my colleague have any additional questions? 

Senator CARDIN. Well, I have a lot of comments, but I think, related to this subject, Maryland is in a somewhat unique position. 

And one of the issues that we will need to talk about is the impact 

it has on each State, including my own State. But it is different 

for Maryland. 

25 

Dr. CONWAY. Yes. 

Senator CARDIN. But I assure you, my principal objective is getting better value, better outcomes. I think the more you can coordinate, the better off you are. 

But I always am concerned about the pressures on the budget 

that are used, at times, to use well-intended programs just to 

produce savings rather than to produce better outcomes. 

And, Dr. Conway, I take you at your word when you say that 

that is not the objective here. And we obviously will be watching 

this pretty closely. 

Dr. CONWAY. Thank you. 

Senator WYDEN. I thank my colleague. And just one last question 

from me, Dr. Conway. 

So phase II of the demonstration seeks to move into this valuebased arena which you have heard that I and certainly others—this 

has been something that has had support on both sides of the aisle 

for some time—believe is constructive, moving away from clunky, 

volume-driven, fee-for-service medicine. That is what phase II 

builds on. 

How does it coordinate with the other laudable goal of precision 

medicine? In other words, you all seek, in the days ahead, to really 

make sure that drugs and treatments—and what is striking about 

this is, this means what it sounds like—really are tailored exactly 

to the needs of a particular individual, recognizing that one particular drug or therapy does not affect George and Harry in the 

same way, and certainly does not affect George and Sally in the 

same way. 

Tell us, if you would, so we have a sense of where you are going, 

how does phase II, in particular, in effect build on the Precision 

Medicine Initiative in the administration? 

Dr. CONWAY. Thank you for the question. We think it very much 

aligns with Precision Medicine, and let me explain how. 

For example, if you had a new therapy that generated significantly better outcomes for patients and you are paying based on 

outcomes and value, that actually supports paying for that therapy 

and the innovation and better patient outcomes it delivered. 

Similarly, for indications of base pricing, you could imagine if you 

can really tease apart for which patients this therapy is maximally 

effective and then pay appropriately for that, it really incentivizes 

innovation and precision medicine, better outcomes for the specific 

patients who will benefit from specific therapies. 

And we think it is a very exciting place to work across the 

health-care system: manufacturers, payers, providers, patient 

groups in support of both precision medicine and paying for value 

and better patient outcomes. 

Senator WYDEN. Senator Burr? 

Senator BURR. Thank you, Mr. Chairman. 

Dr. Conway, I have great admiration for the role that you play. 

And it has to be extremely tough for a doc to defend an agency that 

says we can determine treatment better than the attending physician, because I think that is what this Part B rule in fact does. 

You stated that you met regularly with patient and provider 

groups. Have any of those groups that you met with been supportive of this rule? 

26 

Dr. CONWAY. Yes, we continually meet with patient groups, consumer groups, provider groups. 

Senator BURR. The question is very simple. Have any of them 

been supportive of the Part B rule, yes or no? 

Dr. CONWAY. Yes. We received—— 

Senator BURR. Would you provide for this committee the list of 

those groups that have come out and said, we are supportive of this 

Part B rule? 

Dr. CONWAY. Yes, and I believe we may have even received another letter recently. But yes, we can provide that information. 

Senator BURR. Is CMS considering withdrawing this rule, yes or 

no? 

Dr. CONWAY. We are evaluating the public comments now and intend to take those comments into account in finalizing the rule. 

Senator BURR. Is CMS considering withdrawing the rule? 

Dr. CONWAY. We intend to take the public comments into account 

in finalizing the rule. 

Senator BURR. Are you doing this to save money or to reach a 

better health outcome? 

Dr. CONWAY. We are doing it because we believe it can both 

reach a better health outcome and maintain or lessen expenditures. 

Senator BURR. Does CMS believe they can design a better treatment pathway than a physician can? 

Dr. CONWAY. As you noted, I am a practicing physician. I believe 

physicians care about their patients, and I want physicians and clinicians to make treatment decisions based on what is best for their 

patients. 

I would like to maintain, and the agency has focused on maintaining, that a patient, a beneficiary, should receive the medicine 

they need, and that a physician or clinician should prescribe in all 

instances the medicine that is best for their patient. 

Senator BURR. And would you also agree that the location they 

get that at is important? Transportation is the number one issue 

with health care in this country. It is in the Veterans Administration, it is in Medicaid, and I believe it is in Medicare. 

So when you limit the rural access to these lifesaving treatments, 

have you in fact bettered the outcome? 

Dr. CONWAY. We do not want to limit access, including in rural 

areas. Many of my family members are private practice physicians 

in independent practice. We support independent physicianclinician practice. 

We are proposing a model that we think can support independent 

physician-clinician practice, including rural and small practices. 

But we will review the public comments to determine whether adjustments are needed. 

Senator BURR. Well, you talked earlier—and I apologize for being 

out; I had to go vote—about disincentives that exist in the current 

system. You do not consider it a disincentive for a local-based delivery point when you are saying, but if you go to the hospital, we are 

going to pay you more money? 

Dr. CONWAY. This proposal proposed to pay the same ASP plus 

2.5 percent plus a fixed fee, both in the hospital outpatient and 

physician setting. 

27 

Senator BURR. Dr. Conway, 4 years ago I authored the Advancing Breakthrough Therapies for Patients Act with the chairman 

and my good friend from Colorado, Senator Bennet. And our objective was to bring forward promising breakthrough therapies as fast 

as possible, including those that would be impacted by what CMS 

is proposing. 

This bipartisan law saw remarkable success, particularly in 

bringing forward cancer treatments even faster. As a result of the 

law, in its first 4 years, over 130 drugs have been designated as 

breakthrough and more than 45 drugs have been approved by FDA 

so far. 

I fear that this demonstration project will jeopardize access to 

these breakthrough drugs just as they are becoming available. 

Can you assure the committee today that your proposal will not 

negatively impact the success of the breakthrough therapy legislation? 

Dr. CONWAY. We believe the proposal aligns with innovative 

breakthrough therapies that improve patient outcomes, because the 

proposal is about focusing on paying for drugs and therapies that 

generate better outcomes for patients. 

Senator BURR. My constituents have also written me expressing 

concerns about this CMS proposal. The CEO of an oncology clinic 

in Hickory, NC said this: ‘‘Physicians and caregivers are not prescribing medications to profit themselves. This team in Hickory, 

NC is prescribing medications and therapies because they work.’’ 

Do you fear that providers are profiting themselves, versus providing the therapies because they work? 

Dr. CONWAY. I would want those physicians to continue providing those therapies that work for their patients. 

Senator BURR. So if they feel like this in some way, shape, or 

form takes that ability away from them, then you would see a need 

to change this legislation? 

Dr. CONWAY. We want to review theirs and any other public comments, because we want the proposal to support access to medications for beneficiaries. 

Senator BURR. Last thing, Mr. Chairman. 

Senator WYDEN. The time of the gentleman has expired. Why 

don’t you have one last question so we can go to Senator Scott? 

Senator BURR. Thank you, Mr. Chairman. 

A North Carolinian suffering from primary immune deficiency 

who relies on infusion treatments writes: ‘‘Members of my community on Medicare and the providers who care for them already face 

complexities accessing medical care and treatments. They should 

not have to face the consequences of an initiative that eliminates 

their treatment options. This cost-cutting measure would become a 

life-cutting measure, and I urge you to intervene to stop this proposed reimbursement model.’’ 

That is a patient. I think a patient probably heard from a provider that if this goes through, here is the impact on you. What do 

you say, as a doc, to that patient with immune deficiency disorder? 

Dr. CONWAY. I would say as a doctor to that patient, I want them 

to receive the medicine they need for their immune deficiency. I 

would say to their physician, I want them to prescribe the right 

medicine to their patient at all times, like all physicians should. 

28 

Senator BURR. Then I urge you to really look at this proposed 

rule. 

Thank you, Mr. Chairman. 

Senator WYDEN. Senator Scott? 

Senator SCOTT. Thank you, Mr. Chairman. 

Thank you, Dr. Conway, for being here today. And certainly you 

are from a rural part of Texas. I am from a very rural State, South 

Carolina. So I think we both have the appreciation and affinity for 

the health-care costs and challenges for people living in rural areas 

that are absolutely severe. 

The thing I have heard from my constituents consistently as it 

relates to this demonstration project is fear. They are scared. 

Picture, if you will—and I know your mother is on Medicare, as 

you stated, and mine is as well—picture if you will senior citizens 

living in rural South Carolina scared. 

They are on fixed incomes, and we now have a demonstration 

project that covers the entire Nation. And what they see as the result of this experiment is higher prices, less access, and perhaps, 

in order to receive the lifesaving treatment that they need desperately to stay alive to see their grandkids one more time, a 2- 

or 3-hour drive from Manning, SC to Charleston. And so with great 

uncertainty, feeling confused and afraid, they write into our offices. 

And one of the more difficult things to do in Congress today is 

to find a way to unite Republicans and Democrats on a topic. And 

this demonstration project has done a very good job of creating and 

getting concerns from Republicans and Democrats that all sound 

fairly similar, save one component of the discussion. 

And my questions are not that different from the questions you 

have heard so far, Dr. Conway. They are around rural access; they 

are around rare diseases, the impact on the folks who are socially 

and economically challenged and folks who are concerned that now 

we are seeing the government practicing medicine and determining 

value, as opposed to working together to figure out what truly is 

the value proposition of their visit to the doctor. 

And I think, Dr. Conway, you and I both can agree at least that 

these concerns are at least valid concerns, given the scope, the 

magnitude, the impact on citizens. And I believe that your desires, 

your intentions are good. 

Frankly, you are looking for a way, as you said earlier, to help 

Medicare be there not only for your mother, who is currently receiving the benefits, but for your four kids. I think we share the 

same concern, perhaps with a different outcome. 

And I hope, I would even plead with you on behalf of the citizens 

of South Carolina who are so concerned about this project, to take 

a second look, a step back from a nationwide implementation that 

could have dire effect on folks depending on their very certain paychecks, on their certain benefit from Social Security. 

And so just to highlight a couple of areas, one question being in 

the rare disease arena where, for patients in my State, sickle cell 

anemia is a very powerful weapon against so many folks in my 

State. 

For patients with sickle cell and other rare diseases, blood transfusions are one of the only methods of treatment. While it is clear 

that blood products are excluded from phase I of the demonstraVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 R:\DOCS\26393.000 TIMD
29 

tion, it is unclear if they will be excluded during phase II of the 

demonstration. 

Can you clarify for my folks at home? 

Dr. CONWAY. So, you are right on blood products. They were proposed to be excluded from phase I. We have put out a proposal for 

phase II that we would come forward with the specific drug classes 

or areas for phase II that we plan to address and receive comment 

on those areas, both public input and patient consumer input. 

So our goal is to engage with Congress and with the public and 

specifically patients, consumers. And we did note in the proposed 

rule that if there were specific classes or other issues that needed 

to be addressed, and rare diseases was an example we named, that 

we would look to those public comments and consider how best to 

address those issues. 

Senator SCOTT. Mr. Chairman, do you have time for me to ask 

another question? 

Senator WYDEN. Everyone else has gotten an extra one or two, 

so please feel free, Senator Scott. 

Senator SCOTT. Well, thank you, sir. I appreciate the extra 10 

minutes. I really appreciate that, sir. [Laughter.] I did not think 

that was that funny, but we will go on anyway. 

I certainly have appreciated the concern of my constituents about 

the amount of time that they could spend on the road trying to find 

the right practitioner, perhaps the right hospital to go to. If you are 

living in Manning, Sumter, or in a rural area of South Carolina, 

driving to Columbia or Charleston is not just a hop, skip, and a 

jump. It is a more serious proposition. 

I also note that Obamacare is going to provide a partnership or 

ride-sharing service for young folks to sign up for the health-care 

law. How can we justify the department going out of its way to 

transport the young adults to sign up for Obamacare when the program you are proposing will limit access for some of our most vulnerable, like the elderly and disabled? 

Have we figured out a transportation-sharing program that will 

help with the impact of transportation in rural areas? 

Dr. CONWAY. So for the proposal, we would want the proposal to 

maintain access, including in rural areas, smaller practices, et 

cetera. For patients and physicians who want to deliver medicines, 

we want them to receive the medicines when and where and how 

they want to receive said medicines. 

We put forward the proposal because we thought the proposal 

maintained access and improved quality and could maintain or 

lower expenditures. But we will be looking closely at the public 

comments, including on smaller physician practice issues and rural 

issues, in determining whether adjustments are needed. 

Senator SCOTT. Well, Mr. Chairman, I will stop where I started. 

I do not doubt the sincerity or the intentions of Dr. Conway or 

anyone within his employ. I do want to echo my concerns for my 

citizens, particularly those in rural areas, those with rare diseases—sickle cell being among them—those folks who are just financially strapped. A life that is socially, economically challenged, 

that sounds cool, but the fact of the matter is it means that you 

have too much month for the money that you have. 

30 

And so we are talking about people who are seriously challenged, 

and now are very concerned. And, as you have heard echo throughout the hearing today, the concerns are real, because, while the intentions are good, the access issues are still real concerns. 

And frankly, the pricing, though you may have a static number, $16.80, the impact of those numbers on the actual costs can be 

quite high. 

Thank you, Dr. Conway. Thank you, Mr. Chairman. 

Senator WYDEN. Thank you, Senator Scott. 

Dr. Conway, I just want to make sure. You are a pediatrician. 

You are a career employee in the department. You are not a political appointee. I know you have been published in some of the 

country’s leading medical journals, and you are a career employee. 

Is that correct? 

Dr. CONWAY. Yes, sir. I am a career employee. 

Senator WYDEN. All right. On behalf of Chairman Hatch, I would 

ask for colleagues and staff who are here that any written questions for the record be submitted by Tuesday, July 12, 2016. 

With that, the Finance Committee is adjourned. 

[Whereupon, at 11:50 a.m., the hearing was concluded.] 

(31) 

1 CMS Proposed Rule, ‘‘Medicare Program; Part B Drug Payment Model,’’ https://www. 

federalregister.gov/articles/2016/03/11/2016-05459/medicare-program-part-b-drug-paymentmodel. 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF PATRICK CONWAY, M.D., M.SC., ACTING PRINCIPAL DEPUTY

ADMINISTRATOR, DEPUTY ADMINISTRATOR FOR INNOVATION AND QUALITY, AND

CHIEF MEDICAL OFFICER, CENTERS FOR MEDICARE AND MEDICAID SERVICES, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Chairman Hatch, Ranking Member Wyden, and members of the committee, thank 

you for the invitation to discuss the Centers for Medicare and Medicaid Services’ 

(CMS) initiative to improve how Medicare pays for Part B drugs and to support physicians and other clinicians in delivering higher quality care in the Medicare program. 

Part B drug spending has risen significantly over time. Total Part B payments 

for separately paid drugs in 2015 were estimated at $22 billion (this includes cost 

sharing). In 2007, the total payments were $11 billion; the average annual increase 

since 2007 has been 8.6 percent. This significant growth has largely been driven by 

spending on separately paid drugs in the hospital outpatient setting, which more 

than doubled between 2007 and 2015, from $3 billion to $8 billion respectively.1

CMS has heard from many stakeholders about concerns about the cost, value, and 

access to prescription drugs. As part of an initiative to address rising drug costs, 

the Department of Health and Human Services (HHS), convened a forum that 

brought together consumers, physicians, clinicians, employers, manufacturers, 

health insurance companies, representatives from State and Federal Government, 

and other stakeholders to discuss ideas on how the health care system can meet the 

dual imperatives of encouraging drug development and innovation, while ensuring 

access and affordability for patients. To help further this mission, CMS issued a proposed rule to test a new model to help improve patient care and the value of Medicare drug spending. 

This proposal is part of the administration’s broader strategy to encourage better 

care, smarter spending, and healthier people by paying for what works, unlocking 

health care data, and finding new ways to coordinate and integrate care to improve 

quality. CMS values public input and comments as part of the rulemaking process, 

and looks forward to continuing to work with stakeholders through the rulemaking 

process to maximize the value and learning from the proposed tests. We have received feedback from a wide range of stakeholders on several issues, including the 

size of the model, patient access in small practices and rural areas, and the importance of patient input. We are reviewing all comments closely to determine whether 

adjustments are needed. Our goal is to be responsive to the public comments and 

input from Congress while preserving the integrity and effectiveness of the model. 

PROPOSED NEW MEDICARE PART B DRUG PAYMENT MODEL

Medicare Part B includes a limited drug benefit that encompasses certain drugs 

and biologicals. Currently covered Part B drugs fall into three general categories: 

drugs furnished incident to a physician’s services, drugs administered via a covered 

item of durable medical equipment (DME), and other drugs specified by statute. 

These types of drugs include intravenous infusions (IVs) like cancer treatment 

32 

drugs, injectables like antibiotics or eye care treatments, and other drugs that require a medical professional to administer. 

Many Part B drugs, including drugs furnished in the hospital outpatient setting, 

are paid based on the Average Sales Price (ASP) plus a statutorily mandated 6 percent add-on. The ASP is calculated quarterly using the manufacturer-submitted 

data on sales to all purchasers (with limited exceptions specified in statute, such 

as sales at nominal charge and sales exempt from best price) with manufacturers’ 

rebates, discounts, and price concessions included in the ASP calculation. The ASP 

payment amount does not take into account the effectiveness of a particular drug 

nor the cost of clinically comparable drugs. The Medicare Payment Advisory Commission (MedPAC) has noted that ASP methodology may encourage the use of more 

expensive drugs because the 6 percent add-on generates more revenue for more expensive drugs. 

The proposed rule that CMS issued describes a new Part B Drug Payment Model 

that would test whether alternative drug payment designs may improve how Medicare Part B pays for prescription drugs and supports physicians and other clinicians 

in delivering higher quality care. More specifically, this proposed rule is designed 

to test different provider and patient incentives to do two things: drive the prescribing of the most effective drugs and test new payment approaches that reward 

positive patient outcomes. Physicians often can choose among several drugs to treat 

a patient, and the current Medicare Part B drug payment methodology can penalize 

doctors for selecting lower-cost drugs, even when these drugs are as good or better 

for patients based on the evidence. Among the approaches to be tested are the elimination of certain incentives that work against the selection of high performing 

drugs, as well as the creation of positive incentives for the selection of high performing drugs, including reducing or eliminating patient cost sharing to improve patients’ access and appropriate use of effective drugs. 

Phase 1: Adjustments to the ASP+6 Percent Add-on Methodology 

The proposed model would test whether changing the current 6 percent add-on 

payment to 2.5 percent plus a flat fee payment of $16.80 per drug per day changes 

prescribing incentives and leads to improved quality and value. CMS would update 

the flat fee at the beginning of each year by the percentage increase in the consumer price index for medical care for the most recent 12-month period. 

CMS expects that the add-on payment of 2.5 percent plus a flat $16.80 fee will 

cover the cost (the ASP) of any drug paid under Medicare Part B. The flat fee is 

calculated such that it is budget neutral in aggregate. CMS intends for the test to 

result in savings through changes in prescribers’ behavior, as we hope that the revised pricing removes any excess financial incentive to prescribe high cost drugs 

over lower cost ones when comparable low cost drugs are available. In other words, 

we believe that removing the financial incentive that may be associated with higher 

add-on payments may lead to some savings during phase I of the proposed model. 

Phase 2: Value-Based Purchasing (VBP) Tools 

Commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization successfully employ an array 

of tools including value-based pricing and feedback on prescribing patterns to improve the value of drug payments. To produce a menu of value-based purchasing 

options, CMS reviewed the numerous tools used by entities that manage drug and 

health benefits and identified those that may be applicable to payment for Part B 

drugs with the same positive results. 

The proposed rule sought comments on testing different alternative approaches 

for Part B drugs to improve outcomes and align incentives to improve quality of care 

and spend dollars wisely; these include: 

• Discounting or eliminating patient cost-sharing. Patients are often required to 

pay for a portion of their care through cost-sharing. This proposed test would 

decrease or eliminate cost sharing to improve beneficiaries’ access and appropriate use of effective drugs. 

• Feedback on prescribing patterns and online decision support tools. This proposed test would create evidence-based clinical decision support tools as a resource for providers and suppliers focused on safe and appropriate use for selected drugs and indications. Examples could include best practices in prescribing or information on a clinician’s prescribing patterns relative to geographic and national trends. 

33 

• Indications-based pricing. This proposed test would vary the payment for a 

drug based on its clinical effectiveness for different indications. For example, 

a medication might be used to treat one condition with high levels of success 

but an unrelated condition with less effectiveness, or for a longer duration of 

time. The goal is to pay for what works for patients. 

• Reference pricing. This proposed test would analyze the practice of setting a 

standard payment rate—a benchmark—for a group of therapeutically similar 

drug products. 

• Risk-sharing agreements based on outcomes. This proposed test would allow 

CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments. 

Scope of the Model 

The proposed model would run for 5 years with the goal of having the incentive 

and value-based purchasing tests fully operational during the last 3 years to evaluate changes and collect sufficient data. All providers and suppliers furnishing and 

billing for Part B drugs would be required to participate in the model. This would 

help ensure that observed outcomes do not suffer from selection bias inherent in a 

voluntary participation model and would help test whether the model can ultimately 

be generalized to providers and suppliers billing for Part B drugs with various characteristics, such as different geographies, patient populations, and specialty mix. 

With limited exception, CMS proposed to include all Part B drugs and biologicals 

in this model. 

Under the proposal, providers and suppliers would be placed in a control or study 

groups based on Primary Care Service Areas, which are clusters of zip codes based 

upon patterns of Medicare Part B primary care services (excluding the State of 

Maryland where hospital outpatient departments operate under an all-payer model). 

The exact geographic locations the model would be operational in would be posted 

once the model is finalized, as we have done with other models. 

Maintaining Beneficiary Access to Quality Care 

Ensuring beneficiary access to high quality care and treatment is always at the 

forefront of CMS’s work. In Medicare Part B, most beneficiaries pay a monthly premium for coverage of certain services including prescription drugs administered by 

infusion or injection in physician offices and hospital outpatient departments, doctors’ services, outpatient care, and durable medical equipment (DME). Beneficiaries 

must also meet a deductible of $166 in 2016; once that is met, the beneficiary typically pays 20 percent of the Medicare-approved amount for the services they receive. 

Under this structure, beneficiaries utilizing Part B drugs, especially those using 

higher cost drugs, may face significant out-of-pocket expenses. To the extent that 

prescribing patterns do shift toward lower cost drugs, in aggregate, beneficiaries 

would benefit along with the Medicare program. 

Under the proposed model, beneficiaries would still have access to the same drugs 

and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The proposed model would not affect drug coverage or any other 

Medicare benefits. The proposed model also includes a number of beneficiary protections. All standard Medicare appeals processes would stay the same. The proposed 

model would include a new pre-appeals exceptions review process under Phase II, 

in addition to the standard Medicare appeals processes, that would allow the beneficiary, provider, or supplier to explain why Medicare’s value pricing policy is not 

appropriate for the beneficiary and to seek an exception from the model’s pricing 

approach. Exceptions decisions would be issued within five business days. In addition, CMS would be closely monitoring beneficiary access and health outcomes during the model. There would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

The public comment period for the Proposed Rule concluded on May 9, 2016, and 

CMS is carefully considering all the public comments on this proposal that were received by the close of the comment period. HHS and CMS value public input, and 

we look forward to continuing to work with stakeholders to maximize the value and 

learning from this model. 

34 

CONCLUSION

Millions of Americans rely on medications to manage chronic illnesses and treat 

acute conditions. CMS is dedicated to ensuring that its beneficiaries have and maintain access to the high quality treatments they need while pursuing better drug 

value. Moving forward, HHS and CMS are committed to continuing to listen and 

work together with stakeholders to advance ideas that improve access, affordability, 

and innovation so all Americans have access to the breakthroughs ahead. There are 

no easy answers to these multifaceted challenges, but there is a significant benefit— 

to all of us—of working together to find a solution. I appreciate the committee’s interest and look forward to answering your questions. 

QUESTIONS SUBMITTED FOR THE RECORD TO PATRICK CONWAY, M.D., M.SC. 

QUESTIONS SUBMITTED BY HON. ORRIN G. HATCH

ANALYSIS BEHIND PROPOSED DEMONSTRATION

Question. Does CMS have data indicating that the payment changes in the phases 

of the proposed model, or demonstration will improve quality of care, patient outcomes, or result in savings? If so, why were they not included in the proposed rule? 

Answer. The Medicare Part B Drug Payment Model proposed rule proposed to test 

a new model under the authority of the Center for Medicare and Medicaid Innovation (the Innovation Center). Section 1115A of the Social Security Act (the Act) authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of 

care furnished to Medicare, Medicaid, and Children’s Health Insurance Program 

beneficiaries. 

Testing the proposed Part B Drug Payment model would allow us to learn more 

about how value-based purchasing tools and changes to Average Sales Price (ASP)- 

based reimbursement could reduce Medicare spending on drugs, while preserving or 

enhancing the quality of care furnished to Medicare Part B beneficiaries. The current ASP methodology for Part B drugs may encourage use of more expensive drugs 

because the 6 percent add-on generates more revenue for more expensive drugs. 

The proposed rule discusses the specific approach for the use of an add-on percentage with a flat fee described in MedPAC’s June 2015 Report to Congress. Specifically, as described in the proposed rule, MedPAC evaluated changing the addon to 2.5 percent of ASP plus a budget neutral flat fee per dose of $14. The result 

redistributed add-on payments by decreasing payments for expensive drugs in favor 

of drugs that are paid at lower amounts. Redistribution under this approach favors 

the provider specialties and suppliers that utilize relatively inexpensive drugs. The 

June 2015 MedPAC report determined that under this approach physician specialties that heavily utilize drug therapy would see a decrease in drug revenues while 

specialties that utilize fewer drugs like primary care would see an increase in drug 

revenue. CMS has proposed the same basic approach under phase I of the model 

that was described in the June 2015 MedPAC report: A fixed percentage with a flat 

fee, specifically, a fixed percentage of 2.5 percent and a flat fee of $16.80 per drug 

per day administered. 

Question. The proposed rule presupposes there are lower cost Part B drug alternatives available for all Medicare patients. How many treatment situations exist 

where there are true clinical substitutes, with one costing significantly less than the 

other? What evidence did the agency use in making that determination? Did the 

agency account for patients’ perspectives and experiences in making the determination? 

Answer. CMS proposed two phases for the Part B Drug Payment Model. In phase 

I of the model, CMS proposed implementing a variation to the add-on component 

of Part B drug payment methodology in different geographic areas of the country. 

Phase I would establish payment at Average Sales Price (ASP) plus a 2.5 percent 

add-on percentage and a flat fee per administration day as a budget neutral test. 

In phase II of this proposed model, CMS proposed to implement value-based purchasing (VBP) tools in conjunction with the phase I variation of the ASP add-on 

payment amount for drugs paid under Part B. Phase II would use tools currently 

employed by commercial health plans, pharmacy benefit managers (PBMs), hospitals, and other entities that manage health benefits and drug utilization. SpecifiVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00038 Fmt 6601 Sfmt 6621 R:\DOCS\26393.000 TIMD
35 

cally, CMS proposed to apply one or more VBP tools, such as indications-based pricing, reference pricing, and clinical decision support tools to Part B drugs. 

Neither phase of the Part B model presupposes there are lower cost Part B drug 

alternatives available for all Medicare patients. Rather, the proposed model would 

test, in specific geographic areas, whether the proposed alternative approach for the 

ASP add-on payment and proposed VBP tools would strengthen the financial incentives for physicians to choose higher value drugs. 

Under the proposed Part B drug payment model, beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, 

hospitals, and other providers or suppliers. The proposed model would not affect 

drug coverage or any other Medicare benefits. In the proposed rule, CMS noted that 

the current Part B drug payment policy at ASP+6 percent could have incentives for 

prescribing higher cost drugs when comparable lower cost drugs are available, increasing expenditures. CMS also proposed a pre-appeals exceptions review process 

for phase II of the model, which would create a mechanism for beneficiaries, providers, and suppliers to request an exception to Medicare’s value-based pricing policy, if warranted in the beneficiary’s circumstances. CMS is carefully considering the 

comments received from stakeholders during the comment period on the proposed 

model to determine whether adjustments are needed. 

EFFECT OF REDUCED AVERAGE SALES PRICE ADD-ON

Question. The reality is that the Part B drug payment rate is not Average Sales 

Prices (ASP) plus 6 percent but ASP plus 4.3 percent after the mandatory sequester 

is applied. This effective rate does not even take into account prompt pay discounts, 

which are widely estimated at 1–2 percent of ASP. Does CMS agree with this assessment? 

Answer. CMS is required to reduce Medicare payments for Part B drugs under 

the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as 

amended by the Budget Control Act of 2011. The application of the sequestration 

requires the reduction of Medicare payments by 2 percent for Medicare FFS claims 

with dates-of-service or dates of discharge on or after April 1, 2013. The manufacturer’s ASP is calculated based on sales to all purchasers other than sales exempt 

from best price (such as prices charged to 340B covered entities) and sales at nominal charge, and is net of volume discounts, prompt pay discounts, cash discounts, 

free goods that are contingent on any purchase requirement, chargebacks and rebates (other than rebates under the Medicaid drug rebate program). The model does 

not address the underlying ASP calculation, including the inclusion of prompt discounts in accordance with the ASP statute. The model also does not consider reductions applied to Medicare payment under sequestration, which is independent of 

Medicare payment policy. 

Question. Considering that ASP is an average, with some providers inherently 

paying above it and some below it, won’t some providers be paying more to acquire 

some drugs that they are reimbursed for them considering that the payment rate 

amounts to ASP plus less than 1 percent? 

Answer. Under phase I of the Part B Drug Payment Model, CMS proposed to 

modify the ASP add-on amount in a budget neutral manner. Overall, Part B drug 

payment to practitioners, pharmacies, and hospitals by specialty in phase I of this 

proposed model would not change, as the ASP add-on revision is proposed to be 

budget neutral. We do not expect a sizable overall reduction in Part B drug spending associated with phase I of this model, but we do anticipate an incentive to use 

higher value drugs. We believe that phase I of this model will not change how Part 

B drugs are acquired by providers or suppliers, or how drug manufacturers sell 

their products to providers, suppliers, or intermediaries such as wholesalers. CMS 

is carefully considering the comments received from stakeholders during the comment period on the proposed model to determine whether any adjustments to the 

model are needed. 

Question. The Medicare Payment Advisory Commission (MedPAC) looked at invoice prices for 34 high expenditure drugs, many of them likely cancer drugs, and 

found that one-third were being sold at more than 102 percent of ASP. How does 

CMS expect oncologists (or other physician specialists) in small, rural and community-based practices to acquire necessary cancer drugs if they will be paid less than 

their acquisition cost? 

Answer. CMS is aware of the unique challenges that patients and providers in 

rural areas and providers in small practices may face. The proposed rule set forth 

36 

1MedPAC March 2016 report, http://www.medpac.gov/docs/default-source/reports/chapter3-hospital-inpatient-and-outpatient-services-march-2016-report-.pdf?sfvrsn=0. 

our belief that the proposed payment rate of 102.5 percent of ASP plus $16.80 

should be sufficient to cover the provider’s or supplier’s purchase price. Additionally, 

in the proposed rule, we estimated that overall spending on drugs furnished in the 

office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. As part of the proposed rule, we 

specifically solicited comments on the potential effect that this proposed model may 

have on rural practices, how rural practices may differ from non-rural practices, and 

whether rural practices should be considered separately from other practice locations. We also solicited comments on any potential effects this proposed model may 

have on small practices, how small practices may differ from large practices, and 

whether small practices should be considered separately from other practices. These 

are important issues, and CMS is closely reviewing the comments received during 

the comment period to determine whether adjustments are needed. 

Question. Has CMS conducted any analysis as to whether certain practices, especially those that are small and/or rural, would close or sell to a hospital? 

Answer. There have been longstanding trends in site of service driven by market 

forces unrelated to what the proposed Part B Drug Payment Model would be testing.1 This proposed Part B Drug Payment Model is intended to lead to better value 

for Part B by encouraging providers and suppliers to choose higher value drugs. 

While the proposed rule presented information indicating that the model design 

would not favor hospitals over physician practices, we have received feedback from 

stakeholders on this issue. In the proposed rule, we estimated that, in the aggregate, rural practitioners would be estimated to experience a net benefit under phase 

I of the model. And overall, spending on drugs furnished in the office setting would 

increase while spending on drugs furnished in the hospital setting would decrease 

under phase I of the model. We are carefully considering the comments received 

during the comment period to determine whether adjustments to the model are 

needed. 

Question. If practices are unable to provide drugs for which their acquisition cost 

exceeds the payment—and close or sell to a hospital as a result—it is possible that 

beneficiaries would forgo or delay receiving needed drug treatments? If so, what is 

the impact on beneficiary health and program expenditures on account of the likely 

increase in other services, including expensive preventable hospital admissions and 

readmissions? 

Answer. The proposed Part B Drug Payment Model is intended to lead to better 

value for Part B by encouraging providers and suppliers to choose higher value 

drugs. The proposed rule set forth our belief that the proposed payment rate of 

102.5 percent of ASP plus $16.80 should be sufficient to cover the provider’s or supplier’s purchase price. 

CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health care payment model in this proposed rule to examine its potential 

to lower program expenditures while maintaining or improving the quality of care 

furnished to Medicare Program beneficiaries. One of the key evaluation questions 

that CMS proposed for this purpose pertained to the proposed model’s impact on 

quality of care, access to care, timeliness of care, and the patient experience of care. 

Additionally, as discussed in CMS’s testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

In addition to the current Medicare claims appeals processes, which would remain 

available, CMS is proposing to establish a pre-appeals payment exceptions review 

process for phase II of the model which would allow the provider, supplier, or beneficiary to explain why an exception to the model’s value-based payment policy is 

warranted in the beneficiary’s circumstance. This process would be in addition to, 

not in lieu of, the current appeals process. Payment exceptions decisions would be 

issued within 5 business days of receipt of the request for a payment exception. 

CMS sought comment on these proposed beneficiary protections and values public 

input. We are carefully reviewing all the comments we received during the comment 

37 

2MedPAC March 2016 report, http://www.medpac.gov/docs/default-source/reports/chapter3-hospital-inpatient-and-outpatient-services-march-2016-report-.pdf?sfvrsn=0. 

period, and CMS looks forward to continuing to work with stakeholders to ensure 

quality care and high value for Medicare beneficiaries. 

SHIFT IN SITE OF SERVICE; POTENTIAL FOR CONSOLIDATION

Question. Has CMS evaluated how this demonstration could impact the ability of 

a physician practice in the community, including those in oncology, rheumatology, 

ophthalmology, and others, to remain independent and keep patients out of more 

costly care settings? 

Answer. The proposed Part B Drug Payment Model is intended to lead to better 

value for Part B by encouraging providers and suppliers to choose higher value 

drugs. The proposed rule includes estimated impacts of the proposed rule on physician specialties, including oncologists, rheumatologists and ophthalmologists. In the 

proposed rule, we estimated that overall spending on drugs furnished in the office 

setting would increase while spending on drugs furnished in the hospital setting 

would decrease under phase I of the model. While the proposed rule presented information indicating that the model design would not favor hospitals over physician 

practices, we have received feedback from stakeholders on this issue. We are carefully considering the comments received during the comment period to determine 

whether adjustments to the model are needed. 

Question. The cost of treating patients in community-based clinics treating cancer 

(and other conditions) as opposed to the outpatient hospital setting results in significantly lower costs to both patients and the Medicare program. What steps is CMS 

taking to ensure this demonstration will not push patients out of community care 

settings into the more costly hospital based setting? 

Answer. Under the proposed Part B drug payment model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers. The proposed model would not 

affect drug coverage or any other Medicare benefits. We know that under the current Part B cost structure, beneficiaries utilizing Part B drugs, especially those 

using higher cost drugs, may face significant out-of-pocket expenses. To the extent 

that prescribing patterns do shift towards lower cost drugs, in aggregate, beneficiaries would benefit along with the Medicare program. 

As discussed in CMS testimony, CMS would also be closely monitoring beneficiary 

access and health outcomes during the model. There would be a real-time claims 

monitoring program to track utilization, spending, and prescribing patterns as well 

as changes in site of service delivery, mortality, hospital admissions, and several 

other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstance. CMS values public input and looks forward to continuing to work with stakeholders to ensure quality care for Medicare beneficiaries. 

Question. What impact will this proposal have on consolidation in the health-care 

system and the continued shift of care from the physician office to the hospital? 

Answer. The proposed Part B Drug Payment Model was intended to lead to better 

value for Part B by encouraging providers and suppliers to choose drugs that are 

higher value, while preserving or enhancing the quality of care provided to Medicare 

beneficiaries. There have been longstanding trends driving changes in site of service 

driven by market forces unrelated to what the proposed Part B Drug Payment 

Model would test.2

While the proposed rule presented information indicating that the model design 

would not favor hospitals over physician practices, we have received feedback from 

stakeholders on this issue. In the proposed rule, overall, we estimated spending on 

drugs furnished in the office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. We are 

carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

38 

3https://www.ssa.gov/OP_Home/ssact/title11/1115A.htm. 

Question. How will CMS track, and respond to, shifts in the site of care that may 

result from the proposed demonstration? What protections will CMS take to ensure 

that the demonstration does not further exacerbate the existing trend of hospitalphysician consolidation? 

Answer. As discussed in CMS testimony, CMS would be closely monitoring beneficiary access and health outcomes during the model. There would be a real-time 

claims monitoring program to track utilization, spending, and prescribing patterns, 

as well as changes in site of service delivery, mortality, hospital admissions, and 

several other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

While the proposed rule presented information indicating that the model design 

would not favor hospitals over physician practices, we have received feedback from 

stakeholders on this issue. We are carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

BENEFICIARY IMPACT AND ENGAGEMENT

Question. As the proposed rule does not contain detail on how CMS will assess 

beneficiary access to needed drugs and the quality of care they receive for their conditions during the course of the demonstration nor the evaluation of it, please indicate: the mechanisms the agency has in place, or plans to develop, to track patient 

access to Part B drugs; and the plan to monitor patient outcomes in real time to 

ensure patients are accessing appropriate courses of treatment. 

Answer. CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health-care payment model in this proposed rule to examine its potential to lower program expenditures while maintaining or improving the quality 

of care furnished to Medicare Program beneficiaries. One of the key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact 

on quality of care, access to care, timeliness of care, and the patient experience of 

care. 

Additionally, as discussed in CMS’s testimony, CMS would also be closely monitoring beneficiary access and health outcomes during the model. There would be a 

real-time claims monitoring program to track utilization, spending, and prescribing 

patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure 

that Medicare beneficiaries will continue to have access to Part B drugs under the 

model. 

Question. What quality measures will the agency use to determine if patients are 

receiving not just appropriate but high quality care? 

Answer. CMS’s proposal to evaluate the Part B Drug Payment Model would focus 

upon whether the intervention reduces costs while maintaining or improving quality 

of care. We proposed to examine the model impact at the provider and supplier level 

and at the beneficiary level. The evaluation would address questions such as: what 

is the impact on quality of care, access to care, timeliness of care, and the patient 

experience of care? It also could include assessments of prescribing and utilization 

patterns, health outcomes, Medicare expenditures, provider and supplier costs, and 

other potential impacts of interest to stakeholders. 

Question. How will the agency act fast enough to address any access, quality, or 

outcome problems identified so as to ensure that beneficiary care is not jeopardized 

or beneficiaries are otherwise put at risk? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. In accordance with the statute, CMS will modify 

or terminate the model if, after testing has begun, the Part B Drug Payment Model 

is not expected to improve or maintain the quality of care for beneficiaries.3

Under the proposed model, beneficiaries would still have access to the same drugs 

and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The proposed model would not affect drug coverage or any other 

Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

39 

4https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items 

/2016-03-08-02.html. 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstance. 

Additionally, as discussed in CMS’s testimony, CMS would also be closely monitoring beneficiary access and health outcomes during the model. There would be a 

real-time claims monitoring program to track utilization, spending, and prescribing 

patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure 

that Medicare beneficiaries will continue to have access to Part B drugs under the 

model. 

Question. Does CMS plan to track the impact of this demonstration on long-term 

biopharmaceutical innovation? 

Answer. In phase I of the model, CMS proposed to implement a variation to the 

add-on component of Part B drug payment methodology in different geographic 

areas of the country. We would test whether an alternative approach for the ASP 

add-on payment would strengthen the financial incentive for physicians to choose 

higher value drugs. While this proposed approach would address the add-on to the 

manufacturer’s ASP, it does not directly address the manufacturer’s ASP, which is 

a more significant driver of drug expenditures than the add-on payment for Part B 

drugs. 

As required by statute, CMS’s evaluation of the Part B Drug Payment model 

would focus upon whether the intervention reduces costs while maintaining or improving quality of care. As proposed, the evaluation would focus on key policy questions such as: payment, prescribing patterns, prescriber acquisition prices, 

outcomes/quality, unintended consequences and variable model effects. In addition, 

in the Part B Drug Payment Model proposed rule, CMS sought comments on other 

potential questions for inclusion in the evaluation of the Part B Drug Payment 

Model. We are assessing the comments received during the public comment period. 

Question. Given that there is a concern about randomizing patients to treatment 

arms that may have fewer treatment options and diminished quality of care, does 

CMS plan to require patients to provide informed consent prior to participating in 

this demonstration? 

Answer. Ensuring beneficiary access to high-quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers regardless of model arm. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted 

under the beneficiary’s circumstances. In addition, CMS would be evaluating beneficiary access, quality of care, timeliness of care, and the patient experience of care 

during the model. For example, there would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in 

site of service delivery, mortality, hospital admissions, and several other high-level 

claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. CMS has released a fact 

sheet for beneficiaries that includes key information they need to know about the 

proposed model.4 CMS values public input and looks forward to continuing to work 

with stakeholders to ensure quality care and high value for Medicare beneficiaries. 

OVERLAPPING MODELS AND INTERACTION WITH OTHER PAYMENT CHANGES

Question. The Oncology Care Model (OCM) officially launched on July 1st. Has 

CMS thoroughly evaluated how this proposed demonstration will impact those practices participating in the OCM? If both demonstrations run concurrently, how does 

CMS plan to track outcomes and attribute savings achieved to either model? 

Answer. We acknowledged in the proposed rule that there is potentially greater 

overlap between the Part B Drug Payment Model presented in the proposed rule 

and the Oncology Care Model (OCM) in that both models would affect providers’ and 

suppliers’ incentives for the use of oncology drugs, but in different ways. The proVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00043 Fmt 6601 Sfmt 6621 R:\DOCS\26393.000 TIMD
40 

5http://www.hhs.gov/about/news/2016/06/29/hhs-announces-phvsician-groups-selected-initiative-promoting-better-cancer-care.html. 

posed rule set forth our belief that including OCM practices in the Part B Drug Payment Model would not compromise our ability to evaluate effectively the effects of 

either model. In the proposed rule, we solicited comment on our approach to include 

OCM practices. We also solicited comment on our proposal to include OCM practices, including the best mechanism to account for the overlap between these two 

models in our sample design and whether we should consider excluding OCM practices entirely. We are carefully reviewing all of the comments received during the 

comment period to determine whether adjustments are needed. 

Question. Some have speculated that CMS will exempt oncologists participating 

in the OCM from this demonstration. While this would be a step in the right direction, it would not spare beneficiaries with cancer from potential adverse impact. 

How many oncologists are participating in the OCM and how many oncologists who 

treat Medicare patients are not participating? 

Answer. The goal of OCM is to utilize appropriately aligned financial incentives 

to enable improved care coordination, appropriateness of care, and access to care for 

beneficiaries undergoing chemotherapy. OCM encourages participating practices to 

improve care and lower costs through an episode-based payment model that financially incentivizes high-quality, coordinated care. The Innovation Center expects 

that these improvements will result in better care, smarter spending, and healthier 

people. In June 2016, CMS announced that 195 practices and 17 non-Medicare payers are participating in the Oncology Care Model. More than 3,200 oncologists are 

participating in OCM from these physician practices, and these practices treat nearly a quarter of all Medicare Fee-for-Service beneficiaries with cancer who receive 

chemotherapy.5

Question. In 2015, Congress enacted physician payment reforms through the bipartisan Medicare Access and CHIP Reauthorization Act (MACRA) that encourage 

physicians to participate in alternative payment models (APMs). This Part B drug 

proposed demonstration significantly effects oncologists, rheumatologists, ophthalmologists, gastroenterologists, and physicians in other specialties that are interested 

in developing or participating in APMs. Doesn’t this demonstration, especially with 

its reduced ASP based payment for many drugs, make it significantly harder for 

physicians to invest the time and resources to successfully participate in APMs as 

envisioned by MACRA and as the administration has made a priority? 

Answer. The proposed Part B Drug Payment Model is intended to lead to better 

value for Part B by encouraging providers and suppliers to choose higher value 

drugs. The proposed rule includes estimated impacts of the proposed rule on physician specialties, including oncologists, rheumatologists, and ophthalmologists. The 

proposed rule set forth our belief that the proposed payment rate of 102.5 percent 

of ASP plus $16.80 should be sufficient to cover the provider’s or supplier’s purchase 

price. 

In the proposed rule, we estimated that overall spending on drugs furnished in 

the office setting would increase while spending on drugs furnished in the hospital 

setting would decrease under phase I of the model. While the proposed rule presented information indicating that the model design would not favor hospitals over 

physician practices, we have received feedback from stakeholders on this issue. We 

are carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

We know that physicians and other clinicians may need assistance in transitioning to the Merit-based Incentive Payment System (MIPS) created by the Medicare Access and CHIP Reauthorization Act (MACRA), and we want to make sure 

that they have the tools they need to succeed in a redesigned system. MACRA provided funding for technical assistance to small practices, rural practices, and practices in medically underserved health professional shortage areas (HPSAs). 

CMS announced the availability of $20 million of this funding for on-the-ground 

training and education for Medicare clinicians in individual or small group practices 

of 15 clinicians or fewer. These funds will help provide hands-on training tailored 

to small practices, especially those that practice in historically under-resourced 

areas including rural areas, HPSAs, and medically underserved areas. As required 

by MACRA, HHS will award $20 million each year for 5 years, providing $100 million in total to help these practices successfully participate in the Quality Payment 

Program. 

41 

In addition to MACRA implementation efforts, last month, CMS launched the second round of the Support and Alignment Networks under the Transforming Clinical 

Practice Initiative. TCPI is leveraging primary and specialist care transformation 

work and learning that will catalyze the adoption of APMs on a large scale. CMS 

is carefully considering the comments received from stakeholders on the Part B 

Drug Payment Model proposed rule and the proposed MACRA rule. 

PHASE II POLICY IDEAS

Question. The proposed rule provides little detail on the numerous phase II policy 

ideas, while leaving it open that providers will have to participate in up to all five 

of the ideas as early as January 1, 2017. CMS has made comments subsequent to 

the release of the proposed rule seeming to acknowledge that, at a minimum, a 

multi-step process is needed to develop any of the ideas before they are even possibly workable. Does CMS plan to engage stakeholders in an iterative process before 

implementing any of these ideas? 

CMS proposes that phase II include reference pricing, which would effectively 

limit payment for Part B drugs based on a CMS assessment of whether there is a 

‘‘therapeutically similar’’ medicine available at a lower cost. 

How will CMS identify ‘‘therapeutically similar’’ therapies considering the highly 

individualized reactions that patients can have to different treatments, especially 

biologicals that interact directly with a patient’s own immune system. 

Answer. Phase II of the proposed Part B Drug Payment Model would use tools 

currently employed by commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization. The proposed rule set forth our belief that some of these approaches, when appropriately 

structured, may be adaptable to Part B. 

In the proposed rule, we proposed several value-based pricing tools: reference pricing, indications-based pricing, outcomes-based risk sharing agreements, and discounting or eliminating patient coinsurance amount. This group of tools would serve 

as a framework for interventions for selected Part B drugs. We would not apply all 

these tools to all Part B drugs but implement these tools in a limited manner for 

certain HCPCS drug codes after considering these tools’ appropriateness to specific 

Part B drugs within these codes. 

As we noted in the proposed rule, we would gather additional information on the 

proposed tools, including which specific Part B drugs would be suitable candidates 

for the application of specific tools within the group. CMS also proposed to finalize 

the implementation of specific tools for specific HCPCS codes after soliciting public 

input on each proposal by posting on the CMS website, and we would allow 30 days 

for public comment. CMS will also notify the public by posting on the CMS website 

of application of any VBP tools 45 days before implementation. 

Question. Does CMS have a plan in place to address situations in which not every 

product in a therapeutic class is approved for the exact same set of clinical indications? 

Answer. Under phase II of the proposed Part B Drug Payment Model, CMS would 

gather additional information on the proposed tools, including which specific Part 

B drugs are suitable candidates for the application of specific tools within the group. 

We would not apply all these tools to all Part B drugs but implement these tools 

in a limited manner for certain HCPCS drug codes after considering these tools’ appropriateness to specific Part B drugs within these codes. CMS also proposed to finalize the implementation of specific tools for specific HCPCS codes after soliciting 

public input on each proposal by posting on the CMS website, and we would allow 

30 days for public comment. CMS will also notify the public by posting on the CMS 

website of application of any VBP tools 45 days before implementation. 

Furthermore, CMS has proposed a new pre-appeals payment exceptions review 

process under phase II of the model, in addition to the current Medicare claims appeals processes, that would allow the beneficiary, provider, or supplier to explain 

why an exception to Medicare’s value based pricing policy is warranted in the beneficiary’s circumstances. 

Question. CMS proposes that phase II include indications-based pricing, which 

seeks to pay for treatment of different indications for a drug at different rates. Does 

CMS have the ability to track the specific indication for which a drug is provided 

through the current coding and claims processes? 

42 

6https://innovation.cms.gov/initiatives/part-b-drugs. 

Answer. CMS proposed to use indications-based pricing, which would pay varying 

prices for a given drug based on its varying clinical effectiveness for different indications that are covered under existing Medicare authority, specifically section 1861(t) 

of the Act, and existing national and local coverage determinations. Tracking a specific indication for which a drug is furnished is part of ensuring that items and services furnished are reasonable and necessary for Medicare coverage and payment.6

Question. What evidence would CMS use to determine a drug’s effectiveness for 

each of the different indications? 

Answer. In the proposed rule, CMS proposed to use indications-based pricing 

where appropriately supported by published studies and reviews or evidenced-based 

clinical practice guidelines to more closely align drug payment with outcomes for a 

particular clinical indication. Indications-based pricing decisions would reflect the 

clinical evidence available and strive to rely on competent and reliable scientific evidence from neutral and/or independent sources. As defined in the proposed rule, 

high quality evidence is comprehensive, relies on randomized trial designs where 

possible, and measures outcomes. Research findings should be valid, competent, reliable and generalizable to the Medicare population. 

Question. Would the determination of effectiveness reflect the standard of care for 

individual patients? 

Answer. As noted above, CMS proposed to use indications-based pricing where appropriately supported by published studies and reviews or evidence-based clinical 

practice guidelines to more closely align drug payment with outcomes for a particular clinical indication. As we stated in the proposed rule, research findings 

should be valid, competent, reliable and generalizable to the Medicare population. 

Furthermore, CMS has proposed a new pre-appeals payment exceptions review 

process under phase II of the model, in addition to the current Medicare claims appeals processes, that would allow the beneficiary, provider, or supplier to explain 

why an exception to Medicare’s value based pricing policy is warranted in the beneficiary’s circumstances. 

Question. CMS proposes that phase II include value-based contracting, which 

would determine the payment for a drug based on the outcome achieved by the patients taking it. How would the agency determine the desired outcome for a drug; 

e.g., would it be done by agency officials, contractor personnel? 

Answer. Under phase II of the Part B Drug Payment model, we proposed to test 

approaches for transitioning from a volume-based payment system into one that encourages or even rewards providers and suppliers who maintain or achieve better 

patient outcomes while lowering Part B drug expenditures. As we noted in the proposed rule, the market today uses the term ‘‘value based’’ to encompass a wide variety of different options designed to improve clinical results, quality of care provided, 

and reduce costs. The following example highlights one of the value based pricing 

tools currently in use, which was described in the proposed rule. We proposed to 

test one or more of these tools during phase II of the model. 

We proposed to use indications-based pricing where appropriately supported by 

published studies and reviews or evidenced-based clinical practice guidelines to 

more closely align drug payment with outcomes for a particular clinical indication. 

Indications-based pricing decisions would reflect the clinical evidence available 

and strive to rely on competent and reliable scientific evidence from neutral and/ 

or independent sources. We understand that the quality of available evidence can 

vary for any given drug or indication. As defined in the proposed rule, high quality 

evidence is comprehensive, relies on randomized trial designs where possible, and 

measures outcomes. Research findings should be valid, competent, reliable, and generalizable to the Medicare population. 

To protect beneficiaries and to allow for the consideration of special circumstances 

that may warrant the use of non-model payments in certain situations, we proposed 

a pre-appeals payment exceptions process for phase II of the model. CMS also 

sought comment on potential safeguards that could be implemented with each of the 

value-based pricing tools to make certain that the intent of the policy is not undermined. We are carefully reviewing the comments received during the comment period. 

43 

Question. Does CMS believe that the existing data infrastructure is equipped to 

measure patient outcomes in real time and determine, in an evidence-based manner, 

that the outcomes are the direct result of treatment decisions? Has the agency assessed the impact of these phase II ideas on the ability to realize the promise of 

personalized medicine, which is a priority of the administration? 

Answer. We proposed the Part B Drug Payment Model to test whether alternative 

drug payment designs would lead to a reduction in Medicare expenditures, while 

preserving or enhancing the quality of care provided to Medicare beneficiaries. This 

proposed model’s goals are consistent with the administration’s broader strategy to 

encourage better care, smarter spending, and healthier people by paying providers 

and suppliers for what works, unlocking health-care data, and finding new ways to 

coordinate and integrate care to improve quality. 

Ensuring beneficiary access to high-quality care and treatment is always at the 

forefront of CMS’s work. Under the proposed model, beneficiaries would still have 

access to the same drugs and would retain the complete freedom of choice of doctors, 

hospitals, and other providers or suppliers. The proposed model would not affect 

drug coverage or any other Medicare benefits. As we noted in the proposed rule, we 

would gather additional information on the proposed value based pricing tools, including specific Part B drugs suitable for the application of these group of tools. 

As stated above, CMS’s proposed evaluation of the Part B Drug Payment Model 

would also test the proposed innovative health care payment model in this proposed 

rule to examine its potential to lower program expenditures while maintaining or 

improving the quality of care furnished to Medicare Program beneficiaries. One of 

the key evaluation questions that CMS proposed for this purpose pertained to the 

proposed model’s impact on quality of care, access to care, timeliness of care, and 

the patient experience of care. In the context of our proposal regarding outcomesbased risk-sharing agreements, we also sought comment on methods to collect and 

measure outcomes, including parameters around standardizing value metrics based 

on differences in drug treatments and their targeted patient subpopulations. 

In addition, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

IMMUNE DISORDER IMPACT

Question. The Part B drug demonstration as proposed will have an adverse impact 

on patients with auto-immune diseases such as rheumatic diseases, Crohn’s Disease, and Lupus, among others. These patients face debilitating pain and suffering, 

often eased only by the use of targeted medications provided by or under the close 

supervision of a rheumatologist. Further, these diseases often precipitate or are associated with collateral chronic conditions and are often associated with heightened 

sensitivity to changes in medication. 

Did CMS conduct any analyses on the impact of this proposed demonstration on 

patients with immune disorders? 

Answer. Under the proposed Part B Drug Payment Model, beneficiaries, including 

those with immune disorders, would still have access to the same drugs and would 

retain the complete freedom of choice of doctors, hospitals, and other providers or 

suppliers. The proposed model would not affect drug coverage or any other Medicare 

benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstances. In addition, CMS would be evaluating beneficiary 

access and health outcomes during the model. 

For example, there would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. CMS values public input and looks forward 

44 

7http://bhpr.hrsa.gov/healthworkforce/data/primarycareserviceareas/index.html. 

to continuing to work with stakeholders to ensure quality care and high value for 

Medicare beneficiaries. 

Question. Which, if any, specialty societies and/or patient groups were consulted 

to assure that any reimbursement-driven change in medications would not negatively impact the health of patients with immune disorders? 

Answer. We solicited comments on many different aspects of the proposed Part 

B Drug Payment Model such as scope of the model and the effects on small practices 

and practices in rural areas. In all, we received more than 1,350 comments from 

a wide range of stakeholders, including specialty societies and patient groups. The 

Department of Health and Human Services (HHS) also convened the HHS Pharmaceutical Forum where we heard from a broad range of stakeholders on opportunities 

to improve patient access to affordable prescription drugs, develop innovative purchasing strategies and incorporate value-based and outcomes-based models into purchasing programs in both the public and private sectors. Stakeholder input is very 

important to us, and is one key reason why we utilized the notice and comment 

rulemaking process in developing this model. We are carefully considering the comments received during the comment period to determine whether adjustments are 

needed. Our goal is to be responsive to public comments received during the comment period and input from the Congress. 

Question. The proposed demonstration will have a significant impact on physicians that treat immune disorders. The vast majority of rheumatologists practice 

with at most 1 or 2 fellow physicians, and those practicing in rural areas often have 

solo practices. In fact, many smaller communities have access to few or no rheumatologists. Further, while the demand for rheumatology services is projected to 

grow significantly in the next decade, the number of practicing rheumatologists will 

only increase by just over 1 percent. 

Did CMS examine the relative impact on rheumatologists by urban and rural location, or by size of practice? 

Answer. We are aware of the unique challenges that rheumatologists and other 

types of practitioners in small practices or in rural areas may face. The Part B Drug 

Payment Model proposed rule includes estimated impacts of the proposed rule on 

physician specialties, including rheumatologists. In the proposed rule, we estimated 

that, in the aggregate, rural practitioners would be estimated to experience a net 

benefit under phase I of the model. And overall, spending on drugs furnished in the 

office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. 

As part of the proposed rule, we specifically solicited comments on the potential 

effect that this proposed model may have on rural practices, how rural practices 

may differ from non-rural practices, and whether rural practices should be considered separately from other practice locations. We are carefully considering the comments received during the comment period to determine whether adjustments are 

needed. 

Question. Did CMS undertake any distributional analyses of the affected specialty 

physicians, in particular whether its use of Primary Care Service Areas as an organizing principle was appropriate for a project affecting shortage specialties such as 

rheumatology? 

Answer. CMS proposed Primary Care Service Areas (PCSAs) as a unit of analysis 

to meet the needs of the Part B Drug Payment proposed model. The PCSAs were 

developed with funding from the Health Resources and Services Administration 

(HRSA) to address health workforce planning and policy, and the PCSA datasets 

available from HRSA include measures of specialty physician capacity that can be 

used to examine their distributions.7 CMS also solicited comment in the proposed 

rule for many topics that could affect the way the model test would have to address 

shortage specialties, including the scope of the model and the effect of the model 

on small practices and rural areas. We are reviewing all comments received during 

the comment period to determine whether adjustments are needed. 

Question. Did CMS assess the impact of the demonstration on the health-care 

workforce, especially with respect to the number of rheumatology internship positions? 

45 

Answer. We are aware of the unique challenges that rheumatologists in small 

practices or in rural areas may face. The Part B Drug Payment Model proposed rule 

included estimated impacts of the proposed model on physician specialties, including 

rheumatologists. However, CMS did not assess the impact of the model on the number of rheumatology internship positions for purposes of the proposed rule. 

Question. My understanding is that Medicare Part B covers seven drugs to treat 

rheumatoid arthritis. It is also my understanding that it is very common for rheumatoid arthritis patients to try multiple treatments before they find the one that 

works well for them. Even once a patient is stable, they can stop responding to a 

treatment and may need to switch medications to continue to effectively manage 

their condition. For these patients the availability of multiple treatment options is 

the key to optimizing their health. Realizing that the proposed payment changes are 

may effectively limit the number of treatment options, doesn’t this amount to CMS 

making decisions regarding the best treatment option as opposed to the physician 

and the patient? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers. The proposed model would not 

affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted 

under the beneficiary’s circumstances. In addition, CMS would be evaluating beneficiary access, quality of care, timeliness of care, and the patient experience of care 

during the model. For example, there would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in 

site of service delivery, mortality, hospital admissions, and several other high-level 

claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. CMS values public input and 

looks forward to continuing to work with stakeholders to ensure quality care and 

high value for Medicare beneficiaries. 

SELF-ADMINISTERED DRUGS

Question. What is the CMS rationale for including the self-administered drugs 

covered under Part B in the demonstration when the prescriber is not financially 

connected to the prescription? This scenario seems to be outside of the agency’s primary stated purpose for the demonstration. 

Answer. The Part B drug benefit includes many categories of drugs, and encompasses a variety of care settings. With limited exceptions, CMS proposed to include 

all Part B drugs in this model so that alternative payment approaches could be examined across the entire range of Part B drugs. CMS solicited comments on the 

drugs that were proposed for inclusion in the model. We are carefully reviewing the 

comments received during the comment period to determine whether adjustments 

are needed. 

QUESTIONS SUBMITTED BY HON. PAT ROBERTS

Question. How does, or will, CMMI account for whether this test is putting the 

next generation of treatment advances at risk by stifling innovation, and subsequently new medicines, for Medicare patients due to the level of uncertainty in 

Medicare payment that this proposal creates? 

Answer. In phase I of the Part B Drug Payment Model, CMS proposed to implement a variation to the add-on component of Part B drug payment methodology in 

different geographic areas of the country. We proposed to test whether an alternative approach for the ASP add-on payment would strengthen the financial incentive for physicians to choose higher value drugs. While this approach would address 

the add-on to the manufacturer’s ASP, it would not directly address the manufacturer’s ASP, which is a more significant driver of drug expenditures than the add-on 

payment for Part B drugs. 

CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health care payment model in this proposed rule to examine its potential 

46 

8MedPAC March 2016 report, http://www.medpac.gov/docs/default-source/reports/chapter3-hospital-inpatient-and-outpatient-services-march-2016-report-.pdf?sfvrsn=0. 

to lower program expenditures while maintaining or improving the quality of care 

furnished to Medicare Program beneficiaries. One of the key evaluation questions 

that CMS proposed for this purpose pertained to the proposed model’s impact on 

quality of care, access to care, timeliness of care, and the patient experience of care. 

In addition, in the Part B Drug Payment Model proposed rule, CMS sought comments on other potential questions for inclusion in the evaluation of the Part B 

Drug Payment Model. 

Additionally, as discussed in CMS’s testimony, CMS would also be closely monitoring beneficiary access and health outcomes during the model. There would be a 

real-time claims monitoring program to track utilization, spending, and prescribing 

patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure 

that Medicare beneficiaries will continue to have access to Part B drugs under the 

model. We are carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

Question. Does CMMI believe it has the authority to waive the Affordable Care 

Act’s prohibition from using comparative effectiveness research findings in determining Medicare coverage? And if so, please provide the statutory citation from 

where this is derived. 

Answer. Section 1115A of the Act authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children’s Health Insurance Program beneficiaries. The statute gives the Secretary the 

authority to design and test payment and service delivery models that meet certain 

requirements as to spending and quality. For the Part B Drug Payment Model, we 

proposed to exercise this authority to test whether alternative drug payment designs 

discussed in the proposed rule would lead to spending our dollars more wisely for 

drugs paid under Part B, that is, a reduction in Medicare expenditures, while preserving or enhancing the quality of care provided to Medicare beneficiaries. Under 

the proposed model, beneficiaries would still have access to the same drugs and 

would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The proposed model would not affect drug coverage or any other 

Medicare benefits. 

Question. How does CMS plan to monitor and respond to site of care changes that 

may occur as a result of the proposal? 

Answer. There have been longstanding trends driving changes in site of service 

driven by market forces unrelated to what the proposed Part B Drug Payment 

Model would be testing.8 This proposed Part B Drug Payment Model is intended to 

lead to better value for Part B by encouraging providers and suppliers to choose 

higher value drugs. While the proposed rule presented information indicating that 

the model design would not favor hospitals over physician practices, we have received feedback from stakeholders on this issue. In the proposed rule, we estimated 

that, in the aggregate, rural practitioners would be estimated to experience a net 

benefit under phase I of the model. And overall, spending on drugs furnished in the 

office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. We are carefully considering the 

comments received during the comment period to determine whether adjustments 

to the model are needed. 

Question. How does CMS plan to monitor that patients’ access to medications remains the same as prior to the model? If issues arise, how would the agency address 

the issue in a timely manner? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers. The proposed model would not 

affect drug coverage or any other Medicare benefits. One of the key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact 

on quality of care, access to care, timeliness of care, and the patient experience of 

care. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

47 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted 

under the beneficiary’s circumstances. In addition, CMS would be evaluating beneficiary access, quality of care, timeliness of care, and the patient experience of care 

during the model. For example, there would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in 

site of service delivery, mortality, hospital admissions, and several other high-level 

claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model CMS values public input and 

looks forward to continuing to work with stakeholders to ensure quality care and 

high value for Medicare beneficiaries. 

In addition, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. 

Question. CMMI is in the process of implementing the Enhanced MTM Management Model. How many applications did CMS receive, were they even across the 

5 regions, how many Part D beneficiaries are expected to be affected by the demo? 

In addition, please provide a description of the types of models that you are working 

to implement with detail on the manner in which MTM is delivered—either in person or remotely. 

Answer. The Part D Enhanced Medication Therapy Management (Enhanced 

MTM) model is an opportunity for stand-alone basic Prescription Drug Plans (PDPs) 

in selected regions to offer innovative MTM programs, aimed at improving the quality of care while also reducing costs. As part of the ‘‘better care, smarter spending, 

healthier people’’ approach to improving health delivery, CMS will test changes to 

the Part D program that would achieve better alignment of PDP sponsor and government financial interests, while also creating incentives for robust investment and 

innovation in better MTM targeting and interventions. The objectives for this model 

are for stand-alone basic PDP sponsors to learn how to ‘‘right-size’’ their investment 

in MTM services and identify and implement innovative strategies to optimize medication use, improve care coordination, and strengthen system linkages. 

The Enhanced MTM model test will begin January 1, 2017 with a five-year performance period. CMS will test the model in 5 Part D regions: Region 7 (Virginia), 

Region 11 (Florida), Region 21 (Louisiana), Region 25 (Iowa, Minnesota, Montana, 

Nebraska, North Dakota, South Dakota, Wyoming), and Region 28 (Arizona). Eligible basic stand-alone PDPs in these regions, upon approval from CMS, can vary the 

intensity and types of MTM items and services based on beneficiary risk level and 

seek out a range of strategies to individualize beneficiary and prescriber outreach 

and engagement. Given that the model participants and their model strategies are 

still in the provisional acceptance phase, it would be premature to release any information on the model applicants, number of Part D beneficiaries impacted by the 

model, plans provisionally selected for the model and their proposed MTM model 

strategies before participants are finalized. 

QUESTIONS SUBMITTED BY HON. JOHNNY ISAKSON

Question. I believe that health-care providers and patients should make treatment 

decisions based on individual patients’ needs. If health-care providers are subject to 

CMS’s proposed policies that place them under increased financial pressure, is it 

possible that CMS reimbursement policy changes will drive decision making rather 

than the individual needs of a patient? 

Answer. Under the proposed model, beneficiaries would still have access to the 

same drugs and would retain the complete freedom of choice of doctors, hospitals, 

and other providers or suppliers. The proposed model would not affect drug coverage 

or any other Medicare benefits. 

CMS proposed in phase I of this model to test whether an alternative approach 

for the ASP add on would strengthen the financial incentives for physicians to 

choose higher value drugs. 

As described in the proposed rule, the 6 percent add-on may create incentives for 

use of higher cost drugs when lower priced alternatives exist. To remove the financial incentive that may be associated with higher add-on payments, CMS proposed 

48 

in phase I to test whether an alternative approach for the ASP add-on would 

strengthen the financial incentives for physicians to choose higher value drugs. 

Phase II of the proposed Part B Drug Payment Model would use tools currently 

employed by commercial health plans, pharmacy benefit managers, hospitals, and 

other entities that manage health benefits and drug utilization. The proposed rule 

set forth our belief that some of these approaches, when appropriately structured, 

may be adaptable to Part B. CMS also proposed a pre-appeals exceptions review 

process for phase II of the model, which would create a mechanism for beneficiaries, 

providers, and suppliers to request an exception to Medicare’s value-based pricing 

policy, if warranted in the beneficiary’s circumstances. CMS is carefully considering 

the comments received from stakeholders during the comment period on the proposed model to determine whether adjustments are needed. 

Question. How is CMS factoring in individual needs of patients with complex illnesses such as Parkinson’s, Multiple Sclerosis, and others into its reimbursement 

proposals? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed Part B Drug Payment Model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. We 

know that under the current Part B cost structure, beneficiaries utilizing Part B 

drugs, especially those using higher cost drugs, may face significant out-of-pocket 

expenses. To the extent that prescribing patterns do shift towards lower cost drugs, 

in aggregate, beneficiaries would benefit along with the Medicare program. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstances. In addition, CMS would be evaluating beneficiary 

access and health outcomes during the model. As discussed in CMS testimony, CMS 

would also be closely monitoring beneficiary access and health outcomes during the 

model. There would be a real-time claims monitoring program to track utilization, 

spending, and prescribing patterns as well as changes in site of service delivery, 

mortality, hospital admissions, and several other high-level claims-based measures. 

This would help ensure that Medicare beneficiaries will continue to have access to 

Part B drugs under the model. CMS values public input and looks forward to continuing to work with stakeholders to ensure quality care and high value for Medicare beneficiaries. 

Question. If community providers—who will be hit hardest by these proposals— 

cannot afford to furnish these therapies to patients, patients will either have to 

forgo care or seek care in hospital outpatient departments. Won’t this increase costs 

for the Medicare program given that treating patients in the hospital outpatient department is more expensive than treating them in the community setting? 

Answer. There have been longstanding trends driving changes in site of service 

driven by market forces unrelated to what the proposed Part B Drug Payment 

Model would be testing. The Part B Drug Payment Model was proposed to lead to 

better value for Part B by encouraging providers to choose higher value drugs. 

The proposed rule set forth our belief that the proposed payment rate of 102.5 

percent of ASP plus $16.80 should be sufficient to cover the provider’s or supplier’s 

purchase price. The proposed rule presented information that, overall, spending on 

drugs furnished in the office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. 

Under the proposed Part B drug payment model, beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, 

hospitals, and other providers or suppliers. The proposed model would not affect 

drug coverage or any other Medicare benefits. 

CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health-care payment model in this proposed rule to examine its potential 

to lower program expenditures while maintaining or improving the quality of care 

furnished to Medicare Program beneficiaries. One of the key evaluation questions 

that CMS proposed for this purpose pertained to the proposed model’s impact on 

quality of care, access to care, timeliness of care, and the patient experience of care. 

49 

In addition to the current Medicare claims appeals processes, which would remain 

available, CMS is proposing to establish a pre-appeals payment exceptions review 

process for phase II of the model which would allow the provider, supplier, or beneficiary to explain why an exception to the model’s value-based payment policy is 

warranted in the beneficiary’s circumstance. This process would be in addition to, 

not in lieu of, the current appeals process. Payment exceptions decisions would be 

issued within 5 business days of receipt of the request for a payment exception. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. Additionally, as discussed in CMS testimony, CMS would be closely 

monitoring beneficiary access and health outcomes during the model. There would 

be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital 

admissions, and several other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under 

the model. 

CMS sought comment on these proposed beneficiary protections and values public 

input. We are carefully reviewing all the comments we received during the comment 

period, and CMS looks forward to continuing to work with stakeholders to ensure 

quality care and high value for Medicare beneficiaries. 

Question. Won’t this also result in higher out-of-pocket costs for patients due to 

higher copays/coinsurance? 

Answer. CMS’s proposal to evaluate the Part B Drug Payment Model would focus 

upon whether the intervention reduces costs while maintaining or improving quality 

of care. We proposed to examine the model impact at the provider and supplier level 

and at the beneficiary level. The evaluation would address questions such as: what 

is the impact on quality of care, access to care, timeliness of care, and the patient 

experience of care. It also could include assessments of prescribing and utilization 

patterns, health outcomes, Medicare expenditures, provider and supplier costs, and 

other potential impacts of interest to stakeholders. 

Question. If patients have to forgo care, won’t this negatively impact their health, 

and increase Medicare expenditures due to otherwise preventable hospitalizations, 

surgical interventions, and physician offices visits as well as other expensive services? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed Part B Drug Payment Model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. CMS’s proposed evaluation of the Part B Drug Payment Model would 

also test the proposed innovative health care payment model in this proposed rule 

to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the 

key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the 

patient experience of care. 

Additionally, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

Question. Did CMS account for these higher costs to Medicare when developing 

the proposed rule? 

Answer. The Medicare Part B Drug Payment Model proposed rule presented information indicating that the model design would not favor hospitals over physician 

practices. Specifically, CMS estimated that overall spending on drugs furnished in 

the office setting would increase while spending on drugs furnished in the hospital 

setting would decrease under phase I of the model. However, we received feedback 

from stakeholders on this issue. We are carefully considering the comments received 

during the comment period to determine whether adjustments to the model are 

needed. 

50 

Question. I am concerned about the impact the proposed demonstration will have 

on ‘‘small’’ practices. However, I think it is important that we carefully consider 

what constitutes ‘‘small’’ in the context of the proposed demonstration. In this case, 

‘‘small’’ isn’t just necessarily the number of providers in a practice. ‘‘Small’’ could 

also be determined by the number of doses of a drug that a practice orders. Practices that do not order large quantities are less likely to be able to secure rebates 

or other discounts that high volume practitioners receive when purchasing medications. For example, in ophthalmology, a ‘‘small practice’’ might be one that orders 

1,000 or fewer injections per year for the treatment of age-related macular degeneration. 

How is CMS looking at what is considered a ‘‘small’’ practice to ensure that the 

demonstration does not negatively impact patient access to their needed treatment 

options? 

Answer. In the proposed rule on the Part B Drug Payment Model, CMS estimated 

that overall spending on drugs furnished in the office setting would increase while 

spending on drugs furnished in the hospital setting would decrease under phase I 

of the model. In addition, CMS solicited comments on any potential effects this proposed model may have on small practices, how small practices may differ from large 

practices, and whether small practices should be considered separately from other 

practices. We are carefully considering the comments received during the comment 

period to determine whether adjustments to the model are needed. 

QUESTIONS SUBMITTED BY HON. ROB PORTMAN

Question. Medicare Advantage plans must cover the same benefits as FFS, but 

their reimbursement is partially tied to fee for service costs. The Part B demo will 

change reimbursement for drugs covered under Part B covered drugs for the majority of the country if implemented as proposed. How does the demo interact with MA 

bids and benchmarks particularly after year one of the demo? 

Answer. Under phase I of the proposed Part B Drug Payment Model, CMS proposed to modify the ASP add-on amount in a budget neutral manner. Overall, as 

proposed, Part B drug payment to practitioners, pharmacies, and hospitals by specialty in phase I of this proposed model would not change, as the ASP add-on revision was proposed to be budget neutral. We do not expect a sizable overall reduction 

in Part B drug spending associated with phase I of this model, but we do anticipate 

an incentive to use higher value drugs. The proposed rule set forth our belief that 

phase I of this model would not change how Part B drugs are acquired by providers 

or suppliers, or how drug manufacturers sell their products to providers, suppliers, 

or intermediaries such as wholesalers. The model only applies to payment for Part 

B drugs for beneficiaries with Medicare fee-for-service; Part D drugs and drug payment under Medicare Advantage plans are not included. However, any changes to 

Medicare FFS spending, whether or not they are attributable to this model, would 

be reflected in Medicare Advantage benchmarks in future years. As noted in the 

proposed rule, Medicare Part B currently covers and pays for a limited number of 

prescription drugs. 

Question. CMS is currently testing a number of demonstration programs in the 

oncology space, including the oncology care model. How does the ASP demo relate 

to the OCM demo? If a provider is in the OCM demo, will they be forced to also 

participate in the ASP demo? What about for other wide-scale demos, particularly 

mandatory ones like the Comprehensive Care for Joint Replacement model? Similarly, can you explain in detail how the demo will interact with the push to move 

to alternative payment models for reimbursement for both Phase I and Phase II of 

the model? 

Answer. As noted in the Part B Drug Payment Model proposed rule, there are 

possibilities of overlap between the proposed Part B Drug Payment Model and the 

Medicare Shared Savings Program, the Medicare Intravenous Immune Globulin 

(IVIG) Demonstration, and other Innovation Center payment models, such as the 

Oncology Care Model (OCM) and the Bundled Payments for Care Improvement 

(BPCI) initiative. In general, CMS proposed not to exclude beneficiaries, suppliers, 

physicians or providers in the Part B Drug Payment Model from other Innovation 

Center models or CMS programs, such as the Medicare Shared Savings Program. 

For other models tested by the Innovation Center, we have worked to prevent duplication and to monitor arrangements that minimize duplication of effort. We expect 

limited overlap between this model and bundled payment models such as BPCI and 

51 

9 HHS Announces New Actions to Combat Opioid Epidemic, https://www.hhs.gov/about/ 

news/2016/07/06/hhs-announces-new-actions-combat-opioid-epidemic.html. 

CJR, given that the incentives to reduce spending in those bundled payment models 

are not generally targeted at Part B drugs. As we also noted in the proposed rule, 

we anticipate undertaking similar efforts for the Part B Drug Payment Model. 

We acknowledged in the proposed rule that there is potentially greater overlap 

between the proposed Part B Drug Payment Model and the OCM in that both models will affect providers’ and suppliers’ incentives for the use of oncology drugs, but 

in different ways. CMS proposed to include OCM practices in all arms of the Part 

B Drug Payment Model. 

In the proposed rule, we solicited comment on our approach to include OCM practices, including the best mechanism to account for the overlap between these two 

models in our sample design and whether we should consider excluding OCM practices entirely. We are carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

Question. The administration has promoted many initiatives and requested $1.1 

billion from Congress to combat the prescription opioid and heroin abuse epidemic. 

The Surgeon General has also recently laid out a goal to reduce opioid prescriptions. 

In contrast, the Part B demo seeks to increase reimbursement for pain management 

providers in order to make the cuts to Part B drugs for most providers appear budget neutral. In fact, these providers will receive larger increases than any other provider category under the proposal. Given that the premise of the model stands on 

the notion that reimbursement for drugs incentivizes prescribing behavior, what is 

CMS’ estimate for the impact this will have on prescribing of opioids and how will 

this impact other initiatives to decrease prescriptions for opioids and the opioid and 

heroin abuse epidemic overall. 

Answer. Addressing the opioid crisis is a top priority for the administration, and 

the Secretary is committed to bipartisan solutions and evidence-informed interventions to turn the tide against opioid drug-related overdose and misuse. As a part 

of this effort, the Department of Health and Human Services (HHS) and CMS are 

committed to working with providers to encourage appropriate prescribing of 

opioids.9

While we share the concern regarding unnecessary opiate use, we believe it is important to distinguish between the types of opiate analgesics covered under Medicare Part B and those opiate analgesics covered under other parts of the Medicare 

program. With the exception of implanted pain pumps and palliative care, opiates 

furnished under the Medicare Part B drug benefit are generally not used for longterm analgesia. Instead, these short-acting injectable agents are typically used in 

incident to settings (e.g., in the physician’s office) for acute pain relief and procedure-related analgesia/sedation. Opiates furnished under the Medicare Part B drug 

benefit are not self-administered and must be administered by a physician in an office or hospital outpatient department. Also, these drugs generally would not be provided to patients to be used in the home, unlike oral and other self-administered 

opiate analgesics that are covered under Medicare Part D and dispensed at retail 

pharmacies. We also note that overall utilization for opiate analgesics under Medicare Part B is limited, although we are aware that a large portion of injectable morphine and hydromorphone use is associated with the care and treatment of terminally ill beneficiaries with cancer. 

In the Part B Drug Payment Model proposed rule, we noted that the proposed 

flat fee of $16.80 would increase the payment for some low cost drugs. While we 

expect that contractors will continue to examine claims (as well as patterns of 

claims) for potentially unnecessary use (that is use that is not reasonable and/or 

necessary), we also sought comment on whether additional measures should be 

taken to limit add-on amounts, especially for very low cost drugs. As discussed, 

opioids covered under Medicare Part B are used in the physician practice setting 

are primarily used in a limited number of circumstances and are not typically administered to patients outside of the outpatient setting. CMS is carefully reviewing 

comments received on the proposed model during the comment period to determine 

if adjustments are needed. 

Question. Can CMS align national provider identifiers to claims information and 

the ASP pricing file to determine if prescribing increases when prices and ASPs increase? Why or why not? If not, can CMS detail and provide the exact data that 

52 

10 ASPE Issue Briefing: Medicare Part B Drugs, Pricing, and Incentives, https://aspe.hhs.gov/ 

pdf-report/medicare-part-b-drugs-pricing-and-incentives. 

indicates that the current ASP structure is contributing to increased prescribing of 

more expensive drugs when a cheaper alternative is available? 

Answer. As a result of the design of the average sales price (ASP) payment methodology established in 1847A of the Act, CMS only has information on manufacturers’ reported ASP, which is an average. Providers and suppliers do not report their 

drug acquisition costs to CMS and are not required to do so when submitting a 

claim. 

CMS is able to determine from the claims data when utilization has increased. 

A relatively small number of drugs account for a significant share of Part B spending. The top 20 drugs in terms of Medicare payment account for 57 percent of total 

Part B spending while the top 10 account for 38 percent of total payments.10

Phase I of the proposed model would test a change in the percent add-on portion 

of the payment methodology, but would not alter the ASP reporting structure. The 

add-on provides a larger payment to a provider or supplier when that provider or 

supplier prescribes a more expensive drug than a cheaper drug. We proposed to 

change the add-on from a percentage to a flat fee plus smaller percentage to 

strengthen the financial incentive for physicians to choose higher value drugs. 

Question. Did CMS explore smaller demonstration areas, such as CMS regions? 

Is it necessary to ‘‘test’’ the changes in payment methodology to the entire country 

in order to obtain valid results? How does CMS plan on differentiating the effects 

of this demo when layered on top of other demos and payment changes that are taking place in the Medicare program simultaneously? 

Answer. In the Part B Drug Payment Model proposed rule, CMS solicited feedback from stakeholders on the geographic unit of the proposed model. In order to 

fully test the model, the proposed rule set forth three criteria for selecting the geographic unit. First, the areas would need to be sufficiently large so that most providers and suppliers do not have practice locations in multiple areas. Second, the 

areas would need to be sufficient in number to ensure adequate statistical power 

for evaluation of the model. And third the areas would need to have characteristics 

that are relatively similar when compared to one another so that observed changes 

can be more clearly attributed to the intervention and not to other factors. 

As noted in the Part B Drug Payment Model proposed rule, there are possibilities 

of overlap between the proposed Part B Drug Payment Model and the Medicare 

Shared Savings Program, the Medicare Intravenous Immune Globulin (IVIG) Demonstration, and other Innovation Center payment models, such as the oncology care 

model (OCM) and the Bundled Payments for Care Improvement (BPCI) initiative. 

In general, CMS proposed not to exclude beneficiaries, suppliers, physicians or providers in the Part B Drug Payment Model from other Innovation Center models or 

CMS programs, such as the Medicare Shared Savings Program. For other models 

tested by the Innovation Center, we have worked to prevent duplication and to monitor arrangements that minimize duplication of effort. We expect limited overlap between this model and bundled payment models such as BPCI and CJR, given that 

the incentives to reduce spending in those bundled payment models are not generally targeted at Part B drugs. As we also noted in the proposed rule, we anticipate 

undertaking similar efforts for the Part B Drug Payment Model. 

CMS sought comment on our proposed approach and the potential interactions 

with existing models and payment provisions. We are currently reviewing comments 

we received during the comment period. 

Question. Will CMS have an exceptions process if beneficiaries are negatively impacted by the demo? For example, if a rural provider decides to no longer treat patients, and the patient must travel a distance (say more than 50 miles) to a hospital 

to receive chemotherapy, will CMMI exempt the provider from the demo’s payment 

reductions? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’ work. Under the proposed Part B Drug Payment Model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

53 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted 

under the beneficiary’s circumstances. In addition, CMS proposed to evaluate beneficiary access and health outcomes during the model. CMS values public input and 

looks forward to continuing to work with stakeholders to ensure quality care and 

high value for Medicare beneficiaries. 

Additionally, while the proposed rule presented information indicating that the 

model design would not favor hospitals over physician practices, we have received 

feedback from stakeholders on this issue. In the proposed rule, we estimated that, 

in the aggregate, rural practitioners would be estimated to experience a net benefit 

under phase I of the model. And overall, spending on drugs furnished in the office 

setting would increase while spending on drugs furnished in the hospital setting 

would decrease under phase I of the model. We are carefully considering the comments received during the comment period to determine whether adjustments are 

needed. 

Question. Please detail the manner in which CMS will monitor patient access and 

quality outcomes compared to the control group under the current system. If either 

patient access or quality of care is determined to be harmed, what are CMS’s plans 

for altering the model or making exceptions for patients who cannot access medications in a timely and affordable manner? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed Part B Drug Payment Model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. CMS’s proposed evaluation of the Part B Drug Payment Model would 

also test the proposed innovative health care payment model in this proposed rule 

to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the 

key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the 

patient experience of care. 

As discussed in CMS testimony, CMS also would be closely monitoring beneficiary 

access and health outcomes during the model. There would be a real-time claims 

monitoring program to track utilization, spending, and prescribing patterns as well 

as changes in site of service delivery, mortality, hospital admissions, and several 

other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

In addition to the current Medicare claims appeals processes, which would remain 

available, CMS is proposing for phase II to establish a new pre-appeals payment exceptions process which would allow the provider, supplier, or beneficiary to explain 

why an exception to the model’s value-based pricing policy is warranted in the beneficiary’s circumstances. 

Question. Can CMS detail the metrics and methods it will use to determine success or failure of the demo for both phase I and phase II? In particular, what quality 

metrics are included and how will they be analyzed? If no quality metrics are included in the analysis, why not? 

Answer. As required by statute, CMS’s evaluation of the Part B Drug Payment 

model would focus upon whether the intervention reduces costs while maintaining 

or improving quality of care. We proposed to examine the model impact at the provider and supplier level and at the beneficiary level. As proposed, the evaluation 

would examine the impact on quality of care, access to care, timeliness of care, and 

the patient experience of care. It also could include assessments of patient experience of care, prescribing and utilization patterns, health outcomes, Medicare expenditures, provider and supplier costs, and other potential impacts of interest to 

stakeholders. 

Question. CMS intends the demonstration to be budget neutral. In cases where 

there is only one targeted therapy and cheaper alternatives do not exist, which is 

often the case with diseases treated by Part B covered drugs, and the drugs will 

receive a lower reimbursement under the proposal, how is it possible to maintain 

budget neutrality under the proposal? In fact, Avalere estimated that any drug that 

costs more than $480 is the point at which a drug will be cut. Can CMMI detail 

54 

the number and percentage of drug administered under Part B that are both over 

and under the $480 threshold? How many of these drugs over $480 do not have a 

clinically equivalent or comparable alternative? 

Answer. Under phase I of the Part B Drug Payment Model, we proposed to modify the ASP add-on amount to be 2.5 percent plus a flat fee of $16.80. We proposed to 

establish the amount of the flat fee to ensure total estimated payments under this 

model would be budget neutral to aggregate Part B spending, using the most recent 

year of available claims data. Said differently, while payments for expensive drugs 

would be lower, payments for less expensive drugs would be higher—resulting in a 

budget neutral impact. 

Neither part of the Part B Drug Payment Model presupposes there are lower cost 

Part B drug alternatives available for all Medicare patients. Rather, phase I of the 

proposed model would test, in specific geographic areas, whether the alternative approach for the ASP add-on payment strengthens the incentives for physicians to 

choose higher value drugs, where appropriate and available. 

Question. Since CMMI will be increasing payment rates for lower cost drugs, how 

will this impact beneficiary cost sharing? Beneficiaries are subject to 20 percent cost 

sharing for these drugs. Similarly, beneficiary costs have been proven to increase 

when outpatient provider offices are required by hospitals or if a patient must move 

to an inpatient to access services. If a provider office sells its practice because it 

cannot cover the cost of procuring more expensive drugs due to the cuts in reimbursement or if a provider office closes and patients must revert to an inpatient setting, how will patient cost sharing be impacted? Similarly, how will the Medicare 

trust fund and general treasury funds be impacted? 

Answer. The Part B Drug Payment Model was proposed to lead to better value 

for Part B by encouraging providers to choose higher value drugs. The proposed rule 

set forth our belief that the proposed payment rate of 102.5 percent of ASP plus 

$16.80 should be sufficient to cover the provider’s or supplier’s purchase price. The 

proposed rule presented information that, overall, spending on drugs furnished in 

the office setting would increase while spending on drugs furnished in the hospital 

setting would decrease under phase I of the model. 

Under the proposed Part B drug payment model, beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, 

hospitals, and other providers or suppliers. The proposed model would not affect 

drug coverage or any other Medicare benefits. 

CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health care payment model in this proposed rule to examine its potential 

to lower program expenditures while maintaining or improving the quality of care 

furnished to Medicare Program beneficiaries. One of the key evaluation questions 

that CMS proposed for this purpose pertained to the proposed model’s impact on 

quality of care, access to care, timeliness of care, and the patient experience of care. 

In addition to the current Medicare claims appeals processes, which would remain 

available, CMS is proposing to establish a pre-appeals payment exceptions review 

process for phase II of the model which would allow the provider, supplier, or beneficiary to explain why an exception to the model’s value-based payment policy is 

warranted in the beneficiary’s circumstance. This process would be in addition to, 

not in lieu of, the current appeals process. Payment exceptions decisions would be 

issued within 5 business days of receipt of the request for a payment exception. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. Additionally, as discussed in CMS testimony, CMS would be closely 

monitoring beneficiary access and health outcomes during the model. There would 

be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital 

admissions, and several other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under 

the model. 

CMS sought comment on these proposed beneficiary protections and values public 

input. We are carefully reviewing all the comments we received during the comment 

period, and CMS looks forward to continuing to work with stakeholders to ensure 

quality care and high value for Medicare beneficiaries. 

Question. The President’s budget includes a proposal to lower the ASP add on 

from 6 percent to 3 percent, which produces savings of $6.8 billion, according to 

CBO. The Part B demo proposes to lower ASP to 2.5 percent plus a dispensing fee 

55 

of $16.83 minus sequestration, yet CMS maintains the demo will be budget neutral. 

Please explain in detail how the proposal is budget neutral and how the demo 

wouldn’t save money in Phase I, particularly after year one of the demo is completed. 

Answer. Phase I would establish payment at ASP plus 2.5 percent and a flat fee 

per administration day as a budget neutral test. CMS proposed to derive the flat 

fee, which is not included in the President’s budget proposal, from the difference in 

total payment between total payments with a 6 percent add-on percentage across 

Part B drugs in the most recently available calendar year claims and total estimated payment for Part B drugs in the same set of claims with a 2.5 percent addon percentage to the flat fee. We stated in the proposed rule that we do not expect 

a sizable overall reduction in Part B spending associated with phase I of the model, 

but we do anticipate an incentive to use higher value drugs. 

In the proposed rule, we articulated that we believe that removing the financial 

incentive that may be associated with higher add-on payments will lead to some reduction in expenditures during phase I of the proposed model. We also noted that 

an exact estimate of the amount of savings that might be achieved through behavioral responses is not readily available, and that prior research on behavioral 

changes following modifications to drug margins suggests that the modifications we 

propose to the 6 percent add-on are likely to change prescribing behavior. 

Question. There are a number of payment changes taking place currently and in 

the near future for both outpatient providers and hospitals. Please provide a table 

detailing the changes that are scheduled to take place that the demo will impact 

or interact with over the next 3 years and estimate the accumulative total impact 

on payments for Part B drugs for various provider types in both urban and rural 

settings. These changes should include other demos taking place at CMMI, alternative payment models that will increase under MACRA, as well as the effects of 

sequestration, prompt pay, and others. 

Answer. As noted in the Part B Drug Payment Model proposed rule, there are 

possibilities of overlap between the proposed Part B Drug Payment Model and the 

Medicare Shared Savings Program, the Medicare Intravenous Immune Globulin 

(IVIG) Demonstration, and other Innovation Center payment models, such as the 

oncology care model (OCM) and the Bundled Payments for Care Improvement 

(BPCI) initiative. In general, CMS proposed not to exclude beneficiaries, suppliers, 

physicians or providers in the Part B Drug Payment Model from other Innovation 

Center models or CMS programs, such as the Medicare Shared Savings Program. 

For other models tested by the Innovation Center, we have worked to prevent duplication and to monitor arrangements that minimize duplication of effort. We expect 

limited overlap between this model and bundled payment models such as BPCI and 

CJR, given that the incentives to reduce spending in those bundled payment models 

are not generally targeted at Part B drugs. As we also noted in the proposed rule, 

we anticipate undertaking similar efforts for the Part B Drug Payment Model. 

We stated in the proposed rule that, overall, we believe that phase I of this model 

will not change how Part B drugs are acquired by providers or suppliers, or how 

drug manufacturers sell their products to providers, suppliers, or intermediaries 

such as wholesalers. Because total payments under this phase are not expected to 

change considerably, we anticipate that providers or suppliers will continue to buy 

and bill for Part B drugs that they furnish to their patients. In general, we estimated that phase I has an overall effect of modestly shifting money from hospitals 

and specialties that use higher cost drugs to specialties that use lower cost drugs. 

CMS sought comment on our proposed approach and the potential interactions 

with existing models and payment provisions. We are currently reviewing comments 

we received during the comment period. 

QUESTIONS SUBMITTED BY HON. DANIEL COATS

Question. While CMS’s proposed mandatory demonstration project on Medicare 

Part B seeks to reduce cost, the unintended effect is likely to limit access to care 

for vulnerable populations. This projected impact is deeply concerning. I have heard 

from many Hoosiers who are concerned that their access to lifesaving medications 

will be compromised. Given the input from Congress and other interest groups, do 

you have any recommendations for how CMS could modify this proposal so all highcost Part B medications are not adversely impacted? 

56 

11GAO report, ‘‘Medicare Part B Expenditures for New Drugs Concentrated Among a Few 

Drugs, and Most Were Costly for Beneficiaries’’ (GAO–16–12), October 2015, http:// 

www.gao.gov/products/GAO-16-12. 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed Part B Drug Payment Model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. CMS’s proposed evaluation, the Part B Drug Payment Model, would 

also test the proposed innovative health care payment model in this proposed rule 

to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the 

key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the 

patient experience of care. 

As discussed in CMS testimony, CMS also would be closely monitoring beneficiary 

access and health outcomes during the model. There would be a real-time claims 

monitoring program to track utilization, spending, and prescribing patterns as well 

as changes in site of service delivery, mortality, hospital admissions, and several 

other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

In addition to the current Medicare claims appeals processes, which would remain 

available, CMS is proposing for phase II to establish a new pre-appeals payment exceptions process which would allow the provider, supplier, or beneficiary to explain 

why an exception to the model’s value-based pricing policy is warranted in the beneficiary’s circumstances. 

Question. Dr. Conway’s testimony references that overall Medicare Part B payments have consistently risen over time. However, reimbursement based on ASP for 

Medicare Part B drugs is roughly around 3 percent of total Medicare spending. To 

break this down further, in Medicare Part B, medicines accounted for 10 percent 

of overall Part B spending in 2005. In 2013, medicines under Part B represented 

just over 9 percent of total Part B spending. Trends suggest that this proportion will 

remain stable over the next decade. Is there any concern that this demonstration 

project will create instability? 

Answer. As we stated in the Part B Drug Payment Model proposed rule, based 

on our claims data, we estimate total Part B payments for separately paid drugs 

in 2015 were $22 billion. In 2007, the total payments were $1 1 billion; the average 

annual increase since 2007 has been 8.6 percent.11 This significant growth has been 

largely driven by spending on separately paid drugs in the hospital outpatient setting, which more than doubled between 2007 and 2015, from $3 billion to $8 billion 

respectively.With the proposed model, CMS intended to remove any excess financial 

incentive for physicians to prescribe high cost drugs over lower cost ones when comparable low cost drugs are available. We stated in the proposed rule that, overall, 

we believe that phase I of this model will not change how Part B drugs are acquired 

by providers or suppliers, or how drug manufacturers sell their products to providers, suppliers, or intermediaries such as wholesalers. Because total payments 

under this phase are not expected to change considerably, we anticipate that providers or suppliers will continue to buy and bill for Part B drugs that they furnish 

to their patients. 

We are carefully considering all the comments received from stakeholders during 

the comment period to determine whether adjustments are needed. 

Question. In phase I of this proposal, these payment changes would disproportionately impact the most innovative drugs that treat smaller patient population—specifically cancer patients. With substantial advancements in Part B medicines in the 

near future, what is the rationale for creating uncertainty at a time when we need 

increased innovations that bring new medicines to Medicare patients? 

Answer. In phase I of the Part B Drug Payment Model, CMS proposed to implement a variation to the add-on component of Part B drug payment methodology in 

different geographic areas of the country. We proposed to test whether an alternative approach for the ASP add-on payment would strengthen financial incentive 

for physicians to choose higher value drugs. While this approach would address the 

add-on to the manufacturer’s ASP, it would not directly address the manufacturer’s 

57 

ASP, which is a more significant driver of drug expenditures than the add-on payment for Part B drugs. 

CMS’s evaluation of the Part B Drug Payment Model would test the proposed innovative health care payment model in this proposed rule to examine its potential 

to lower program expenditures while maintaining or improving the quality of care 

furnished to Medicare Program beneficiaries. One of the key evaluation questions 

that CMS proposed for this purpose pertained to the proposed model’s impact on 

quality of care, access to care, timeliness of care, and the patient experience of care. 

In addition, in the Part B Drug Payment Model proposed rule, CMS sought comments on other potential questions for inclusion in the evaluation of the Part B 

Drug Payment Model. 

Additionally, as discussed in CMS’s testimony, CMS would also be closely monitoring beneficiary access and health outcomes during the model. There would be a 

real-time claims monitoring program to track utilization, spending, and prescribing 

patterns as well as changes in site of service delivery, mortality, hospital admissions, and several other high-level claims-based measures. This would help ensure 

that Medicare beneficiaries will continue to have access to Part B drugs under the 

model. We are carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

QUESTIONS SUBMITTED BY HON. DEAN HELLER

Question. The proposed demonstration is very broad in scope—it is a nationwide 

demonstration, covering virtually all Part B drugs for all Medicare beneficiaries 

across all settings of care. At full implementation, it appears that this demonstration will impact 75 percent of Part B providers nationally. This is larger than any 

previous CMMI demonstration. How did CMS arrive at the decision to test the Part 

B payment changes on this scale? Did CMS consider smaller sample sizes for the 

program? Why was a smaller test size rejected? 

Answer. CMS solicited feedback from stakeholders on the geographic unit of the 

proposed model. In order to fully test this model, the proposed rule set forth three 

criteria for selecting the geographic unit. First, the areas would need to be sufficiently large so that most providers and suppliers do not have practice locations in 

multiple areas. Second, the areas would need to be sufficient in number to ensure 

adequate statistical power for evaluation of the model. And third the areas would 

need to have characteristics that are relatively more similar when comparing one 

another so that observed changes can be more clearly attributed to the intervention 

and not to other factors. We are carefully considering all of the comments received 

during the comment period. 

Question. Other than the 5-year time limit for the proposed demonstration, what 

are the other limits on the demonstration’s scope? 

Answer. CMS is proposing a two phase model to test whether alternative payment 

approaches for Part B drugs improve value (relative to current drug payment approaches under Part B), and improve outcomes, while reducing expenditures for 

Part B drugs. CMS proposed two phases for the Part B Drug Payment Model. In 

phase I of the model, CMS proposed implementing a variation to the add-on component of Part B drug payment methodology in different geographic areas of the country. Phase I would establish payment at Average Sales Price (ASP) plus a 2.5 percent add-on percentage and a flat fee per administration day as a budget neutral 

test. 

In phase II of this proposed model, CMS proposed to implement value-based purchasing (VBP) tools in conjunction with the phase I variation of the ASP add-on 

payment amount for drugs paid under Part B. Phase II would use tools currently 

employed by commercial health plans, pharmacy benefit managers (PBMs), hospitals, and other entities that manage health benefits and drug utilization. Specifically, CMS proposed to apply one or more VBP tools, such as indications-based pricing, reference pricing, and clinical decision support tools to Part B drugs. 

We proposed that the model would run for 5 years; phase I would begin in late 

2016 (no earlier than 60 days after the rule is finalized) and phase II would begin 

no sooner than January 1, 2017. We expected initiation of the VBP tools could take 

several years to fully implement. Our goal was to have both phases of the model 

in full operation during the last 3 years to collect sufficient data and to estimate 

58 

the effect of the alternative payment designs on beneficiary outcomes and Medicare 

expenditures. 

We also proposed to exclude certain categories of Part B drugs from the model 

because we did not believe that all Part B drugs are appropriate candidates for including of the model. These include, but are not limited to, the following categories: 

contractor-priced drugs; influenza, pneumococcal and hepatitis B vaccines; drugs infused with a covered item of durable medical equipment for phase I; certain endstage renal disease drugs; blood and blood products; and drugs in short supply. We 

are carefully considering stakeholder comments received during the comment period. 

Question. Given the broad scope of the proposed demonstration, does CMS consider the demonstration to be a ‘‘test’’ versus a new Part B payment policy? If CMS 

does consider the proposed demonstration to be a true ‘‘test,’’ please explain your 

conclusions in detail and the basis for your conclusions. If not, please explain why 

the proposed model does not conform to statutory requirement to test models. 

Answer. Section 1115A of the Social Security Act (the Act) authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to 

Medicare, Medicaid, and Children’s Health Insurance Program beneficiaries. 

Models to be tested under section 1115A of the Act must address a defined population for which there are either deficits in care leading to poor clinical outcomes 

or potentially avoidable expenditures. Section 1115A(b) of the Act describes a number of payment and service delivery models that the Secretary may choose to test, 

but the Secretary is not limited to those models. In addition, the statute directs the 

Secretary to focus on models expected to reduce program costs while preserving or 

enhancing the quality of care received by beneficiaries. We proposed to exercise this 

authority to test whether the alternative drug payment designs discussed in this 

proposed rule would lead to spending our dollars more wisely for drugs paid under 

Part B, that is, a reduction in Medicare expenditures, while preserving or enhancing 

the quality of care provided to Medicare beneficiaries. While we proposed to establish drug pricing under phase I of the proposed model to be budget neutral to total 

expenditures in the CY 2014 claims, we expected changes in prescribing behavior 

that would result in program savings. 

Stakeholder input is very important to us, and is one key reason why we utilized 

the notice and comment rulemaking process in developing this model. 

As permitted by section 1115A of the Act, we proposed testing the Part B Drug 

Payment Model within specified geographic areas. In phase I of the model, we proposed implementing a variation to the add-on component of Part B drug payment 

methodology in different geographic areas of the country. We would test whether the 

proposed alternative approach for the ASP add on payment, which is discussed in 

this proposed rule, would strengthen the financial incentive for physicians to choose 

higher value drugs. To eliminate selection bias, we proposed that all providers and 

suppliers furnishing any Part B drugs included in the Part B Drug Payment Model 

who are located in the geographic areas that are selected for inclusion in the model 

would participate. 

We also proposed to use a control group to compare those regions where there is 

a change in Part B drug payment under the proposed model to regions where there 

is no change in Part B drug payment. We proposed to exercise this authority to test 

whether the alternative drug payment designs proposed in the proposed rule would 

lead to spending our dollars more wisely for drugs paid under Part B, that is, a reduction in Medicare expenditures, while preserving or enhancing the quality of care 

provided to Medicare beneficiaries. 

In phase II of this proposed model, CMS proposed to implement value-based purchasing (VBP) tools in conjunction with the phase I variation of the ASP add-on 

payment amount for drugs paid under Part B. Phase II would use tools currently 

employed by commercial health plans, pharmacy benefit managers (PBMs), hospitals, and other entities that manage health benefits and drug utilization. Specifically, CMS proposed to apply one or more VBP tools, such as indications-based pricing, reference pricing, and clinical decision support tools to Part B drugs. 

Question. Most models that have been tested by CMMI have been voluntary for 

participants, and the few mandatory models that CMMI has tested have been based 

on evidence from an initial, voluntary test. Why in this case has CMMI chosen to 

move forward with a demonstration that is mandatory at its initiation? 

59 

Answer. Section 1115A of the Social Security Act (the Act) authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to 

Medicare, Medicaid, and Children’s Health Insurance Program beneficiaries. As 

stated in the proposed rule, we believe a model in which all providers and suppliers 

furnishing included Part B drugs in the selected geographic areas participate in the 

model would be appropriate to ensure that observed outcomes in each arm of the 

model would not suffer from selection bias inherent in a voluntary participation 

model and that observed outcomes could be generalized to all providers and suppliers billing Part B drugs. In addition, this would allow us to observe the experiences of an entire class of providers and suppliers with various characteristics, such 

as different geographies, patient populations, and specialty mixes, and to examine 

whether these characteristics would impact the effect of the model on prescribing 

patterns and Medicare Part B drug expenditures. 

Question. In testing previous demonstrations, CMS has conducted extensive modeling to assess the potential unintended consequences of its design on providers and 

patients prior to initiating a model test. These model simulations have been released publicly. Has CMS conducted such modeling for this Part B demonstration? 

If CMS has not conducted simulations, please explain why. If it has conducted simulations, what do the results of this modeling show about the potential for unintended consequences or provider behavior changes? Why hasn’t CMS released its 

findings? 

Answer. The distributional impacts are presented in the proposed rule and are the 

projected effects of phase I of the proposed Part B Drug Payment Model. Phase I 

would establish payment at ASP plus 2.5 percent and a flat fee per administration 

day as a budget neutral test. CMS proposed to derive the flat fee from the difference 

in total payment between total payments with a 6 percent add-on percentage across 

Part B drugs in the most recently available calendar year claims and total estimated payment for Part B drugs in the same set of claims with a 2.5 percent addon percentage to the flat fee. We stated in the proposed rule that we do not expect 

a sizable overall reduction in Part B spending associated with phase I of the model, 

but we do anticipate an incentive to use higher value drugs. 

In the proposed rule, we articulated that we believe that removing the financial 

incentive that may be associated with higher add-on payments will lead to some reduction in expenditures during phase I of the proposed model. We also noted that 

an exact estimate of the amount of savings that might be achieved through behavioral responses is not readily available, and that prior research on behavioral 

changes following modifications to drug margins suggests that the modifications we 

propose to the 6 percent add-on are likely to change prescribing behavior. 

We estimated the effects of the proposed change in payment policy by examining 

the estimated change in payment on various categories of providers and suppliers. 

In general, phase I would have the overall effect of modestly shifting money from 

hospitals and specialties that use higher cost drugs to specialties that use lower cost 

drugs. In aggregate, rural practitioners were estimated to experience a net benefit 

and rural hospitals were estimated to experience smaller reductions than urban hospitals. 

We did not model the impact of phase II because the proposed rule invited extensive comment on which VBP tools would be appropriately applied to the Part B and 

hospital outpatient drug benefit and we cannot yet quantify the overall impact of 

VBP. 

Question. How feasible will it be for CMS to prepare and build the systems, processes, and other infrastructure necessary to test the model within existing time and 

resource constraints? Will CMS be able to appropriately monitor the model and the 

activities of its participants to ensure program integrity? 

Answer. CMS’s proposed evaluation of the Part B Drug Payment Model would 

also test the proposed innovative health care payment model in this proposed rule 

to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the 

key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the 

patient experience of care. In addition, as discussed in CMS testimony, CMS would 

be closely monitoring beneficiary access and health outcomes during the model. 

There would be a real-time claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, morVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00063 Fmt 6601 Sfmt 6621 R:\DOCS\26393.000 TIMD
60 

12http://bhpr.hrsa.gov/healthworkforce/data/primarycareserviceareas/index.html. 

tality, hospital admissions, and several other high-level claims-based measures. This 

would help ensure that Medicare beneficiaries will continue to have access to Part 

B drugs under the model. 

Question. The primary care service areas that CMS will use to randomize Part 

B providers into the demonstration are fairly small. As a result, practices with multiple locations could have sites that fall into different arms of the demonstration. 

How many practices will be experiencing multiple arms of the model? 

Answer. CMS proposed Primary Care Service Areas (PCSAs) as a unit of analysis 

to meet the needs of the Part B Drug Payment proposed model. The PCSAs were 

developed with funding from the Health Resources and Services Administration 

(HRSA) to address health workforce planning and policy, and the PCSA datasets 

available from HRSA include measures of specialty physician capacity that can be 

used to examine their distributions.12 PCSAs are areas defined by aggregating clusters of ZIP codes with the goal of representing service areas for office based primary 

health care services. As we outlined in our proposed rule, CMS considered a number 

of options before proposing to define regions by PCSAs. Based on our analysis, 

PCSAs were most appropriate when compared to defining the regions by ZIP codes 

or other options. We are reviewing all comments received during the comment period to determine whether adjustments are needed. 

Question. Given the significant changes under Medicare Part B already passed by 

Congress, why did CMS decide to propose these changes before any formal guidance 

regarding the implementation of MACRA? 

With passage of MACRA, many Medicare providers are engaged or will soon begin 

to engage in alternative payment models (APMs). Will this model hinder the ability 

of physicians, particularly oncologists, rheumatologists, ophthalmologists, and other 

specialists who provide Part B medicines as part of their practice to participate and 

succeed in APMs? How will changes under the demo impact physician practices’ 

ability to capture bonus payments earned under MACRA? 

Answer. The proposed Part B Drug Payment Model is intended to lead to better 

value for Part B by encouraging providers and suppliers to choose higher value 

drugs. The proposed rule includes estimated impacts of the proposed rule on physician specialties, including oncologists, rheumatologists and ophthalmologists. The 

proposed rule set forth our belief that the proposed payment rate of 102.5 percent 

of ASP plus $16.80 should be sufficient to cover the provider’s or supplier’s purchase 

price. In the proposed rule, we estimated that overall spending on drugs furnished 

in the office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. While the proposed rule 

presented information indicating that the model design would not favor hospitals 

over physician practices, we have received feedback from stakeholders on this issue. 

We are carefully considering the comments received during the comment period to 

determine whether adjustments are needed. 

We know that physicians and other clinicians may need assistance in transitioning to the MIPS created in MACRA, and we want to make sure that they have 

the tools they need to succeed in a redesigned system. The Congress provided funding in MACRA for technical assistance to small practices, rural practices, and practices in medically underserved HPSAs. 

CMS announced the availability of $20 million of this funding for on-the-ground 

training and education for Medicare clinicians in individual or small group practices 

of 15 clinicians or fewer. These funds will help provide hands-on training tailored 

to small practices, especially those that practice in historically under-resourced 

areas including rural areas, HPSAs, and medically underserved areas. As required 

by MACRA, HHS will award $20 million each year for 5 years, providing $100 million in total to help these practices successfully participate in the Quality Payment 

Program. 

In addition to MACRA implementation efforts, CMS launched the second round 

of the Support and Alignment Networks under the Transforming Clinical Practice 

Initiative. TCPI is leveraging primary and specialist care transformation work and 

learning that will catalyze the adoption of APMs on a large scale. CMS is carefully 

considering the comments received from stakeholders on the Part B Drug Payment 

Model proposed rule and the proposed MACRA rule. 

61 

13 MedPAC, March 2016 report, http://www.medpac.gov/docs/default-source/reports/chapter-3-hospital-inpatient-and-outpatient-services-march-2016-report-.pdf’?sfvrsn=0. 

Question. With the ongoing demands of a changing health-care system, has CMS 

considered the feasibility of physician practices being able to successfully implement 

changes of this magnitude in such a short period of time? 

Answer. CMS is cognizant of challenges physicians face; we have heard from numerous clinicians who tell us that they want to focus on delivering the care that 

is best for their patients, not on reporting or paperwork. Many of CMS’s payment 

systems require annual updates. For each of these updates CMS provides outreach 

to physicians to help them better understand the changes. 

We proposed that the model would run for 5 years; phase I would begin in late 

2016 (no earlier than 60 days after the rule is finalized) and phase II would begin 

no sooner than January 1, 2017. CMS will also notify the public by posting on the 

CMS website of application of any VBP tools 45 days before implementation. We expected initiation of the VBP tools could take several years to fully implement. We 

received numerous comments from stakeholders regarding the proposal and are 

working to review the comments received during the comment period. 

Question. Numerous studies have found that the cost of cancer care is more expensive for beneficiaries and the Medicare program when it is delivered in the hospital setting. To what extent do the changes proposed by CMS create the risk of 

shifting more care into higher cost settings, like hospital outpatient departments? 

What effect will this have on beneficiary access to care in their communities and 

beneficiary cost sharing for Part B services? Has CMS considered the potential for 

site-of-service shifts in its analysis of the model’s impact? If not, why wasn’t this 

considered? 

Answer. The Part B Drug Payment Model was proposed to lead to better value 

for Part B by encouraging providers and suppliers to choose higher value drugs. 

There have been longstanding trends driving changes in site of service driven by 

market forces unrelated to what the Part B drug payment model is testing.13

While the proposed rule presented information indicating that the model design 

would not favor hospitals over physician practices, we have received feedback from 

stakeholders on this issue. In the proposed rule, we estimated overall spending on 

drugs furnished in the office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. We are 

carefully considering the comments received during the comment period to determine whether adjustments to the model are needed. 

Question. Will CMS need to issue an amendment to the contracts with Medicare 

Administrative Contractors (MACs) to implement this model for either phase I or 

phase II or will all of the changes required under the model be covered under their 

current scope of work? 

Has CMS considered whether additional payments will be required under revised 

MAC contracts? 

Answer. Many of CMS’s payment systems require annual updates, which are implemented by the MACs. The Medicare Administrative Contractors (MACs) would 

process claims under phase I of the model and would update their systems to reflect 

the model pricing. For phase II, CMS proposed that there would be a VBP contractor that CMS would contract with to assist in implementation of the VBP tools 

included in this phase of the model. 

Question. With so many different parts of the country being subject to different 

Part B reimbursement methodologies (particularly in phase II), how will CMS monitor MAC implementation to ensure the model is being conducted properly and without fraud or error? 

Answer. CMS conducts vigorous oversight of its MACs. CMS routinely collects 

various types of data from MACs, has regular calls with MACs, makes MAC performance information publicly available, and meets with providers and the industry 

as requested to discuss policy and operational concerns. CMS also oversees MAC reviewer training and conducts accuracy reviews. 

Question. In phase II, does CMS envision a role for MACs in using the tools proposed in the rule (e.g., reference based pricing, indications based pricing, clinical decision tools)? Or will CMS be making only national determinations? If the latter, 

62 

will CMS continue to follow local coverage determinations and policies or will CMS 

waive these requirements? 

Answer. Phase II of the Part B Drug Payment Model would use tools currently 

employed by commercial health plans, pharmacy benefit managers (PBMs), hospitals, and other entities that manage health benefits and drug utilization. In the 

proposed rule, we articulated our belief that some of these approaches, when appropriately structured, may be adaptable to Part B. 

In the proposed rule, we proposed several value-based pricing tools: reference pricing, indications-based pricing, outcomes-based risk sharing agreements, and discounting or eliminating patient coinsurance amount. This group of tools would serve 

as a framework for interventions for selected Part B drugs. We would not apply all 

these tools to all Part B drugs but implement these tools in a limited manner for 

certain HCPCS drug codes after considering these tools’ appropriateness to specific 

Part B drugs within these codes. 

We proposed using indications-based pricing to vary prices for a given drug based 

on its varying clinical effectiveness for different indications that are covered under 

existing Medicare authority, specifically section 1861(t) of the Act, and existing national and local coverage determinations. 

In the proposed rule, we solicited comments regarding the proposed tools, including specific Part B drugs suitable for the application of this group of tools. 

QUESTIONS SUBMITTED BY HON. SHERROD BROWN

CLARIFYING THE INTENT OF THE PART B DEMO

Question. The growth in the cost of Part B prescription drugs is unsustainable. 

The rapidly increasing costs have created a status quo where many seniors—who 

are often on fixed incomes—cannot afford these lifesaving medicines. Every day I 

get a call or a letter from an Ohioan who has trouble affording their prescription 

drugs. This is unacceptable, and it must be addressed. We cannot continue to ignore 

the rapidly rising cost of prescription drugs or prematurely halt any proposal designed to address the problem. 

As you wrote in your testimony, Dr. Conway, Part B drug payments were estimated at $22 billion in 2015 alone. That is why CMS must act to find this solutions 

to this problem. As your testimony makes clear, the status quo—where increased 

Part B cost increases exceed inflation year after year after year—is unsustainable 

for taxpayers and for seniors. 

The following three questions are clarifying questions to ensure my colleagues and 

I understand the intent and the scope of the demo. 

First, does this proposed model make any changes to a Medicare beneficiary’s benefit? 

Second, does this proposed model make any changes to a beneficiary’s drug coverage? 

Third, under this proposed model, would a Medicare beneficiary lose access to any 

Part B drug? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers. The proposed model would not 

affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstances. In addition, CMS has proposed to closely evaluate 

beneficiary access and health outcomes during the model. CMS’s proposed evaluation of the Part B Drug Payment Model would also test the proposed innovative 

health care payment model in this proposed rule to examine its potential to lower 

program expenditures while maintaining or improving the quality of care furnished 

to Medicare Program beneficiaries. One of the key evaluation questions that CMS 

63 

proposed for this purpose pertained to the proposed model’s impact on quality of 

care, access to care, timeliness of care, and the patient experience of care. 

As discussed in CMS testimony, CMS also would be closely monitoring beneficiary 

access and health outcomes during the model. There would be a real-time claims 

monitoring program to track utilization, spending, and prescribing patterns as well 

as changes in site of service delivery, mortality, hospital admissions, and several 

other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

CMS values public input and looks forward to continuing to work with stakeholders to ensure quality care and high value for Medicare beneficiaries. 

THE ADDITION OF BENEFICIARY PROTECTIONS

Question. Although the demonstration is designed to make prescription drugs covered by Medicare Part B more affordable, there are some improvements that could 

be made to the model to ensure its success. For example, a series of suggestions submitted to the committee in a letter by organizations focused providing consumers 

with a voice, including AARP and the Medicare Rights Center, would help protect 

consumers and ensure constant monitoring of the demo. 

One of the policy proposals they have is to create a dedicated ombudsman program for this model. An ombudsman could help monitor beneficiary and provider 

experiences throughout implementation of the model, publicly report on the findings, and act as a resource to help quickly resolve any potential beneficiary issues. 

Will you please describe some of the additional beneficiary protections included 

in the demo, and if possible, share what additional consumer protections—such as 

an ombudsman program—may be incorporated in the final version? 

Will CMS be monitoring claims data related to this demonstration real-time? 

Can you describe the pre-appeals process for the demo? How will CMS educate 

providers and consumers on this process? 

Answer. CMS values public input and looks forward to continuing to work with 

stakeholders to ensure quality care and high value for Medicare beneficiaries. Ensuring beneficiary access to high-quality care and treatment is always at the forefront of CMS’s work. We solicited comment regarding beneficiary protections in the 

proposed rule and are closely reviewing the comments we received during the comment period. 

Coverage of drugs and all other Medicare benefits would be unaffected by the proposed model. CMS’s proposed evaluation of the Part B Drug Payment Model would 

test the proposed innovative health care payment model in this proposed rule to examine its potential to lower program expenditures while maintaining or improving 

the quality of care furnished to Medicare Program beneficiaries. One of the key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the patient experience of care. CMS proposed to evaluate the quality and costs associated with 

the proposal throughout the life of the model, including to evaluate ensure patient 

experience of care. 

Additionally, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

In addition to current Medicare claims appeals processes, which would remain 

available, CMS proposed to establish a new pre-appeals payment exceptions process 

which would allow the provider, supplier, or beneficiary to explain why the model’s 

VBP-tool based payment amount is not appropriate for the beneficiary. This exceptions process would be in addition to, not in lieu of, the current appeals process. 

Payment exceptions decisions would be issued within 5 business days of receipt of 

the request for a payment exception. 

OUR GROWING MEDICARE POPULATION

Question. Medicare currently covers more than 55 million seniors and individuals 

with disabilities. That number is expected to grow exponentially over the next several years as more and more baby boomers age into the program. 

64 

Do you have a plan to address the fact that tens of thousands of individuals will 

age into Medicare during this demo? How do you plan to manage the influx of new 

patients? How will this compare to existing Medicare beneficiaries? 

Answer. Medicare enrollment has increased from 19 million in 1966 to 58 million 

beneficiaries expected in FY 2017. In the future, CMS expects that the average 

monthly enrollment will expand from 57 million beneficiaries in FY 2016 to 75 million by FY 2026. 

Coverage of drugs and all other Medicare benefits would be unaffected by the proposed model, including coverage of drugs and all other Medicare benefits for beneficiaries newly eligible for Medicare. Additionally, as discussed in CMS testimony, 

CMS would be closely monitoring beneficiary access and health outcomes during the 

model. There would be a real-time claims monitoring program to track utilization, 

spending, and prescribing patterns as well as changes in site of service delivery, 

mortality, hospital admissions, and several other high-level claims-based measures. 

This would help ensure that Medicare beneficiaries will continue to have access to 

Part B drugs under the model. 

CMS has proposed to closely evaluate beneficiary access and health outcomes during the model. CMS’s proposed evaluation of the Part B Drug Payment Model would 

also test the proposed innovative health care payment model in this proposed rule 

to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the 

key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the 

patient experience of care. 

QUESTIONS SUBMITTED BY HON. MICHAEL F. BENNET

Question. Dr. Conway, we have heard concerns that the acquisition costs for rural 

practices exceed the Medicare payment amount for certain cancer drugs, this could 

lead to patients needing to use hospital-based outpatient departments. Some physicians have stated that under the demo, they believe that they will not be reimbursed adequately and would no longer be able to administer infusions to patients, 

particularly in rural areas where patients already have to travel significant distances to see their specialists including oncologists and rheumatologists. As these 

specialists could stop providing services, we hear concerns that care will shift to 

costlier settings. Have you heard this concern, and is this potential access and 

health care spending issue something you are taking into account as you are going 

through comments? 

Answer. The proposed Part B Drug Payment Model is intended to lead to better 

value for Part B by encouraging providers and suppliers to choose higher value 

drugs. The proposed rule includes estimated impacts of the proposed rule on physician specialties, including oncologists, rheumatologists and ophthalmologists. The 

proposed rule set forth our belief that the proposed payment rate of 102.5 percent 

of ASP plus $16.80 should be sufficient to cover the provider’s or supplier’s purchase 

price. In the proposed rule, we estimated that overall spending on drugs furnished 

in the office setting would increase while spending on drugs furnished in the hospital setting would decrease under phase I of the model. While the proposed rule 

presented information indicating that the model design would not favor hospitals 

over physician practices, we have received feedback from stakeholders on this issue. 

We are carefully considering the comments received during the comment period to 

determine whether adjustments are needed. 

Question. Obviously, we here in Congress and you all at CMS have gotten a great 

deal of feedback from many that want to move forward and pay for value and quality but are concerned about access to both their provider and the right course of 

treatment. Can you talk about CMS’s current engagement with the patient and provider community on this demonstration? 

Answer. We solicited and received comments on many different aspects of the proposed model such as scope of the model and the effects on small practices and practices in rural areas. Stakeholder input is very important to us, and is one reason 

why we utilized the notice and comment rulemaking process in developing this 

model. We are carefully considering the comments we received during the comment 

period. Our goal is to be responsive to the public comments received during the comment period and input from the Congress. 

65 

In addition to the notice provided through the rulemaking process, CMS has proposed to engage in certain educational activities. Specifically, we proposed to develop an evidence-based clinical decision support tool and make prescribing pattern 

reports available to practitioners. 

Question. As you are working on the final rule, are you considering any specialized protocols for treatments that are used in oncology or other specialty areas that 

do not have a lower cost therapeutic alternative? Along the same lines, are there 

considerations for patients with rare diseases that are limited to specific treatments? 

Since most rare diseases do not have established treatment guidelines and quality 

measures, will CMS have alternative safeguards in place to ensure beneficiary access for those with a rare disease? How do you plan to engage with the rare disease 

patient stakeholder community as you work to address their concerns? 

Answer. Ensuring beneficiary access to high-quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and would retain the complete freedom of choice of 

doctors, hospitals, and other providers or suppliers. The proposed model would not 

affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstance. 

In addition, CMS has proposed to closely evaluate beneficiary access and health 

outcomes during the model. CMS’s proposed evaluation of the Part B Drug Payment 

Model would also test the proposed innovative health care payment model in this 

proposed rule to examine its potential to lower program expenditures while maintaining or improving the quality of care furnished to Medicare Program beneficiaries. One of the key evaluation questions that CMS proposed for this purpose 

pertained to the proposed model’s impact on quality of care, access to care, timeliness of care, and the patient experience of care. 

As discussed in CMS testimony, CMS also would be closely monitoring beneficiary 

access and health outcomes during the model. There would be a real-time claims 

monitoring program to track utilization, spending, and prescribing patterns as well 

as changes in site of service delivery, mortality, hospital admissions, and several 

other high-level claims-based measures. This would help ensure that Medicare beneficiaries will continue to have access to Part B drugs under the model. 

CMS values public input and looks forward to continuing to work with stakeholders to ensure quality care and high value for Medicare beneficiaries. 

Question. In your testimony you discussed maintaining the standard Medicare appeals process throughout the demonstration and including a new pre-appeals exceptions review process under phase II. Can you describe how the appeals process will 

operate in real time so that patients maintain access to needed medications? What 

can other Medicare appeals processes tell us in terms of how long it might take for 

patients to receive a response? 

Answer. Under the Part B Drug Payment Model proposed rule, CMS proposed to 

establish a pre-appeals payment exceptions review process for pricing established 

under the value-based pricing section of phase II. This process would allow the provider, supplier, or beneficiary an opportunity to dispute payments made under 

phase II. This process would be in addition to, not in lieu of, the current appeals 

process, and would be available to any providers, suppliers, or beneficiaries receiving services in PCSAs assigned to one of the VBP arms. Providers, suppliers, and 

beneficiaries would have the opportunity to appeal any payment determination via 

the appeals mechanisms that currently exist outside of this model. 

CMS has proposed that the payment exceptions decisions would be issued, in writing, within 5 business days of receipt of the request for a payment exception. 

Throughout this process, providers and suppliers would be prohibited from charging 

a beneficiary more than the applicable cost sharing, even if a payment exceptions 

request is not approved by the contractor or the payment amount determined by the 

contractor remains unchanged as a result of the appeals process. 

66 

QUESTIONS SUBMITTED BY HON. ROBERT P. CASEY, JR. 

Question. People with disabilities have opposed the use of a measure called 

‘‘quality-adjusted-life-years’’ or QALYs as a determinant of the value of health care. 

Currently, there is a statutory safeguard that prevents the agency from using this 

kind of cost effectiveness or QALY measure as the basis for Medicare policy in an 

effort to prevent discrimination against people with disabilities and other vulnerable 

populations. 

What assurance can you give people with disabilities that CMS will not waive this 

safeguard? 

The statute referenced is: 

Sec. 1182 (42 U.S.C. 1320e–1). 

(e) The Patient-Centered Outcomes Research Institute established under section 

1181(b)(1) shall not develop or employ a dollars-per-quality adjusted life year 

(or similar measure that discounts the value of a life because of an individual’s 

disability) as a threshold to establish what type of health care is cost effective 

or recommended. The Secretary shall not utilize such an adjusted life year (or 

such a similar measure) as a threshold to determine coverage, reimbursement, 

or incentive programs under title XVIII. 

Answer. CMMI did not propose to waive 1182(e), and this Model will abide by the 

laws and regulations governing the Medicare program. Section 1115A of the Act authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of 

care furnished to Medicare, Medicaid, and Children’s Health Insurance Program 

beneficiaries. Under the proposed Part B Drug Payment model, beneficiaries would 

still have access to the same drugs and would retain the complete freedom of choice 

of doctors, hospitals, and other providers or suppliers. The proposed model would 

not affect drug coverage or any other Medicare benefits. 

Additional beneficiary protection in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the current Medicare 

claims appeals processes, that would allow the beneficiary, provider, or supplier to 

explain why an exception to Medicare’s value-based pricing policy is warranted in 

the beneficiary’s circumstance. CMS sought comment on this protection and values 

public input. In addition, CMS proposed to evaluate quality of care, access to care, 

timeliness of care, and patient experience of care during the model. 

We are carefully reviewing all the comments we received during the comment period. CMS looks forward to continuing to work with stakeholders to ensure quality 

care and high value for Medicare beneficiaries. 

Question. When it comes to pharmaceuticals, we have long recognized the important role played by drugs that are the only available therapies for their indications, 

which can include many drugs for rare diseases. For example, during drug development, the FDA grants promising therapies for rare diseases the ‘‘orphan drug designation,’’ which can confer extra exclusivity if the drug is ultimately approved, and 

entitles the manufacturer to qualify for the Orphan Drug Tax Credit to help offset 

development costs. 

Similarly, we must consider how changes to drug payment policy will impact patient access to drugs when there is no alternative therapy. One of the main concepts 

this demonstration is looking to test is the incentive to prescribe a more expensive 

drug to achieve higher reimbursement, but what precautions has CMS taken to ensure access when there is only one drug available for a rare condition? If a physician 

is no longer able to afford to prescribe the drug, what is the beneficiary supposed 

to do? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed model, beneficiaries would still 

have access to the same drugs and will retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The proposed Part B Drug Payment 

Model would not affect drug coverage or any other Medicare benefits. We are carefully reviewing the comments we received during the comment period. 

CMS’s proposed evaluation of the Part B Drug Payment Model would test the proposed innovative health care payment model in this proposed rule to examine its 

potential to lower program expenditures while maintaining or improving the quality 

of care furnished to Medicare Program beneficiaries. One of the key evaluation questions that CMS proposed for this purpose pertained to the proposed model’s impact 

67 

on quality of care, access to care, timeliness of care, and the patient experience of 

care. 

Additionally, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

Question. Mental health advocates including the National Association for Mental 

Illness, the National Council for Behavioral Health, Mental Health America, and 

the American Foundation for Suicide Prevention have raised concerns about what 

these proposals mean for patients with mental illness. Many of these patients use 

Part B medications to treat their mental illness, but for others their mental illness 

is a comorbidity that impacts their adherence and response to treatments for cancer 

or other complex conditions. 

How will CMS account for the role of mental illness, or other comorbidities, in 

determining treatment value in phase II of the demonstration? 

Answer. Ensuring beneficiary access to high quality care and treatment is always 

at the forefront of CMS’s work. Under the proposed Part B Drug Payment model, 

beneficiaries would still have access to the same drugs and would retain the complete freedom of choice of doctors, hospitals, and other providers or suppliers. The 

proposed model would not affect drug coverage or any other Medicare benefits. 

Additional beneficiary protections in phase II of the proposal included a proposed 

pre-appeals payment exceptions review process, in addition to the standard current 

Medicare claims appeals processes that would allow the beneficiary, provider, or 

supplier to explain why an exception to Medicare’s value-based pricing policy is warranted in the beneficiary’s circumstance. In addition, CMS proposed to evaluate 

quality of care, access to care, timeliness of care, and patient experience of care during the model. 

Additionally, as discussed in CMS testimony, CMS would be closely monitoring 

beneficiary access and health outcomes during the model. There would be a realtime claims monitoring program to track utilization, spending, and prescribing patterns as well as changes in site of service delivery, mortality, hospital admissions, 

and several other high-level claims-based measures. This would help ensure that 

Medicare beneficiaries will continue to have access to Part B drugs under the model. 

QUESTIONS SUBMITTED BY HON. MARK R. WARNER

Question. On June 22, 2016, the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds released its annual report, showing that growth in the costs of prescription drugs paid by Medicare 

continue to exceed growth in other Medicare costs and overall health expenditures. 

As we move to a system that pays for value, not volume, this growth threatens the 

gains our country has made in helping to drive down health-care costs, after an unprecedented run of 5 years of slow growth. There are numerous reasons why patients and heath care payers are experiencing rising prescription drug costs, and the 

solutions are not simple. 

The Department has the intended goal of linking 80 percent of Medicare payments to value by 2018, including 50 percent to alternative payment models such 

as bundled payments. While there has been substantial innovation in how health 

plans and government reimburse for hospital and physician services, payment for 

prescription drugs is often based on more traditional outcomes; for example, volume 

of product purchased. 

In light of these circumstances, please consider the following questions: 

Do risk-sharing agreements, in which payments are linked to agreed-upon patient 

outcomes, hold promise in improving how government reimburses for prescription 

drugs? 

In the proposed demonstration, phase II will look at various models to ‘‘pay for 

value.’’ What tools and resources do we have, whether from CMMI or in the private 

market, that can help generate the evidence we need to ensure that we pay for 

value? 

68 

14https://sop.washington.edu/department-of-pharmacy/performance-based-risk-sharing-database/. 

Answer. CMS proposed and sought comment on a set of value based pricing tools 

to be used in phase II of the model that are currently employed by commercial 

health plans, pharmacy benefit managers, hospitals, and other entities that manage 

health benefits and drug utilization. In the proposed rule, we stated our belief that 

some of these approaches, when appropriately structured, may be adaptable to Part 

B. 

There are a number of innovative tools being used in the private sector. One example is risk-sharing arrangements that link the payment for drugs to patient 

health outcomes. As we highlighted in the proposed rule, the University of Washington’s School of Pharmacy maintains the Performance Based Risk Sharing Database,14 which currently lists detailed information on the 311 risk-sharing arrangements subject to participation fees and licensing agreements. 

The private market also capitalizes on reference pricing, which refers to setting 

a standard payment rate—a benchmark—for a group of therapeutically similar drug 

products. Like all other models, CMS analyzed practices from the private sector and 

sought public input regarding the proposed tools. CMS is currently reviewing the 

public comments we received during the comment period. 

The Part B Drug Payment Model proposal is part of the administration’s broader 

strategy to encourage better care, smarter spending, and healthier people by paying 

providers for what works, unlocking health care data, and finding new ways to coordinate and integrate care to improve quality. 

Question. In your view, do we have enough objective data on clinical effectiveness 

to move towards value purchasing agreements on a large scale? If not, what investments are necessary to move in that direction? Do you believe that there are other 

entities, public or private, that should be conducting this research? 

Answer. Phase II of the proposed Part B Drug Payment Model would use tools 

currently employed by commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization. These 

tools have been used for years with positive results, and we believe that some of 

these successful approaches may be adaptable to Part B. We will test whether the 

implementation of the tools affects expenditures and outcomes. 

In the proposed rule, we proposed several value-based pricing tools: reference pricing, indications-based pricing, outcomes-based risk sharing agreements, and discounting or eliminating patient coinsurance amount. This group of tools would serve 

as a framework for interventions for selected Part B drugs. We would not apply all 

these tools to all Part B drugs but implement these tools in a limited manner for 

certain HCPCS drug codes after considering these tools’ appropriateness to specific 

Part B drugs within these codes. In the proposed rule, we solicited comment on the 

proposed tools, including specific Part B drugs suitable for the application of this 

group of tools. 

Question. Phase II of the proposed demonstration will also include clinical decision 

support tools for providers and suppliers. How does HHS propose to ensure that patients and others are aware of this information, as well as the results of value-based 

evaluations? 

Answer. The proposed two component clinical decision support (CDS) tool would 

be offered through a web-based format. This tool would allow participating physicians in the VBP arm of the model to conveniently access up-to-date literature and 

consensus guidelines, as well as feedback reports. 

Physicians who voluntarily accessed the proposed educational CDS tool would be 

free to decide if and how they would apply information from the tool to their practice. This educational component would provide information on prescribing for specific indications that reflects up-to-date literature and consensus guidelines focusing 

on effective treatments as well as safe and appropriate drug use for specific diagnoses. For example, we anticipated that information would be listed and indexed to 

correspond to drugs and disease states or conditions that are commonly treated in 

Part B. This tool is not intended to act as or replace, in any way, the physician’s 

medical judgment for the treatment of patient-specific clinical conditions nor is the 

tool intended to replace a practitioner’s ability to order reasonable and necessary 

Part B drugs as appropriate. 

69 

15 ‘‘HHS Reaches Goal of Tying 30 Percent of Medicare Payments to Quality Ahead of Schedule,’’ http://www.hhs.gov/about/news/2016/03/03/hhs-reaches-goal-tying-30-percent-medicarepayments-guality-ahead-schedule.html. 

The proposed feedback report component of the CDS tool would provide information on Part B claims payment patterns for specific drugs and/or indications either 

nationally or within specific geographic areas. These reports would provide feedback 

on how an individual physician’s drug claims patterns compare with local or national data or even recommended guidelines. This information would be intended for 

use solely to support a physician’s interest in mindful prescribing. 

Question. To what extent has CMS considered addressing statutory or regulatory 

impediments to the adoption of value-based contracts outside of this demonstration 

model? 

Answer. The Part B Drug Payment Model proposed rule is part of the administration’s broader strategy to encourage better care, smarter spending, and healthier 

people by paying providers for what works, unlocking health-care data, and finding 

new ways to coordinate and integrate care to improve quality. 

The Affordable Care Act established tools such as the Medicare Shared Savings 

Program and the Center for Medicare and Medicaid Innovation to use alternative 

payment models to achieve better care, smarter spending, and healthier people. Alternative payment models are ways for Medicare to reimburse providers based on 

the quality of care rather than the number of services provided. Examples include 

accountable care organizations, advanced primary care medical homes, and models 

that bundle payments for episodes of care. 

Before the Affordable Care Act, very few Medicare payments flowed through alternative payment models. By 2014, approximately 20 percent of payments were made 

through alternative payment models, and today more than 30 percent of payments 

are made through alternative payment models.15 In addition to Medicare, dozens of 

insurance companies, health systems, employers, and organizations have joined 

CMS in setting their own goals to move to alternative payment models. As part of 

this effort, in 2015, HHS established the Health Care Payment Learning and Action 

Network to align efforts between government, private sector payers, employers, providers, and consumers to broadly scale these gains in better care, smarter spending, 

and healthier people. 

PREPARED STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM UTAH

WASHINGTON—Senate Finance Committee Chairman Orrin Hatch (R–Utah) today 

delivered the following opening statement at a hearing to examine the Centers for 

Medicare and Medicaid Services’ (CMS) proposed drug rule for Medicare Part B: 

I’d like to welcome everyone to this morning’s hearing that will allow the committee to examine the Obama administration’s proposed Medicare Part B drug demonstration. I would like to thank Dr. Patrick Conway from the Center for Medicare 

and Medicaid Services for testifying. 

Today’s topic is very important. The proposed CMS demonstration project would 

radically alter the ways in which Medicare pays for drugs and biologics treatments 

that physicians prescribe and administer to patients in the outpatient settings that 

are covered under Part B. 

Typically, these are drugs and treatments that are used in a physician’s office or 

hospital. They are used to treat vulnerable beneficiaries with serious medical conditions, such as cancer, macular degeneration, rheumatoid arthritis, neurological disorders, primary immunodeficiency diseases, and a number of rare illnesses. 

From the day CMS made their proposed demonstration public this past March, 

I have made my opinion very clear: I believe this experiment is ill-conceived and 

likely to harm beneficiaries. It is an overreach on the part of CMS that, in my opinion, goes beyond the agency’s statutory authority, extends nationwide, and requires 

all Medicare Part B providers to participate. 

As we all know, the experiment would change the Part B payment system in two 

phases, both of which are very troubling—and that’s putting it kindly. 

Given these inherent concerns, I’d like to hear an explanation from CMS as to 

why they believe their new payment changes will not harm Medicare beneficiaries. 

70 

So far, what they’ve given us lacks any such explanation or justification. And, that’s 

not all that’s missing from the elements of the demonstration that have been made 

public. 

Indeed, this proposal is troubling—and, again, I’m being kind with that description—not only for what is in it, but what has been left out. 

For example, with its proposal, CMS has not indicated the conditions in which 

a physician has the option to prescribe a high or low cost drug that have the same 

patient benefit. 

In addition, CMS has not provided an analysis of how many physicians, including 

those in small and rural practices, would lose money purchasing needed drugs. 

They have not provided an analysis of how often physicians would have to refer 

beneficiaries to the less-convenient, more costly hospital outpatient setting. 

And, CMS has not yet indicated how it will assess the impact on beneficiary access and quality both during the course of the demonstration and the formal evaluation of it. 

Not surprisingly, the proposed experiment has been widely condemned by experts 

and stakeholders. 

Almost immediately after the proposed demonstration was released, we received 

a letter from over 300 stakeholder organizations asking for our help in getting CMS 

to withdraw the proposal. These organizations included: the Arthritis Foundation, 

the Caregiver Action Network, the Immune Deficiency Foundation, the Lung Cancer 

Alliance, and the National Alliance for Mental Illness. 

The organizations that have reached out with concerns about how this proposal 

represents patients who suffer from the diseases treated by these drugs, including 

cancer, arthritis, mental illness, and HIV. They represent the physicians who treat 

the patients with these devastating conditions, including oncologists, rheumatologists, and ophthalmologists. 

I have also heard many of these same concerns from my constituents. Many 

Utahns feel that the proposed demonstration would deprive them of the drugs that 

best treat their conditions and require them to have to travel great distances and 

incur significant additional expenses to receive needed care. 

Obviously, Utah is not alone here. Patients and providers from virtually every 

State have weighed in on this matter, which prompted all of the Republican members of the Finance Committee to send a letter to Acting CMS Administrator Slavitt 

urging the withdrawal of the proposal. 

That’s right, 14 Senators from the only Senate committee with oversight jurisdiction sent a detailed and thoughtful letter to CMS about this proposal. 

And, how did the agency respond? We received what essentially amounts to a 

form letter, thanking the committee members for sharing their views and noting 

that CMS will consider all public comments. It could not have been more dismissive 

in its tone. 

That is the level of attention and seriousness CMS ascribes oversight from Congress. And, sadly, this is not an isolated incident. For 7 years now, the entire 

Obama administration has patronized, stonewalled, or flat-out ignored oversight efforts on the part of Finance Committee Republicans. There are countless examples. 

Sometimes the agencies show disregard for the law—like when they refused to 

provide any meaningful response to numerous inquiries about illegal reinsurance 

payments issued under the so-called Affordable Care Act. 

Other times, they discount our oversight role entirely—like when they denied Finance Committee staff access to last week’s Medicare and Social Security Trustees 

Reports until the press conference putting the administration’s own misleading spin 

on the reports was well underway. 

I have, on numerous occasions, in writing, during hearings like this, and elsewhere, expressed my hope that the administration, as a whole, would change its 

ways and become more cooperative and transparent. I have asked countless nominees that have come before the committee to commit to being responsive to senators’ 

inquiries. Yet, over 7 years, this unprecedented level of disregard has continued, 

unabated. 

71 

Given the short time left with this administration, I won’t renew these calls for 

more cooperation and responsiveness today. I feel quite certain that there are no 

new improvements on the immediate horizon. 

However, given that we have a high-ranking administration official before us 

today, I hope that, at the very least, we can finally get some straight answers to 

the many questions raised by CMS’s Part B proposal. 

I note that our witness, Dr. Conway, stated in an early May interview on the proposed demonstration that CMS ‘‘will interact with Congress and take feedback and 

make adjustments as necessary.’’ 

I do hope that our conversation today will be more consistent with that sentiment 

than the dismissive response letter shortly after that statement was made. The Senators on this committee—and more importantly, the constituents we represent—deserve at least that much. 

LETTER SUBMITTED BY HON. ORRIN G. HATCH

March 17, 2016 

The Honorable Mitch McConnell The Honorable Paul Ryan 

Majority Leader Speaker of the House of Representatives 

U.S. Senate U.S. House of Representatives 

Washington, DC 20510 Washington, DC 20515 

The Honorable Harry Reid The Honorable Nancy Pelosi 

Minority Leader Minority Leader 

U.S. Senate U.S. House of Representatives 

Washington, DC 20510 Washington, DC 20515 

Dear Leader McConnell, Leader Reid, Speaker Ryan, and Leader Pelosi: 

We, the 316 organizations listed below, are writing to express our strong concern 

with the Centers for Medicare and Medicaid Services’ (CMS) March 8, 2016 proposed rule that would implement a new ‘‘Medicare Part B Payment Model.’’ We believe that this type of initiative, implemented without sufficient stakeholder input, 

will adversely affect the care and treatment of Medicare patients with complex conditions, such as cancer, macular degeneration, hypertension, rheumatoid arthritis, 

Crohn’s disease and ulcerative colitis, and primary immunodeficiency diseases. We 

previously sent a letter to Department of Health and Human Services (HHS) Secretary Sylvia Burwell asking her not to move forward with this type of initiative, 

and we now respectfully request that you ask CMS to withdraw the proposed rule. 

Medicare beneficiaries—representing some of the nation’s oldest and sickest patients—must often try multiple prescription drugs and/or biologics before finding 

the appropriate treatment for their complex conditions. These patients need immediate access to the right medication, which is already complicated by the fact that 

treatment decisions may change on a frequent basis. These vulnerable Medicare patients and the providers who care for them already face significant complexities in 

their care and treatment options, and they should not face mandatory participation 

in an initiative that may force them to switch from their most appropriate treatment. 

A Center for Medicare and Medicaid Innovation (CMMI) initiative that focuses on 

costs rather than patients and health-care quality, implemented based on primary 

care service areas, rather than the unique challenges of patients, is misguided and 

ill-considered. Medicare beneficiaries with life-threatening and/or disabling conditions would be forced to navigate a CMS initiative that could potentially lead to an 

abrupt halt in their treatment. This is not the right way to manage the Medicare 

program for its beneficiaries. 

As CMS contemplates payment and delivery system reforms, there is a critical need 

for transparent, comprehensive communications with stakeholders throughout the 

process. We were deeply disappointed that CMS only provided a limited opportunity 

for stakeholder input before announcing sweeping proposed changes to Medicare 

Part B drug payments. In doing so, the agency largely failed to consider stakeholder 

concerns that the initiative could adversely impact patients’ access to life-saving and 

life-changing Medicare Part B covered drugs. 

72 

1 2015 Medicare Trustees Report. 

2Medicare Payment Advisory Commission, ‘‘Medicare Drug Spending;’’ presentation at September 2015 public meeting; available at: http://www.medpac.gov/documents/september-2015- 

meeting-presentation-medicare-drug-spending.pdf?sfvrsn=0. 

We believe these types of initiatives should be initially implemented in a targeted, 

patient-centered and transparent way that accounts for the unique needs of Medicare beneficiaries. In fact, CMMI is statutorily required to ensure that its initiatives 

target ‘‘deficits in care,’’ and can only expand the scope and duration of a model 

after careful assessment of the model’s impact on quality of care, patient access, and 

spending. We are very deeply concerned, therefore, that CMS’ proposed Part B 

Model would be applied on a nationwide basis—to all states except Maryland, due 

to its all-payer model—and would include the ‘‘majority’’ of Part B drugs. Furthermore, given the success of the current Part B reimbursement methodology in ensuring patient access to the most appropriate treatments, it is unclear what ‘‘deficits 

in care’’ CMS is attempting to address in this incredibly wide-ranging initiative. 

In the proposed rule, CMS expresses concern that the 6-percent ASP add-on payment ‘‘may encourage the use of more expensive drugs because the 6-percent addon generates more revenue for more expensive drugs.’’ This assumption fails to take 

into account the fact that providers’ prescribing decisions depend on a variety of factors, including clinical characteristics and the complex needs of the Medicare population. Most importantly, there is no evidence indicating that the payment changes 

contemplated by the model will improve quality of care, and may adversely impact 

those patients that lose access to their most appropriate treatments. In fact, data 

suggests that the current Part B drug payment system has been both cost effective 

and successful in ensuring patient access to their most appropriate treatment, as 

Part B expenditures remain relatively stable 1 and Part B drugs account for just 3% 

of total program costs.2

Finally, it is important to understand that with the Budget Control Act, CMS has 

already cut Medicare reimbursement for physician-administered drugs by 2 percent, 

further impacting some providers’ ability to administer essential drugs at the current reimbursement rate. It is imperative CMS acknowledges and evaluates the impact of the current, real payment rate and engages multiple stakeholders, starting 

with patients and providers, before implementing a new, severe reimbursement cut 

that is effectively ASP + 0.86 percent (plus a small flat fee). In closing, we urge you 

to ensure that our nation’s oldest and sickest patients continue to be able to access 

their most appropriate drugs and services. We therefore request that you ask CMS 

to permanently withdraw the Part B Drug Payment Model from consideration. 

Sincerely, 

1 in 9: The Long Island Breast Cancer 

Action Coalition 

Action CF 

ADAP Advocacy Association (aaa+) Advocates for Responsible Care (ARxC) 

Aimed Alliance Alabama Academy of Ophthalmology 

Alabama Cancer Congress Alabama Gastroenterological Society 

Alaska Society of Eye Physicians and 

Surgeons 

Alliance for Patient Access (AfPA) 

Alliance of Specialty Medicine Alzheimer’s and Dementia Alliance of 

Wisconsin 

American Academy of Allergy Asthma 

and Immunology (AAAAI) 

American Academy of Ophthalmology 

American Association of Diabetes Educators American Bechet’s Disease Association 

American College of Mohs Surgery American College of Rheumatology 

American Gastroenterological Association American Liver Foundation, Upper Midwest Division 

American Society of Clinical Oncology 

(ASCO) 

American Urological Association 

AmerisourceBergen Anticoagulation Forum 

Arizona BioIndustry Association (AZBio) Arizona United Rheumatology Alliance 

73 

Arkansas State Rheumatology Association Arthritis Foundation 

Asian Americans for Community Involvement Association of Black Cardiologists 

Association of Community Cancer Centers (ACCC) Association of Idaho Rheumatologists 

Association of Indian Physicians of Ohio Association of Northern California 

Oncologists (ANCO) 

Association of Women in Rheumatology 

(AWIR) 

Asthma and Allergy Foundation of 

America, New England Chapter 

Axis Advocacy Biocom 

BioFlorida, Inc. BioForward 

BioHouston BioKansas 

BioNJ Bionorth TX 

Bioscience Association of West Virginia Biotechnology Innovation Organization 

(FKA Biotechnology Industry Organization) 

BioUtah Brain Injury Association of Georgia 

California Academy of Eye Physicians 

and Surgeons 

California Hepatitis C Task Force 

California Life Sciences Association 

(CLSA) 

California Rheumatology Alliance (CRA) 

Cancer Support Community Cancer Support Community Central 

Ohio 

Cancer Support Community North Texas CancerCare 

Cardinal Health Caregiver Action Network 

Caring Ambassadors Cascade AIDS Project 

Center for Healthcare Innovation Central Texas Rheumatology Society 

Chicago Life Sciences Consortium 

(CLSC) 

COA Patient Advocacy Network (CPAN) 

Coalition of Hematology Oncology Practices (CHOP) Coalition of State Rheumatology Organizations (CSRO) 

Coalition of Texans with Disabilities 

(CTD) 

Colon Cancer Alliance 

Colorado BioScience Association Colorado Gerontological Society 

Colorado Rheumatology Association Colorado Society of Eye Physicians and 

Surgeons (CSEPS) 

Colorado State Grange Community Access National Network 

(CANN) 

Community Liver Alliance Community Oncology Alliance (COA) 

Connecticut Oncology Association (CtOA) Connecticut Rheumatology Association 

Cutaneous Lymphoma Foundation Delaware Academy of Ophthalmology 

Delaware BioScience Association Dia de la Mujer Latina 

Digestive Disease National Coalition 

(DDNC) 

Digestive Health Physicians Association 

(DHPA) 

Easter Seals Massachusetts Eastern Pennsylvania Chapter, National 

Hemophilia Foundation 

EDSers United Foundation Elder Care Advocacy of Florida 

Epilepsy Foundation of Greater Chicago Epilepsy Foundation of Western Wisconsin 

Fabry Support and Information Group Florida Allergy, Asthma and Immunology Society (FAAIS) 

Florida Gastroenterologic Society Florida Psychiatric Society 

74 

Florida Society of Clinical Oncology 

(FLASCO) 

Florida Society of Neurology 

Florida Society of Ophthalmology Florida Society of Rheumatology 

Florida State Hispanic Chamber of Commerce GBS/CIDP Foundation International 

Georgia Bio Georgia Chapter of the American College of Cardiology 

Georgia Mental Health Consumer Network Georgia Society of Clinical Oncology 

(GASCO) 

Georgia Society of Rheumatology Global Colon Cancer Association 

Global Healthy Living Foundation H.E.A.L.S of the South 

Hawaii Society of Clinical Oncology Health Coalition, Inc. 

Healthcare Distribution Management 

Association 

Healthcare Institute of New Jersey 

(HINJ) 

Healthcare Leadership Council HealthHIV 

Hematology-Oncology Managers of New 

York (HOMNY) 

Hepatitis Foundation International 

iBio—Illinois Biotechnology Industry Organization Idaho Society of Clinical Oncology 

Idaho Society of Ophthalmology Illinois Medical Oncology Society 

Illinois Society of Eye Physicians and 

Surgeons (ISEPS) 

Immune Deficiency Foundation (IDF) 

Indiana Academy of Ophthalmology 

(IAO) 

Indiana Health Industry Forum (IHIF) 

Indiana Oncology Society INDUNIV Research Consortium 

International Cancer Advocacy Network 

(ICAN) 

International Foundation for Autoimmune Arthritis (IFAA) 

International Institute for Human Empowerment, Inc. ION Solutions 

Iowa Academy of Ophthalmology (IAO) Iowa Biotechnology Association 

Iowa Oncology Society Iowa State Grange 

Kansas City Area Life Sciences Institute, 

Inc. 

Kansas Rheumatology Alliance 

Kansas Society of Clinical Oncology Kansas Society of Eye Physicians and 

Surgeons (KSEPS) 

Kentuckiana Rheumatology Alliance Kentucky Association of Medical Oncology (KAMO) 

Kentucky Life Sciences Council Large Urology Group Practice Association (LUGPA) 

Life Science Washington Louisiana Oncology Society 

Lung Cancer Alliance LUNGevity 

Lupus Foundation of America (LFA), Indiana Chapter Lupus Foundation of Colorado 

Maryland DC Society of Clinical Oncology Maryland Society for the Rheumatic Diseases (MSRD) 

Massachusetts Association for Mental 

Health 

Massachusetts Society of Eye Physicians 

and Surgeons (MSEPS) 

Massachusetts, Maine and New Hampshire Rheumatology Association MassBio 

Mayors Committee on Life Sciences McKesson 

Medical Oncology Association of Southern California (MOASC) Medical Partnership 4 MS 

Medical Society of the State of New York Men’s Health Network 

75 

Mental Health Systems, Inc. Metropolitan Atlanta Rheumatology Society (MARS) 

MichBio—Michigan Biosciences Industry 

Association 

Michigan Lupus Foundation 

Michigan Osteopathic Association Michigan Rheumatism Society 

Michigan Society of Eye Physicians and 

Surgeons (MiSEPS) 

Michigan Society of Hematology and Oncology (MSHO) 

Midwest Oncology Practice Society 

(MOPS) 

Minnesota Academy of Ophthalmology 

Minnesota Society of Clinical Oncology Mississippi Academy of Eye Physicians 

and Surgeons 

Mississippi Arthritis and Rheumatology 

Society 

Mississippi Oncology Society 

Missouri Biotechnology Association 

(MOBIO) 

Missouri Oncology Society 

Missouri Society of Eye Physicians and 

Surgeons (MoSEPS) 

Montana BioScience Alliance 

Montana State Oncology Society NASW–NC (National Association of Social Workers) 

National Alliance on Mental Illness 

(NAMI) 

National Alliance on Mental Illness 

Greater Des Moines (NAMI) 

National Alliance on Mental Illness Iowa 

(NAMI) 

National Alliance on Mental Illness Kentucky (NAMI) 

National Alliance on Mental Illness 

Texas (NAMI) 

National Association for Rural Mental 

Health 

National Association of County Behavioral Health and Developmental Disability Directors (NACBHDD) National Association of Hepatitis Task 

Forces 

National Blood Clot Alliance (NBCA) National Cancer Care Alliance 

National Hispanic Medical Association National Infusion Center Association 

(NICA) 

National Medical Association (NMA) National Minority Quality Forum 

National MPS Society National Patient Advocate Foundation 

Nebraska Academy of Eye Physicians 

and Surgeons 

Nebraska Medical Association (NMA) 

Nebraska Oncology Society Neurofibromatosis Mid-Atlantic 

Nevada Oncology Society New England Biotech Association 

(NEBA) 

New Jersey Academy of Ophthalmology New Jersey Association of Mental 

Health and Addiction Agencies, Inc. 

(NJAMHAA) 

New Jersey Rheumatology Association New Jersey Society for Oncology Managers (NJSOM) 

New York State Ophthalmological Society New York State Rheumatology Society 

NewYorkBIO NMBio 

NORM—National Organization of 

Rheumatology Managers 

North American Thrombosis Forum 

North Carolina Biosciences Organization 

(NCBIO) 

North Carolina Oncology Association 

North Carolina Psychiatric Association North Carolina Psychological Association 

North Carolina Rheumatology Association (NCRA) North Carolina Society of Eye Physicians and Surgeons (NCSEPS) 

76 

Northern New England Clinical Oncology Society Ohio Association of Rheumatology 

Ohio Foot and Ankle Medical Association Ohio Gastroenterology Society 

Ohio Hematology Oncology Society Ohio Ophthalmological Society (OOS) 

Oklahoma Academy of Ophthalmology Oklahoma Society of Clinical Oncology 

Oncology Managers of Florida Oncology Nursing Society 

Oregon Bioscience Association Oregon Rheumatology Alliance 

Oregon Society of Medical Oncology 

(OSMO) 

Oregon State Grange 

Oregon Urological Society Patients Rising 

PCa Blue Inc. Pennsylvania Academy of Ophthalmology 

Pennsylvania Bio Pennsylvania Rheumatology Society 

Pennsylvania State Grange Pharmaceutical Research and Manufacturers of America (PhRMA) 

Philadelphia Rheumatism Society Phoenix Rheumatology Association 

Physicians Advocacy Institute (PAI) Premier Oncology Hematology Management Society (POHMS) 

Prevent Blindness Prevent Blindness, Ohio Affiliate 

Prevent Cancer Foundation Prostate Conditions Education Council 

(PCEC) 

Puerto Rico Society of Ophthalmology Pulmonary Hypertension Association 

Quality Cancer Care Alliance (QCCA) RetireSafe 

Rheumatism Society of the District of 

Columbia 

Rheumatology Alliance of Louisiana 

Rheumatology Association of Iowa (RAI) Rocky Mountain Oncology Society 

Rush To Live Salud USA 

SCBIO Society for Women’s Health Research 

Society of Utah Medical Oncologists South Carolina Gastroenterology Association 

South Carolina Oncology Society South Carolina Rheumatism Society 

South Carolina Society of Ophthalmology South Dakota Biotech 

South Florida Cancer Association Southern California Rheumatology Society (SCRS) 

Spina Bifida Association of Kentucky State of Texas Association of Rheumatologists (STAR) 

State of Texas Kidney Foundation StopAfib.org 

Taking Control of Your Diabetes 

(TCOYD) 

Tech Council of Maryland 

Tennessee Oncology Practice Society 

(TOPS) 

Tennessee Rheumatology Society 

Texas Association of Business Texas Association of Manufacturers 

Texas BioAlliance Texas Healthcare and Bioscience Institute (THBI) 

Texas Life Sciences Collaboration Center Texas Nurse Practitioners 

Texas Ophthalmological Association Texas Society of Clinical Oncology 

Texas State Grange The American College of Surgeons/ 

Commission on Cancer 

The Arizona Clinical Oncology Society The Crohn’s Colitis Effect 

The Medical Alley Association The Mended Hearts, Inc. 

The Retina Society The U.S. Oncology Network 

The Vasculitis Foundation U.S. Hereditary Angioedema Association 

77 

United States Cutaneous Lymphoma 

Consortium 

Utah Ophthalmology Society 

Veterans Health Council Vietnam Veterans of America 

Virginia Association of Hematologists 

and Oncologists 

Virginia Biotechnology Association 

Virginia Hematology Oncology Association (VAHO) Virginia Society of Eye Physicians and 

Surgeons 

Washington Academy of Eye Physicians 

and Surgeons 

Washington Rheumatology Alliance 

Washington State Medical Oncology Society Washington State Prostate Cancer Coalition 

Washington State Urology Society Wellness and Education Community Action Health Network 

West Virginia Oncology Society West Virginia Rheumatology State Society 

Wisconsin Academy of Ophthalmology Wisconsin Association of Hematology 

and Oncology 

Wisconsin Association of Osteopathic 

Physicians and Surgeons 

Wisconsin Rheumatology Association 

Wyoming Epilepsy Association Wyoming Ophthalmological Society 

cc: The Honorable Orrin Hatch The Honorable Ron Wyden 

Chairman Ranking Member 

Committee on Finance Committee on Finance 

U.S. Senate U.S. Senate 

The Honorable Fred Upton The Honorable Frank Pallone 

Chairman Ranking Member 

Committee on Energy and Commerce Committee on Energy and Commerce 

U.S. House of Representatives U.S. House of Representatives 

The Honorable Kevin Brady The Honorable Sander Levin 

Chairman Ranking Member 

Committee on Ways and Means Committee on Ways and Means 

U.S. House of Representatives U.S. House of Representatives 

LETTER SUBMITTED BY HON. PAT ROBERTS, 

A U.S. SENATOR FROM KANSAS

June 28, 2016 

Hon. Orrin G. Hatch Hon. Ron Wyden 

Chairman Ranking Member 

Committee on Finance Committee on Finance 

U.S. Senate U.S. Senate 

Washington, DC 20510 Washington, DC 20510 

Dear Chairman Hatch and Ranking Member Wyden: 

The undersigned patient and disease advocacy organizations representing a diverse 

array of Medicare beneficiaries are writing to thank you for convening today’s hearing on the proposed Medicare Part B Drug Payment Demonstration. As organizations that represent Medicare beneficiaries living with a broad range of chronic and 

disabling health conditions, we have a number of concerns with the proposed Demonstration put forward by the Centers for Medicare and Medicaid Innovation 

(CMMI) and appreciate that the Finance Committee is willing to engage in oversight regarding the design and potential impact of program on beneficiaries. 

Many of our organizations have submitted comments to CMMI on this proposed 

Demonstration expressing concerns on a range of issues, including: 

• While this has been deemed a ‘‘demonstration’’ by CMMI, participation will be 

mandatory for many physicians and their patients and will affect 75% of the 

78 

Medicare population, making it much larger than a typical demonstration 

project. 

• The payment methodology outlined in Phase 1 of the Demonstration has significant potential to limit access to the full range of available treatments under 

Part B to treat serious illnesses and conditions such as cancer, arthritis, multiple sclerosis, primary immune deficiency, macular degeneration and schizophrenia. 

• Patients often have to try several different treatment options before finding one 

that works for them. Under the Demonstration, patients could be forced to 

switch from the most appropriate treatment or discontinue treatment because 

of transportation hurdles. 

• CMMI’s Phase 2 proposals to engage value assessments of treatments based on 

the ‘‘average’’ patient fail to capture the complexity of medical co-morbidities 

and the diverse complex needs of individual patients. Many of the patients who 

will be affected have rare and/or chronic diseases and are not the average patient. 

• There was a lack of stakeholder input from the beginning of this process, and 

many of the problems with the Demonstration could have been mitigated had 

patient groups been involved on the front end. 

• There is concern that this Demonstration could have an impact beyond Part B, 

and ultimately affect patient access to Part D drugs. 

While there are several consumer groups that have come out in support of this 

Demonstration, it is important to note that consumers and patients are two very 

different constituencies. Patients are the ones utilizing the health care system on 

a regular, on-going basis, and should be protected and considered most thoroughly 

throughout this process. 

We are grateful for the Committee’s willingness to carefully examine the proposed 

CMMI Demonstration with a particular focus on how it will impact access to treatment for Medicare beneficiaries that live every day with life threatening and chronic 

illnesses. We urge you to demand answers form CMMI and would encourage your 

efforts to block full implementation of this Demonstration until these questions are 

answered. 

Thank you for your leadership in ensuring that the concerns of patients are addressed. Please contact Sandie Preiss, Vice President of Advocacy and Access at the 

Arthritis Foundation with any questions at spreiss@arthritis.org, 202–887–2910. 

Sincerely, 

AIDS Institute Alliance for the Adoption of Innovations 

in Medicine (Aimed Alliance) 

Alliance for Patient Access American Autoimmune Related Diseases 

Association 

Arthritis Foundation Asthma and Allergy Foundation of 

America 

Caregiver Action Network COPD Foundation 

Epilepsy Foundation GBS/CIDP Foundation International 

Global Healthy Living Foundation Health HIV 

Hemophilia Federation of America Hepatitis Foundation International 

Immune Deficiency Foundation International Foundation for Autoimmune Arthritis 

Lupus and Allied Diseases Association Lupus Foundation of America 

MLD Foundation National Alliance on Mental Illness 

National Psoriasis Foundation NeedyMeds 

Partnership to Improve Patient Care Prevent Blindness 

Pulmonary Hypertension Association RetireSafe 

Scleroderma Foundation Sjogren’s Syndrome Foundation 

U.S. Hereditary Angioedema Association Veterans Health Council 

Vietnam Veterans of America 

79 

PREPARED STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON

What underlies this debate, in my view, is the fact that the United States is in 

an era of miracle treatments and cures. There are drugs on the market today and 

close on the horizon that were science fiction not too long ago. The question now 

is whether Americans will be able to afford them. These treatments threaten to become a major strain on our health care programs, on insurers, and on family budgets across the country. 

That was one of the big takeaways from the 18-month investigation Senator 

Grassley and I conducted on a bipartisan basis into the rollout of one blockbuster 

drug. You could see in that one case, a drug that treats Hepatitis C, the balancing 

act this country faces between miracle cures and limited resources to pour into prescribing them. And I believe this will be the pattern for years to come. Absent reforms, this is going to continue—lots of cures, and a big question mark when it 

comes to access and affordability. 

Now, those Hepatitis C drugs are not the focus of this hearing. Today the committee will examine a demonstration project set to begin in Medicare Part B, which 

is the part of the program that covers outpatient care. Part B pays for a small share 

of the drugs many seniors are prescribed, and the demonstration would affect the 

way those drugs are paid for. The demonstration has brought to the forefront some 

big questions about how the United States is going to address the trend of climbing 

drug prices. 

The fact is, seniors are getting pounded by drug costs. And in my view, there is 

an enormous amount of work that has to be done to guarantee that seniors have 

affordable access to the medications they need. In Medicare Part B, seniors’ pocketbooks are often hit especially hard because their share of drug costs is a co-insurance instead of a co-pay. That means rather than a flat, manageable fee, some seniors are facing a huge burden, stuck paying a percentage of a drug’s total cost. I 

look at that burden the same way I look at the rising out-of-pocket cost for seniors 

in Medicare Part D. For part D I’ve proposed an out-of-pocket cap to help protect 

seniors. And in my view, this committee ought to take a close look at ways to make 

sure seniors aren’t getting clobbered in Part B as well. 

There are also important questions to be addressed with respect to this demonstration project. That’s why all the Finance Committee Democrats and I sent a 

letter in April to Andy Slavitt, the Acting Administrator of the Centers for Medicare 

and Medicaid Services, outlining key concerns we had about the impact this project 

would have on patients. 

At their core, our concerns are about making sure that vulnerable seniors have 

access to life-saving medications. Protecting access is a big issue in rural areas 

where seniors today are often facing fewer choices and lower quality of care. And 

it’s extremely important that the project not result in patients being told that they 

have to go get treatment at the hospital, where treatment is typically more costly 

and less convenient. 

Finally, our letter said that this demonstration project has to sync up with the 

effort Medicare is making to move toward paying for treatment based on its value, 

rather than its volume. When you’re focusing on the value and the efficiency of care, 

there’s the potential to raise the quality of care for seniors while saving money at 

the same time. 

I hope the committee is able to examine these issues carefully today as it looks 

at the Medicare Part B demonstration. I want to thank Dr. Conway for joining the 

committee here today, and I look forward to hearing his testimony. 

(81) 

1 AMCP comments to CMS Re ‘‘Medicare Program; Part B Drug Payment Model (CMS–1670– 

P).’’ Available at http://bit.ly/27biTT5. Accessed June 28, 2016. 

COMMUNICATIONS

ACADEMY OF MANAGED CARE PHARMACY

100 North Pitt Street, Suite 400 

Alexandria, VA 22314 

800–827–2627 | 703–683–8416 

Fax 703–683–8417 

www.amcp.org 

Hon. Orrin G. Hatch Hon. Ron Wyden 

Chairman Ranking Member 

Senate Finance Committee Senate Finance Committee 

219 Dirksen Senate Office Building 219 Dirksen Senate Office Building 

Washington, DC 20510 Washington, DC 20510 

Dear Chairman Hatch and Ranking Member Wyden: 

The Academy of Managed Care Pharmacy (AMCP) appreciates the opportunity to 

submit comments for the record on the hearing titled ‘‘Examining the Proposed 

Medicare Part B Drug Demonstration’’ held on June 28, 2016. AMCP submitted detailed comments 1 to the Centers for Medicare and Medicaid Services (CMS) in response to the proposed rule titled ‘‘Medicare Program; Part B Drug Payment Model 

(CMS–1670–P)’’ published in the Federal Register on March 11, 2016. 

AMCP is a professional association of pharmacists and other practitioners who serve 

society by the application of sound medication management principles and strategies to improve health care for all. The Academy’s 8,000 members develop and provide a diversified range of clinical, educational, medication and business management services and strategies on behalf of the more than 200 million Americans covered by a managed care pharmacy benefit. 

While AMCP was pleased to see a commitment by CMS to evaluate methods to 

move from quantity and process-orientated payments for drugs under Medicare Part 

B to payment policies focused on rewarding higher quality and improved patient 

outcomes, AMCP expressed concern that the proposal, as written, did not fully consider the unintended consequences to beneficiaries that may result from the scope 

and design of the model. AMCP offered comments on several elements that we believe were either missing from the proposed rule, could be improved upon, or required clarification. AMCP urged CMS to carefully consider comments received and 

release a revised proposed rule with an opportunity for additional stakeholder feedback prior to finalization and adoption to ensure that the perspectives of managed 

care pharmacy and other stakeholders are considered. AMCP recommended that 

after consideration of comments, CMS reissue the proposal focused on areas that 

could successfully achieve the objectives of improving outcomes and quality and lowering costs without jeopardizing beneficiary access to medications. 

Specifically, AMCP commented that: 

• The Scope and Breadth of the Model Should be Narrowed—The proposed 

rule would require significant and complex changes and could ultimately result 

in a mandatory nationwide pilot that would impact up to 75 percent of providers. CMS should narrow the scope in consultation with providers and health 

plans and pharmacy benefit management companies (PBMs) that have implemented value-based purchasing initiatives in the commercial market to determine the potential for success under Medicare Part B. 

82 

• The Model Should Include Pharmacists as Key Members of the Health 

Care Team—Pharmacists play a critical role as members of the health care 

team by serving as the medication management experts to help patients achieve 

clinical goals, reduce overall health care costs, and improve patient satisfaction. 

CMS should include pharmacists as key members of the health care team for 

phase II of the model to achieve enhanced benefits to Medicare beneficiaries 

through a collaborative approach to medication management. 

• The Model Should Create an Allowance for Formularies and Utilization 

Management Tools—The proposed rule does not accommodate the use of 

pharmacy and therapeutics (P&T) committees established by health plans and 

PBMs to develop formularies for Medicare Part B or allow for the use of utilization management tools, which are elements that have been key to the success 

in decreasing costs, improving quality, and increasing value in Medicare Part 

D and the commercial market. CMS should consider the inclusion of a requirement to establish a Part B formulary with appropriate utilization management 

tools facilitated by health care providers, health plans, and PBMs under phase 

II of the model. 

• The Model Should Detail How VBP Tools Will Be Monitored and Evaluated—CMS should release detailed plans for how it will evaluate the model’s 

success, including specific clinical end points (such as quality of life, patientreported outcomes, and survival rates). 

• The Model Should Focus on Targeted Disease States—AMCP is concerned 

that the proposed rule is overly ambitious in including Part B drugs for all disease states in the model. CMS should reevaluate the scope of the model and 

focus on specific disease states that are prevalent in the Medicare population 

that have multiple therapies available with non-significant differences in clinical benefit but significant differences in cost of therapy, such as the treatment 

of age-related macular degeneration. In addition, CMS should also consider disease states and drug categories where biosimilars are entering the marketplace 

such as psoriasis, rheumatoid arthritis, and white blood stimulants. 

• The Model Should Require Documentation of Part B Drug Claims Using 

NDC Numbers—A barrier to evaluating the success of VBP tools in Part B is 

the current method of documenting drugs under Part B using Healthcare Common Procedure Coding System (HCPCS) codes and not National Drug Code 

(NDC) numbers. The ability to track the drug administered to the specific NDC 

number is critical to truly implement VBP tools as they are used today in Medicare Part D and in the commercial market. CMS should require documentation 

of NDCs on all Medicare Part B claims. 

• The Model Should Evaluate the Impact on Specialty Care Providers— 

Primary Care Service Areas (PCSAs) may not be the most appropriate geographic unit for specialty care providers, as specialty care providers are typically located in very different geographical areas and practice settings than a 

traditional primary care provider, and often entail networks that may span 

across multiple PCSAs. CMS should evaluate the impact of using PCSAs on 

specialty care providers and whether there is sufficient correlation between the 

two or whether consideration of an alternate geographic unit for specialty care 

providers is warranted. 

• The Model Should Use a Comprehensive Approach to Develop Evidence-Based Clinical Practice Guidelines—CMS should support medication 

product selection by P&T Committees and providers using the totality of the 

evidence. Therefore, CMS should be comprehensive in the type of information 

that is used to develop VBP frameworks, and to avoid relying on a single 

source. 

• The Model Should Monitor for Unintended Consequences to Beneficiaries—CMS should amend the proposed rule to include a mechanism for 

monitoring unintended consequences to beneficiaries and a strategy for suspending the model, in part or in its entirety, if beneficiary harms are identified. 

• The Model Should Evaluate the Impact of Competing CMMI Initiatives—AMCP is concerned about the impact and potential overlap of the proposed Part B payment model with other CMMI initiatives, such as the Oncology 

Care Model, and alternative payment models under the Medicare Access and 

CHIP Reauthorization Act of 2015 (MACRA). CMS should consider the potential 

overlap in test models and ensure a mechanism is in place to encourage active 

83 

participation in ongoing and future test models to allow for meaningful assessment for improving value in the U.S. health care system. 

• The Model Should Evaluate the Impact on Medicare Advantage Benchmarks—The proposed rule does not reference Medicare Advantage, which covers approximately one-third of Medicare beneficiaries. CMS should clarify how 

Medicare Advantage plans are accounted for in the proposed rule and whether 

Medicare Advantage plans will have access to the same VBP tools to help offset 

reductions in benchmarks. 

• The Model Should Evaluate Potential Market Shifts—CMS should consider how the proposed rule may result in a market shift of costs from Medicare 

Part B to other payment areas and care settings with greater costs. 

AMCP appreciates your concern with the proposed rule and the opportunity for 

stakeholders to be heard. If you have any questions regarding AMCP’s comments 

or would like further information, please contact me at 703–683–8416 or 

scantrell@amcp.org. 

Sincerely, 

Susan A. Cantrell, RPh, CAE 

Chief Executive Officer 

AMERICAN SOCIETY OF HEALTH-SYSTEM PHARMACISTS (ASHP) 

7272 Wisconsin Avenue 

Bethesda, MD 20814 

Email: gad@ashp.org 

Phone: 301–664–8710 

ASHP (the American Society of Health-System Pharmacists} respectfully submits 

the following statement for the record to the Senate Finance Committee hearing on 

examining ‘‘Examining the Proposed Medicare Part B Drug Demonstration.’’ 

ASHP represents pharmacists who serve as patient care providers in acute and ambulatory settings. The organization’s more than 43,000 members include pharmacists, student pharmacists, and pharmacy technicians. For over 70 years, ASHP 

has been at the forefront of efforts to improve medication use and enhance patient 

safety. 

ASHP appreciates CMS’s ongoing efforts to enhance healthcare quality and value, 

and we support the Model’s goal of reducing Medicare spending, while improving 

care and maintaining patient access. After careful review and analysis of the Model, 

we remain concerned that the Model’s scope, timeline, and methodology could negatively impact patient access and quality of care. The Model’s extremely aggressive 

timeline alone raises red flags, and CMS’s decision to not solicit any input from key 

stakeholders—including physicians, pharmacists, and patients—prior to proposing a 

mandatory demonstration program magnifies the issue. Given the Model’s potential 

to disrupt care, coupled with what will surely be costly implementation and oversight, ASHP in its comment letter to the agency urged CMS to rethink and restructure the Model with input from stakeholders and patients. A considered, collaborative approach has worked for other demonstration programs; in departing from 

best practices in this case, CMS will miss an opportunity to engage experts in 

crafting a demonstration project that can meet our shared goals without undermining care or destabilizing patient access. To better convey our concerns to the 

Committee, we highlight the following risk areas in the Model and propose alternative approaches. 

I. The Model’s timeline and scope threaten patient access. 

As noted above, while we support the Model’s goals, its proposed timeline and scope 

could disrupt patient access and reduce quality of care. Generally, we question the 

imposition of a large-scale mandatory demonstration program without first testing 

its methodology in smaller, more targeted pilot programs. 

A. Timeline of Model 

Although we appreciate the importance of data, the Model presents clear risks for 

patients, including provider disruption and care delays, which outweigh the value 

of comprehensive data on pricing of all Part B medications. Further, due to the randomized nature of Phase I and a rapidly approaching target start date, providers 

will have minimal time to prepare for changes that can significantly impact their 

budgets as well as their ability to continue certain patient care services. This issue 

84 

1See, e.g., Sheri Fink, ‘‘Drug Shortages Forcing Hard Decisions on Rationing Treatments,’’ NY 

Times (January 29, 2016), available at http://www.nytimes.com/2016/01/29/us/drug-shortages-forcing-hard-decisions-on-rationing-treatments.html?_r=O; and ASHP, ‘‘Understanding and 

Managing Drug Shortages’’ (2002), available at http://www.ashp.org/Doclibrary/Policy/Drug 

Shortages/DShort-abbott-drug.aspx. 2See ASHP Drug Shortages Resource Center, available at http://www.ashp.org/shortages; 

and ASHP, ‘‘Contrasting the FDA (CDER) and ASHP Drug Shortage Websites: What Are the 

Differences?’’ available at http://www.ashp.org/Doclibrary/Policy/DrugShortages/FDA-versusASHP.pdf. 

seems likely to intensify for Phase II, which includes only vague descriptions of potential models, but which is slated to be rolled out only a year after Phase I begins. 

With no previous opportunity to engage with CMS on the Model, and without adequate time to plan for these changes, it will be extremely difficult for providers to 

implement programs in a way that protects patients from unintended negative consequences. Therefore, as noted above, we advocate for collaborative revision of the 

Model’s scope and timeline. 

B. Scope of Model 

Broad Inclusion of Part B Drugs: ASHP suggests that the Model’s broadly inclusive 

approach fails to target medications appropriately and may create negative consequences for patients. While we understand that CMS is seeking to gather data 

on prescribing practices, the Model is premised on two erroneous assumptions: (1) 

that prescribing decisions are intrinsically linked to profit margins; and (2) that 

there are always lower-cost alternatives to higher-cost medications. Regarding the 

first assumption, due to medication purchasing practices, prescribers are often unaware of the purchase price of medications, which would also make them unaware 

of any prescribing incentives. Prescribers choose the best therapeutic option for their 

patients—and the best option may be a higher-cost medication. Further, for some 

drugs, such as rituximab and CMV immune globulin, the best option is also the only 

option. Given the time constraints of the comment period, we could not fully survey 

our members regarding drugs with no lower-cost alternatives, which raises concerns 

that there are similarly situated medications that have not yet been identified. To 

safeguard patients, we recommend limiting a demonstration of this type only to 

medications that have known lower-cost equivalents. 

Additionally, while we were pleased that CMS excluded drugs in ‘‘short supply,’’ we 

are concerned that CMS defines this term too narrowly. Relying solely on the FDA 

shortage list would offer only a piece of the shortage picture.1 Coupled with the 

agency’s proposal to require that a drug appear on the FDA shortage list at the time 

the Model’s quarterly price report is produced, a narrow definition of shortage could 

exacerbate access problems. Thus, the FDA list should be supplemented with other 

recognized lists, including, but not limited to, the ASHP shortage list.2

Impact on Existing Models and Demonstrations: ASHP supports expansion of alternative payment models (APMs) linked to quality and value. Although some of the 

proposed Phase II value-based payment models sound promising, we question how 

CMS will overlay multiple models on systems with ongoing APMs and demonstrations without interfering with them. ASHP requests that the Committee ask CMS 

to clarify how both phases of the Model will interact with new and existing APMs. 

Specifically, how will CMS treat the Model under the new MIPS and MACRA proposals? Will the Model be treated as an APM? Will CMS be able to control for Model 

participation when evaluating providers through other APMs and demonstrations— 

particularly after Phase II is rolled out? Based on feedback from our members, if 

the Model is implemented as proposed, it could create a chilling effect on provider 

participation in other APMs. ASHP members indicated that logistical and administrative burdens created by the Model, particularly for providers with practice sites 

in different model arms, would make them less likely to participate in other CMMI 

demonstrations or APMs simultaneously. Absent clear evidence that CMS has considered the Model’s impact on, and interaction with, current APMs and demonstrations, we are concerned that it may distort program results and undermine participation in value-based programs/models. 

II. The Model may disrupt patient access and care quality, while failing 

to provide patients with immediate, measurable benefits. 

Patient Costs: Optimal, safe, and effective medication use is impossible without actual patient access to medications, and medication costs can hinder patient access 

to vital medications. ASHP is committed to finding workable solutions to this problem, but CMS provides no evidence that Phase I of the Model will result in concrete 

patient savings. CMS notes that it ‘‘doesn’t expect a sizable overall reduction in Part 

85 

3 81 Fed. Reg. 13239 (March 11, 2016). 

4 ASHP has consistently advocated for a reimbursement rate of ASP + 6% in its comments 

on CMS’s annual Hospital Outpatient Prospective Payment System rules. As noted in these 

comments, the 6% rate allows hospitals to cover their costs. Factoring in sequestration’s impact, 

hospitals already face reimbursement rates lower than the minimum required to cover the costs 

of core pharmacy services, and the Model would further reduce those reimbursement rates. 

B drug spending associated with Phase I of this model, but we do anticipate an incentive to use higher-value drugs.’’ 3 CMS makes no claim that any cost savings in 

the system will be passed on to beneficiaries in the tangible form of reduced outof-pocket costs. Further, as discussed below, the Model carries serious unintended 

negative consequences for patient access—yet these risks are not balanced by reward in the form of unambiguous gains for patient access and outcomes. 

Patient Access: Based on discussions with our members and other clinician stakeholders, ASHP anticipates that payment changes in Phase I will likely result in a 

significant shift of patients from community settings to hospital outpatient departments. The proposed Model test payment (2.5% of ASP + $16.80) does not cover the 

overhead and handling costs for many medications in the hospital and healthsystem setting 4—and it seems likely that this would also be true in community settings. Given the limited comment period, we were unable to survey members regarding drugs that are ‘‘under water,’’ but anecdotally our members indicate that there 

are examples at all price points, including infliximab, a higher-cost biologic. Additionally, ASHP members indicate that the reduced payment (particularly when the 

cost of sequestration is factored in) may result in losses on a number of other drugs, 

including ipilimumab and melphalan. Reimbursement reduction may limit the ability of providers to offer certain services (e.g., infusions), leaving hospital outpatient 

departments as the only alternative. The resulting disruption of provider-patient relationships would fragment care, complicate beneficiary access, and increase pressure on hospital outpatient departments. 

We appreciate CMS’s attempt to address patient safety by offering a prior approval 

process for Model drugs and proposing to implement a ‘‘real-time claims monitoring’’ 

system to monitor beneficiary access. However, as proposed, neither fully safeguards 

patient access. Prior approvals come at the cost of increased administrative burden 

and delays for patients. We believe prior approvals should be a last resort, not a 

solution for the larger medication-access issues that the Model may generate. As 

noted above, not all medications have acceptable lower-cost equivalents—for providers who prescribe those drugs, prior approvals will be the rule rather than the 

exception. Similarly, CMS’s proposal to implement a ‘‘real-time claims monitoring 

process’’ to protect patient access lacks sufficient detail. Our understanding is that 

developing this system would require, at minimum, extensive technology upgrades 

plus personnel support and oversight. Further, it is unclear how access problems 

would be identified and resolved. Given how essential effective monitoring is to ensuring patient access, we ask that the Committee request CMS clarify how the monitoring process will work in practice. 

Conclusion 

ASHP greatly appreciates the opportunity to provide a statement for the record and 

commends the Senate Finance Committee for holding this hearing on the CMS’s 

Part B Model Demonstration project. Again, we reiterate our support for the Model’s 

underlying goals; however, based on the concerns highlighted above, ASHP is advocating for significant revisions to the Model’s scope and timeline after comprehensive, meaningful consultation with stakeholders, including physicians, pharmacists, 

and patients. We have already signaled our eagerness to assist CMS in any way 

possible as it revises the Model, and we offer the same assistance to the Committee 

as you collaborate with other industry stakeholders. 

AMERICAN SOCIETY OF RETINA SPECIALISTS (ASRS) 

20 North Wacker Drive, Suite 2030 

Chicago, IL 60606 

Phone 312–578–8760 

Fax 312–578–8763 

http://www.asrs.org/ 

May 9, 2016 

Andrew Slavitt 

Acting Administrator 

Centers for Medicare and Medicaid Services 

86 

1https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items 

/2016-03-08.html. 

Department of Health and Human Services 

Hubert H. Humphrey Building, Room 445–G 

200 Independence Avenue, SW 

Washington, DC 20201 

Re: Medicare Program Part B Drug Payment Model [CMS–1670–P] 

Dear Acting Administrator Slavitt: 

On behalf of the American Society of Retina Specialists (ASRS), its members and 

their patients, we submit the following comments on the Centers for Medicare and 

Medicaid Services (CMS) Medicare Program Part B Drug Payment Model [CMS– 

1670–P]. The ASRS is the largest retinal organization in the world, representing 

over 2,700 fellowship-trained members. Retina specialists are board-certified ophthalmologists who have completed fellowship training in the medical and surgical 

treatment of retinal diseases. 

ASRS SUPPORTS CMS’S GOALS BUT NOT THE CURRENT PROPOSAL 

The ASRS supports CMS’s stated goals of ‘‘improving incentives for the best clinical 

care’’ and desire to ‘‘drive the prescribing of the most effective drugs.’’ 1 We also 

wholeheartedly support the alternative payment model framework offered by the 

Medicare Payment Advisory Commission (MedPAC) Commissioners at its December 

2014 meeting and agree a successful alternative payment system must: 

• Provide sufficient incentive for providers to maximize health outcomes and 

value while reducing costs; 

• Ensure that payment policies do not compromise quality of care or limit patients’ treatment options; 

• Assess the impact of such payment policies on low-income patients; and 

• Implement a sufficiently transparent and adequate exceptions process to allow 

providers to prescribe more-expensive products when medically necessary. 

Unfortunately, the current proposal falls short in not meeting: (1) the stated goals 

of the proposal itself, and (2) the standards set forth for MedPAC. As a result, the 

payment proposal has the potential to negatively impact patient care and outcomes 

when Medicare beneficiaries are treated with injectable drugs in the office setting. 

IMPLICATIONS OF PAYMENT POLICY ON TREATMENT PATTERNS AND 

PRACTICE FINANCIALS 

The proposal has several limitations due to the following: 

• The existing ASP-based fee schedule payment methodology of 106% (104.3% 

after sequestration) does not yield profit for physicians and thereby does not 

provide an inappropriate incentive for them to choose high-cost treatment; 

• Interchangeable treatment options are not necessarily available; therefore, less 

costly alternatives may not be an option to treat patients; and 

• Across retinal diseases, we have no data demonstrating that changes in current 

treatment patterns would improve the quality of patient care. 

What Do We Know About Physician Practice Expenses for Drug Acquisition and 

Other Overhead? 

The House Ways and Means Committee has requested from the GAO a cost study 

to examine how Medicare’s payment for drugs covered under Medicare Part B compares to actual acquisition and overhead costs. We feel that any proposal from CMS 

should be formulated after the GAO results are available. 

ASRS membership, in response to the CMS proposal and to reply to requests from 

Deputy Administrator Conway, commissioned a study of 8 practices that were able 

to pull detailed cost accounting data for calendar year 2015 in the short time allotted in the comment period. The study found that drug acquisition and overhead expenses for injectable drugs that have their own unique HCPCS J codes was, on average, 98.9% (range 96.5% to 103.2%) of total payments across the 8 practices. (For 

more information, see appendix A.) 

It is worth noting that given the limited time available to collect these data, only 

high volume practices with capable financial staffs were able to respond to the surVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00090 Fmt 6601 Sfmt 6621 R:\DOCS\26393.000 TIMD
87 

2 77 Fed. Reg. at 8,387. 

vey in this short period of time. Even under these circumstances, not all high volume practices generated net revenue from office administered drugs. In fact, our belief is that lower volume practices, which provide the majority of patient care in retina around the country, would have less purchasing power and higher overhead 

costs compared to the practices in the study from which we were able to collect data. 

Based on the analysis of real retina practice data, we believe the ASP + 2.5% and 

a flat fee even without sequestration do not recognize the true costs of purchasing 

and handling the more complex biologics, and will limit the ability of some providers 

to administer essential sight-saving drugs. For physicians to be able to continue to 

purchase Part B drugs on behalf of their patients, the payment rate must at least 

cover all overhead costs. If not, patients will be forced to travel to the more expensive hospital outpatient departments to receive monthly treatments. Driving more 

care to an often less convenient, more costly setting will make it more challenging 

for beneficiaries to access needed care and will increase overall Medicare costs. This 

will lead to further consolidation and less choice for seniors. 

Therefore, before proposing any payment policy that is not based on ASP + 6% it 

would be helpful if CMS would explain why it has changed its position that ‘‘ASP 

+ 6% payment is an appropriate payment rate for separately payable drugs and 

biologicals.’’ 2

Financial Incentives Do Not Influence Drug Choice 

The ASRS takes issue with the assumption that physicians may choose their patients’ drug therapy based on which drug provides them the highest reimbursement. 

MedPAC considered this issue and concluded that there is little evidence to support 

such a claim. Moreover, our research also suggests this is not the case. In the ASRS 

2015 Preferences and Trends survey, 64% of respondents indicated that they currently use the least-costly alternative, Avastin®, as the first-line treatment for new 

patients with wet AMO. However, when asked which anti-VEGF agent they would 

choose if Avastin®, Lucentis® and Eylea® were the same price, respondents 

dropped Avastin® to the last choice. Avastin® was also the last choice of our members when asked ‘‘which anti-VEGF do you believe most effectively treats the broadest range of wet AMO patients.’’ For those familiar with the results of recent clinical 

trials, these survey results are not surprising. 

Treatment Options Are Not Interchangeable 

In its June 2015 report, MedPAC recognized that a number of clinical factors, including variations in effectiveness of drugs in treating patients with specific conditions and comorbidities, potential side effects, on or off label use of a drug, as well 

as whether or not a drug is compounded, may influence a provider’s choice among 

therapeutic alternatives. For retina specialists, all of these factors are in fact considered. 

Currently, of the 3 utilized anti-VEGF agents, only Lucentis® and Eylea® have specific FDA approval for treatment of age-related macular degeneration, diabetic 

macular edema, and retinal vein occlusion. Avastin not only does not have FDA approval for the treatment of these retinal diseases, but it must also be used in a compounded form. Many patients are reluctant to choose a compounded drug being used 

off-label and should not be forced to do so when several FDA-approved options exist. 

Clinical response varies among the 3 anti-VEGF agents in individual patients. 

While all 3 anti-VEGF agents have similar efficacy in many patients, various trials 

have demonstrated differences in subsets of patients. Retina specialists must evaluate each patient individually, and select the appropriate agent accordingly. Ultimately, the retina specialist utilizes clinical judgment and the patient’s response to 

a particular drug to select the best course of therapy. As the recently released results of the National Eye Institute funded study Comparison of Age-related Macular 

Degeneration Treatments Trials (CATT) 5-year follow up found, patients often 

switch anti-VEGF agents and dosages. This ability of a physician to individualize 

treatment and select the most efficacious agent for each patient is critical to safely 

maximizing recovery and maintaining visual function in patients with blinding diseases of the retina. 

Since anti-VEGF agents are not interchangeable, ASRS is seriously concerned that 

for many retina specialists the phase I new payment methodology will no longer 

cover the costs to deliver FDA-approved drugs to their patients. If retina specialists 

are unable to cover the costs of the medically necessary Part B drug, patients will 

88 

be forced to go elsewhere (likely farther away and/or to a more costly care setting) 

to receive their injections. 

THE RETINA COMMUNITY IS AND WILL CONTINUE TO BE VESTED IN 

IMPROVING PATIENT OUTCOMES AND BEING FINANCIALLY RESPONSIBLE 

The ASRS is concerned that the CMS has not provided guidance on how it defines 

‘‘most effective drugs.’’ It is a physician’s duty to base clinical decisions on clinical 

evidence, not just cost. Retina specialists work in a specialty that requires the administration of expensive Medicare Part B drugs—Lucentis® and Eylea®—to save 

vision, and the ASRS and its members have devoted tremendous resources to supporting efficacy, comparative effectiveness clinical research, and the dissemination 

of clinical trial results. 

Through this research, cost savings have already been achieved. For example, the 

treat-and-extend protocol, now widely used in the treatment of macular degeneration and diabetic retinopathy, allows retina specialists to treat less often than done 

in pivotal phase III clinical trials, yielding significant savings in terms of treatment 

burden and cost while maintaining excellent vision outcomes. In other cases, comparative effectiveness studies have found statistical differences in treatment options 

that support use of the more expensive treatment option. 

Protocol T, for example, found that the relative benefit of Eylea® was clinically and 

statistically significant for the subset of eyes that had 20/50 or worse vision at baseline. If phase I moves forward unchanged, this subset of diabetic retinopathy patients may not be able to receive the most effective treatment. Given this, and the 

fact that more than 300 clinical trials are currently underway to explore additional 

ways to treat AMO and diabetic retinopathy with fewer injections and achieve even 

better outcomes, we believe CMS needs to establish a mechanism for defining ‘‘most 

effective drugs.’’ Since the National Institutes of Health (NIH) fund many of the 

comparative effectiveness studies, we believe CMS should consider collaborating 

with NIH to develop this mechanism. Moreover, since some patients simply respond 

better to one treatment over another, ASRS recommends that CMS create a sufficiently transparent and adequate exceptions process to allow providers to prescribe 

medically necessary drugs irrespective of cost. 

CONCLUSION AND RECOMMENDATIONS 

Given the concerns expressed above, the ASRS recommends that CMS not continue 

with phase I of the demonstration project as written, and reevaluate the development of alternative payment models that can achieve the same goal without increasing risks for patient outcomes after real-world practice data is available to guide 

this process. 

ASRS appreciates the opportunity to provide comments on the proposed Medicare 

Program Part B Drug Payment Model. If we may provide any additional information, please contact Jill Blim, ASRS Executive Vice President, at jill.blim@asrs.org. 

Sincerely, 

Tarek S. Hassan, M.D. Mark S. Humayun, M.D., Ph.D. 

President President-Elect 

John S. Pollack, M.D. Timothy G. Murray, M.D., M.B.A. 

Vice President Governance Treasurer 

Carl C. Awh, M.D. Philip J. Ferrone, M.D. 

Secretary Vice President Education 

Geoffrey G. Emerson, M.D., Ph.D. Jill F. Blim, M.S. 

Chair, Federal Affairs Committee Executive Vice-President 

APPENDIX A 

ANALYSIS OF PRACTICE REVENUES AND EXPENSES FOR DRUGS 

ADMINISTERED IN RETINA PHYSICIAN OFFICES 

BACKGROUND 

On March 8, 2016, the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule to test new models to improve how Medicare Part B pays 

89 

for prescription drugs and supports physicians and other clinicians in delivering 

higher quality care. 

Currently, Medicare Part B covers prescription drugs that are administered in a 

physician’s office or hospital outpatient department, such as cancer medications, 

injectables like antibiotics, or eye care treatments. Drugs paid under Medicare Part 

B generally fall into three categories: 

(1) Drugs furnished incident to a physician’s service in the office or hospital outpatient settings, 

(2) Drugs administered via a covered item of durable medical equipment, and 

(3) Other categories of drugs explicitly identified in the law. 

PROPOSED RULE AND CHANGES IN PAYMENT THAT WOULD APPLY TO 

OPHTHALMIC DRUGS ADMINISTERED BY RETINA PHYSICIANS 

Medicare Part B generally pays physicians and hospital outpatient departments the 

average sales price of a drug, plus a 6 percent add-on. The proposed model would 

test whether changing the add-on payment to 2.5 percent plus a flat fee payment 

of $16.80 per drug per day changes prescribing incentives and leads to improved 

quality and value. CMS goes on to say that: 

‘‘CMS expects that the add-on payment of 2.5 percent plus a flat $16.80 fee will 

cover the cost of any drug paid under Medicare Part B. The flat fee is calculated 

such that it is budget neutral in aggregate.’’ 

While the proposal may be budget neutral in aggregate, the fact is that CMS does 

not know the impact of specific subspecialties based on provider financials, treatment mix, and so forth. 

Therefore, the American Society of Retina Specialists (ASRS) commissioned an independent study by an economics and accounting firm, Quorum Consulting, Inc. (San 

Francisco, CA) to gather data from retina practices to: (1) determine revenue for 

injectable drugs; (2) account for direct and indirect costs associated with injectable 

drugs; in order to: (3) report profit or loss for physician administered drugs that 

may be affected by the proposed rule. 

ABSTRACT OF STUDY METHODS AND RESULTS 

Methods 

We solicited members of the ASRS to provide detailed financial and cost accounting 

data. We requested data on revenues (total collections) and costs (expenses) for calendar year 2015. We obtained data on all injectable drugs administered retina physician practices offices (hospital and ASC facilities were not included). The scope of 

the analysis was specific to FDA approved drugs with product specific HCPCS ‘‘J’’ 

codes, which are addressed within the scope of the CMS proposal. 

Cost Accounting Data Collection 

For direct and indirect expenses, we obtained site-specific data on: 

Drug Acquisition Costs (by HCPCS code) 

A. Acquisition price per unit 

B. Added costs 

a. Shipping and handling 

b. Sales tax 

c. Other cost increases 

C. Cost offsets 

a. Discounts 

b. Chargebacks 

c. Rebates 

d. Other cost offsets 

Other Practice Expenses 

A. Practice Expenses 

B. Staff Time 

• Salaries and benefits for staff time responsible for acquiring, storing, 

preparing, transporting, and disposing of drugs and drug revenue collections (this differs from GAO allocated based on time spent on these 

activities). 

C. Other indirect expenses 

• Space—Physical space used for storing and preparing drugs. 

90 

• Equipment—Equipment used for storing, preparing, transporting, disposing of drugs and claims management (office equipment, PODIS, 

EHR, other IT, etc.). 

• Supplies—Supplies used for storing, preparing, transporting, and disposing of drugs. 

• Support Contracts—Contracts for other organizations to provide services supporting acquiring, storing, preparing, transporting, and disposing of drugs (e.g., waste disposal). 

• State provider taxes. 

Results and Discussion 

We obtained detailed revenue (collections) and expenses (direct and indirect costs) 

for calendar year 2015 from 8 retina practices from around the country. While sites 

were from regions throughout the country, participating sites all tended to be high 

volume practices. This is likely due to the fact that sites had to provide data in a 

short amount of time (to accommodate the CMS comment period), and only high volume sites had accounting and other administrative staff available to provide the requested information. Participating sites also varied in their payer mix and utilization of different types of drugs. 

We found that drug acquisition and overhead expenses for injectable drugs included 

in the analysis were on average 98.9% (range 96.5% to 103.2%) of total collections 

across the 8 practices. In some cases, practices made a profit on injectable drugs 

while in other cases had a net loss. There was variation in drug profit or loss by 

drug and by practice. 

It is worth noting that given the limited time available to collect these data, only 

high volume practices with capable financial staff were able to respond to the survey 

in this short period of time. Even under these circumstances, not all high volume 

practices generated profits on office administered drugs. In fact, our belief is that 

lower volume practices, which provide the majority of patient care in retina around 

the country would have less purchasing power and higher overhead compared to the 

study for which we were able to collect data. 

BIORX, LLC 

Senate Committee on Finance 

Dirksen Senate Office Bldg. 

Washington, DC 20510–6200 

Dear Honorable Chairman Orrin Hatch: 

BioRx, LLC, a Diplomat company (‘‘BioRx’’), is a specialty and home infusion pharmacy which provides pharmacy services to patients dealing with chronic and/or rare 

diseases, such as cancer, autoimmune disorders, and hemophilia. The patients we 

treat are often prescribed expensive medications which have complex therapy requirements. At BioRx, we strive to provide quality pharmacy services to our patients, and to ease patients’ burdens and worries while they manage their conditions. 

BioRx appreciates the opportunity to comment on the proposed Part B drug payment model. While BioRx understands the Centers for Medicare and Medicaid’s 

(CMS) desire to lower the cost of Part B medications, BioRx is concerned that the 

proposed revisions will limit the ability of specialty and home infusion pharmacies 

to provide services to Medicare patients and will ultimately block patient access to 

life-saving medications. BioRx has the following concerns regarding the proposed 

rule: 

1. The proposed rule should exclude IVIG, hemophilia products, orphan drugs, 

and drugs that are in short supply from the proposed payment model. 

When implementing the final rule, CMS should take into consideration the fact 

that there are not always comparable lower priced drug alternatives. The main rationale for the proposed rule, besides reducing Medicare expenditures, is to discourage providers from prescribing expensive medications when there are lower priced 

alternatives available. IVIG, hemophilia products, and new or short supply drugs 

often do not have comparable lower priced drugs available, and the proposed pricing 

methodology may hinder a pharmacy’s or doctor’s ability to prescribe or provide to 

patients those medications. 

91 

1 CMS Medicare Part B Proposed Rule, pg. 16. 

2See, ‘‘Pharmacy Dispensing Cost Analysis for the State of Maryland,’’ December 7, 2011 (the 

survey concluded that the average dispensing cost for specialty pharmacies was $185.24 per prescription). See also, Exhibit B, which provides a list of common specialty pharmacy services, 

which create the high overhead cost, https://mmcp.dhmh.maryland.gov/pap/docs/md_2011_ pdca_report.pdf. 

IVIG, orphan and short supply drugs tend to have very little price variation between the different medications, meaning prescribers have little to no incentive to 

prescribe one product versus the other. Most hemophilia products are in a similar 

position to IVIG, orphan and short supply drugs, even though there are four categories of hemophilia products, (in order from least expensive to most: plasma derived, recombinants, recombinants with a longer half-life, and inhibitors), which do 

have different prices. While plasma derived products are the least expensive, they 

are not the same as inhibitors. Hemophilia patients who develop inhibitors, have 

an allergic reaction, or need a quicker clotting response time to stop a serious bleed 

(such as one in the brain) will need to use the higher priced inhibitor medication, 

and trying to force clinicians to use the lowest cost hemophilia products, which, 

while comparable, do not provide the same medical benefit or fast acting solution, 

could seriously harm the patients. Trying to discourage caregivers from prescribing 

or providing needed high cost medications could have a negative impact on patient 

health outcomes. 

Because IVIG, hemophilia, and orphan and short supply drugs do not provide 

‘‘any excessive financial incentive to prescribe high cost drugs over lower cost 

drugs,’’ 1 as lower priced comparable alternatives are typically unavailable, these 

products should be excluded from the proposed Part B payment model. 

2. Specialty pharmacies should also be excluded from the proposed rule, as specialty pharmacies do not prescribe the medication, nor do they have access 

to the service fees paid to physicians and hospitals for infusion services and 

can provide significant cost savings to CMS. 

The proposed rule does not address the role of pharmacies in providing care to 

patients, nor does it consider the affect the rule will have on pharmacies that provide home infusion services to patients. Specialty pharmacies do not prescribe or select the medication; therefore, the proposed rule’s rationale for needing to discourage 

providers from prescribing the more expensive medications would not apply to pharmacies. Additionally, pharmacies provide high quality, cost effective care to beneficiaries, and the proposed payment model could limit their ability to participate in 

the Medicare programs. 

When a pharmacy provides home infusion services to the patient, the pharmacy 

bills CMS under Part B, and the pharmacy does not receive payment from CMS for 

the injection or infusion. The current price of ASP + 6% helps specialty pharmacies 

cover the cost of the medication, and the cost of services performed. If specialty 

pharmacies are only able to receive ASP + 2.5% and a flat fee of $16.80 for the 

medication, then the specialty pharmacies will not be able to cover their operating 

or infusion costs.2 Attached in Exhibit A is an example of how the payment change 

reduces the pharmacies ability to pay overhead costs. A healthcare provider cannot 

provide services under an arrangement which causes them to consistently lose 

money. 

Beyond filing the prescriptions and performing back-end benefits investigations 

and adherence monitoring, most specialty pharmacies also arrange for the home administration of IVIG and other infusion products. Home infusion is not only easily 

accessible to the patients; it also saves plans at least $20,000 per year per patient. 

However, specialty pharmacies cannot provide those cost savings under the proposed rule, as they would be unable to cover their medication and operation costs 

with the new fee. 

If specialty pharmacies are unable to provide the medication and home infusion 

services, then more and more patients will have to go to emergency or out-patient 

settings to receive their medication. This arrangement would increase the costs of 

care, and make it more burdensome for patients to receive their medications. Therefore, specialty pharmacies should be excluded from the proposed rule. 

3. The demonstration for the proposed rule is overly broad, and a small scale 

pilot version of the proposed rule should be conducted first, before the proposed rule, if effective, is expanded to cover all providers. 

92 

3 ESI/Accredo, Specialty Pharmacy Times, February 2014. 

The demonstration is overly broad, and it seems ill-advised to implement such a 

wide reaching rule when CMS has failed to conduct a small scale test pilot of the 

proposed rule to determine possible affect. The potential impact on providers and 

beneficiaries is too great to roll out on such a large scale when there is little to no 

concrete knowledge or data on how the rule will affect all interested parties. Traditionally, CMS uses smaller scales to test new payment models, and BioRx respectfully requests CMS to test the proposed payment model out on a small population 

before implementing the method on a larger scale. 

4. The proposed rule needs greater clarification on the methodology of assigning 

PCSAs and the variation add-on methodology for different geographic locations. 

The stratified randomized selection methodology of assigned PCSAs requires further clarification; the verbiage is very technical and we need the methodology defined so it makes more sense to the participating entities. Additionally, because the 

proposed model is a 5 year demonstration, CMS needs to provide clarity on whether 

or not providers experiencing financial hardship may opt out of the experiment or 

not. 

5. Competing CMS proposals and demonstrations should not be overlapped 

with the Part B proposed model. 

CMS acknowledges the potential for overlap with other CMS proposed pricing 

models, such as the Oncology Care Model or the alternative payment models 

incentivized by the Medicare Access and CHIP Reauthorization Act of 2015, but offers no way to handle the matter. CMS needs to provide some controls to its proposed model to ensure that providers are not participating in more than one proposed rule demonstration. Furthermore, CMS ignores the potential for skewed data 

they may receive from providers who are operating under more than one of the proposed Part B payment models. It is crucial that CMS finds some way to control the 

demonstration so that providers are only affected by one demonstration. 

6. CMS needs to provide greater detail and narrow the scope on Phase II of the 

proposed payment model before it can be used. 

CMS stated on page 14 that in Phase II, it proposes to ‘‘test the application of 

a group of value-based purchasing (‘‘VBP’’) tools that commercial and Medicare Part 

D plans use to improve patient outcomes and manage drug costs.’’ While BioRx is 

fully supportive of implementing new systems that will provide cost effective quality 

care, CMS should carefully consider which tools to utilize before testing, and should 

considering excluding DME infusion drugs and specialty pharmacies from Phase II. 

DME infusion drugs should be excluded, because Medicare already limits the use 

of infusion drugs through Local Coverage Determinations (LCDs). These LCDs already narrowly define which infusion drug can be used for each indication, and ensures the appropriate use of infusion medications. Additionally, some patients require multiple medications which may need to be carefully vetted to prevent complications or negative drug interactions, and the VBP tools may not adequately take 

those circumstances into consideration. 

Specialty pharmacies should either be excluded from Phase II or the VBP tools 

should be narrowly tailored to apply to the applicable organization. VBP tools used 

for a clinician or hospital setting is often inappropriate for a specialty pharmacy, 

as specialty pharmacies do not prescribe or order the medications and can provide 

valuable cost savings to plans that may not be accessible in other healthcare settings. 

For example, specialty pharmacies play a crucial role in providing home infusion 

services, which saves plans an estimate of $20,000 per patient a year.3 Specialty 

pharmacies also offer patients access to pharmacists and/or nurses 24/7, which can 

reduce the amount of emergency room trips a patient takes in a year. Savings can 

also be found through increased medication adherence rates in patients and partial 

fill programs, which allows patients to fill half of a prescription in order to determine medication tolerance prior to purchasing the full amount. 

7. Several lawmakers have expressed great concerns or even direct opposition 

to the CMS proposal. 

Both Republican and Democrat representatives have written and signed letters to 

CMS regarding the proposed rule, and the response has been negative. The biparVerDate Mar 15 2010 16:42 Jul 27, 2017 Jkt 000000 PO 00000 Frm 00096 Fmt 6601 Sfmt 6621 R:\DOCS\26393.000 TIMD
93 

4http://www.citizen.org/documents/66-ds-may-16-2016-cms-demo-letter.pdf. 

5http://www.citizen.org/documents/66-ds-may-16-2016-cms-demo-letter.pdf. 

6http://www.citizen.org/documents/240-rs-4-ds-may-2-2016-cms-demo-letter.pdf. 

7Pear, Robert, ‘‘Plan to Cut Medicare Drug Payments Leaves Senators Skeptical,’’ The New 

York Times, June 28, 2016 (http://www.nytimes.c/2016/06/29/us/plan-to-cut-medicare-drugpayments-leaves-senators-skeptical.html?_r=O). 

tisan reaction to the proposed rule shows that there are clear flaws in the proposed 

rule. 

In a letter signed by about 65 representatives sent to CMS on May 16, 2016 regarding the proposed rule, the representatives expressed concerns regarding the potential effects the rule may have on beneficiaries and physicians.4 The representatives in this letter even urged CMS to work with stakeholders while revising the 

rule ‘‘to ensure that this model does not undermine the quality of and access to care 

that Medicare beneficiaries expect and deserve.’’ 5 In another letter sent on May 2, 

2016 to CMS, the representatives asked CMS to withdraw the proposed rule, as 

they believed the proposed rule would limit senior citizens access to care.6 Around 

250 representatives signed this letter. 

While the two letters differ in their level of opposition to the proposed rule, both 

letters express the same concern that the proposed rule will limit patient access to 

medication. There is also concern among representatives that the proposed rule will 

force patients to receive care in emergency rooms or at hospitals, where the cost of 

treatment is much higher and less convenient.7 BioRx, as previously mentioned, has 

the same concern that this proposed rule will limit seniors access and ability to receive home health services or be able to infusion their medications at home. 

For the above reasons, BioRx respectfully requests that the Senate Committee on 

Finance continues to ask CMS to withdraw the Medicare Part B Drug Demonstration, or exclude DME infusion drugs and specialty pharmacies from VBP tools, or 

to narrowly tailor the tools to fit the appropriate health care provider. 

BioRx appreciates the opportunity to comment on this proposal and hopes that 

the Senate Committee on Finances passes these comments onto CMS, for serious 

consideration. 

Sincerely, 

Scott Sorenson 

Director, Medicaid and Government Services 

BioRx, LLC—A Diplomat Company 

Exhibit A 

Price Effect Example 

Product J-CODE 

BioRx Cost as 

of 

January 2016 

CMS Allowable 

Effective 

January 2016 

GM% today CMS Proposed 

Allowable 

GM% with new 

proposal Reduction % 

A J7192 $1.0200 $1.1770 12.74% $1.1378 10.35% 18% GM loss 

GM = Gross Margin 

Exhibit B 

Specialty pharmacies often provide the following services: 

Clinical Pharmacist and Pharmacy Tech 

➢ Consulting with prescribers 

➢ Monitoring for potential drug interactions 

➢ Dispensing 

➢ Assay management 

➢ Pharmacist time in validating an individual’s coverage prior to dispensing 

➢ Preferred drug list review activities 

➢ Monthly/quarterly reporting to state Medicaid agency 

➢ Medication profile set up and drug utilization review 

➢ Emergency telephone support 

➢ On call (24/7 nurse and pharmacist) clinical and delivery support for patients 

94 

Warehouse, Shipping and Delivery Personnel 

➢ Couriers ➢ Emergency deliveries ➢ Tracking of deliveries ➢ Packaging ➢ Manufacturer communication ➢ Ensuring stock rotation 

Reimbursement Personnel 

➢ Prior authorizations/receipt of approval ➢ Billing per insurer’s guidelines and providing required documentation 

Nursing 

➢ Initial patient assessment/education ➢ Home infusion training ➢ Ongoing patient assessment/education ➢ Consumer/patient counseling ➢ Staff education and training ➢ Disease management 

➢ Developing and coordinating emergency plans with schools, caregivers, work, 

etc. 

Materials (Supplies) and Dispensing 

➢ Needles 

➢ Syringes 

➢ Alcohol wipes/sanitizer 

➢ Bandages 

➢ Medical tape 

➢ Sterile gloves 

➢ Tourniquets 

➢ Needle disposing containers 

➢ Temperature controlled boxes 

➢ Heat/cold packs 

➢ Masks/coolers/IV supplies, swab sticks 

➢ Sterile drapes 

➢ Coolants 

➢ Shipping insurance 

➢ Prescription dispensing materials (packages, labels) 

➢ Postage 

Advocate 

➢ Home inventory check of factor and supplies 

➢ Factor utilization and infusion log 

➢ Patient communication and therapy monitoring 

THE CENTER FOR FISCAL EQUITY

14448 Parkvale Road 

Rockville, Maryland 20853 

Statement by Michael Bindner 

Chairman Hatch and Ranking Member Wyden, thank you for the opportunity to 

submit our comments on this topic. We will leave the description of the experiment 

to the Administration witnesses and concentrate on why the experiment may or may 

not be necessary. As usual, our comments are based on our four-part tax reform 

plan, which is as follows: 

• A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure every 

American pays something. 

• Personal income surtaxes on joint and widowed filers with net annual incomes 

of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other 

international spending, with graduated rates between 5% and 25% in either 5% 

or 10% increments. Heirs would also pay taxes on distributions from estates, 

but not the assets themselves, with distributions from sales to a qualified ESOP 

continuing to be exempt. 

95 

• Employee contributions to Old-Age and Survivors Insurance (OASI) with a 

lower income cap, which allows for lower payment levels to wealthier retirees 

without making bend points more progressive. 

• A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT 

with additional tax expenditures for family support, health care and the private 

delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the 

corporate income tax, business tax filing through individual income taxes and 

the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60. 

While the Administration may be correct in siting this experiment as a way to both 

improve cost and care, the underlying reason has to be cost minimization. As we 

saw with Medicare Part C in the mid-90s, minimization on its own leads to decreased care and providers who exit the system and need premium pay to return. 

Aside from throwing up our hands and agreeing to deficit spending, as Congress did 

in establishing such incentives for Part C when it established Part D, some form 

of revenue increase is required. 

Both the Simpson-Bowles Commission and the Rivlin-Domenici Commission recommended an increase in Part B and D premiums. That is all well and good, but 

seniors and the disabled don’t simply have spare cash to throw around without decreasing other spending, like housing or food. For most people, that European vacation only comes as a gift from grateful children or merciful siblings. Therefore, the 

only way to increase premiums is to also increase the basic Social Security and Disability benefit (which will need to happen anyway if the drive to a $15 minimum 

wage keeps gaining success). 

Increasing the benefit is usually seen as a matter of raising the income cap and 

making the bend points in benefit calculation more severe so that the contribution 

increase does not simply lead to higher benefits for wealthier retirees. There is, 

however, another option. 

Our proposal is to lower the employee income cap on contributions to decrease the 

entitlement for richer retirees while the employer income cap is eliminated, the employer and employee payroll taxes are decoupled and the employer contribution 

credited equally to each employee at some average which takes in all income. If a 

payroll tax is abandoned in favor of some kind of consumption tax, all income, both 

wage and non-wage, would be taxed and the tax rate may actually be lowered. 

Ultimately, fixing health care reform will require more funding, probably some kind 

of employer payroll or net business receipts tax—which would also fund the shortfall 

in Medicare and Medicaid (and take over most of their public revenue funding), regardless of whether Part B and D premiums are adjusted. 

Our Net Business Receipts Tax/Subtraction VAT proposal above is the recommended consumption tax. It would not show up on the receipt because it can be 

offset by employer provided substitutes. 

The NBRT can provide an incentive for cost savings if we allow employers to offer 

services privately to both employees and retirees in exchange for a substantial tax 

benefit, either by providing insurance or hiring health care workers directly and 

building their own facilities. Employers who fund catastrophic care or operate nursing care facilities would get an even higher benefit, with the proviso that any care 

so provided be superior to the care available through Medicaid. Making employers 

responsible for most costs and for all cost savings allows them to use some market 

power to get lower rates, but no so much that the free market is destroyed. 

This proposal is probably the most promising way to arrest health care costs from 

their current upward spiral—as employers who would be financially responsible for 

this care through taxes would have a real incentive to limit spending in a way that 

individual taxpayers simply do not have the means or incentive to exercise. While 

not all employers would participate, those who do would dramatically alter the market. 

A kind of beneficiary exchange could be established so that participating employers 

might trade credits for the funding of former employees who retired elsewhere, so 

that no one must pay unduly for the medical costs of workers who spent the majority of their careers in the service of other employers. 

96 

Thank you for this opportunity to share these ideas with the committee. As always, 

we are available to meet with members and staff or to provide direct testimony on 

any topic you wish. 

NATIONAL ASSOCIATION OF CHAIN DRUG STORES (NACDS) 

1776 Wilson Blvd., Suite 200 

Arlington, VA 22209 703–549–3001 https://www.nacds.org/ 

Introduction 

The National Association of Chain Drug Stores (NACDS) thanks Chairman Hatch, 

Ranking Member Wyden, and members of the Committee on Finance for the opportunity to submit a statement for the hearing on ‘‘Examining the Proposed Medicare 

Part B Drug Demonstration.’’ 

NACDS and the chain pharmacy industry are committed to partnering with the Department of Health and Human Services, policymakers, and others to work on finding ways to lower prescription drug costs in the Medicare Part B program. NACDS 

supports sensible efforts to control spending while preserving patient health and access to the services they need. As the face of neighborhood healthcare, chain pharmacies and pharmacists work on a daily basis to provide the best possible care and 

the greatest value to their patients with respect to access to critical medications and 

pharmacy services. We help to assure that patients both are able to access their 

medications and take them properly. 

Pharmacists work with patients to find ways to lower prescriptions costs through 

the use of generic drugs, helping to navigate insurance plans, and encouraging participation in pharmacy drug discount programs. We encourage patients to empower 

themselves by building and maintaining relationships with their physician, specialists, and pharmacist to help improve the quality, accessibility, and affordability of 

their care. 

As this committee examines the Part B Drug Payment Demonstration, we offer the 

following for its consideration. 

Value of Pharmacy 

In Phase II of the model, the agency plans on incorporating new and innovative approaches to reducing prescription drug costs through the use of Value-Based Purchasing tools. Today, pharmacists play an increasingly important role in the delivery of services, including key roles in new models of care beyond the traditional feefor service structure. Pharmacists are engaging with other professionals and participating in models of care based on quality of services and outcomes, such as accountable care organizations. Pharmacies, in their role as leaders in medication management services such as medication therapy management (MTM) and promotion of generic utilizations, could play an important role in Phase II of the model by improving and ensuring medication adherence and reducing prescription drug costs for the 

Medicare program. 

Poor medication adherence costs the U.S. healthcare system $290 billion annually. 

Pharmacist-provided services such as MTM are important tools in the effort to improve medication adherence, patient health, and healthcare affordability. Improved 

medication adherence and MTM not only reduce costs, but improve patient care, enhance communication between providers and patients, improve collaboration among 

providers, optimize medication use for improved patient outcomes, contribute to 

medication error prevention, improve hospital and readmission cost avoidance, and 

enable patients to be more actively involved in medication self-management. 

Pharmacies have also long promoted generic drugs as safe, cost-effective alternatives for many patients. Increasing the use of generic drugs in a public program is 

one of the most effective ways to reduce prescription drug costs. For every 1 percent 

increase in generic utilization, the Medicaid program could save $558 million. For 

example, if all other states could match the generic utilization rate of Hawaii 

(82.7%), the Medicaid program could save $6.56 billion annually. Because community pharmacies have a higher generic dispensing rate—71%—than any other practice setting, it is important to recognize the role of community pharmacies in promoting generic drug utilization. 

We believe options should be explored to better utilize pharmacists in the Medicare 

program. One option we urge you to consider is recognizing pharmacists as providers in the Medicare program. Pharmacists provide access to health tests, help to 

97 

manage chronic conditions such as diabetes and heart disease, and provide expanded immunization services. However, the lack of pharmacist recognition as a 

provider by third-party payors, including Medicare and Medicaid, limits the number 

and types of services pharmacists can provide, even though fully qualified to do so. 

Retail pharmacies are often the most readily accessible healthcare provider. Research shows that nearly all Americans (86%) live within 5 miles of a retail pharmacy. Such access is vital in reaching the medically underserved. 

We urge you to increase access to much-needed services for underserved Medicare 

beneficiaries by supporting H.R. 592/S. 314, the Pharmacy and Medically Underserved Areas Enhancement Act, which will allow Medicare Part B to utilize pharmacists to their full capability by providing those underserved beneficiaries with 

services (subject to state scope of practice laws) not currently reaching them. This 

important legislation would lead not only to reduced overall healthcare costs, but 

also to increased access to healthcare services and improved healthcare quality. 

Misplaced Incentives for the Part B Drug Payment Model 

The goal of the model is to incentivize the use of lower costs prescription drugs in 

Phase I through the use of a reduced average sales price (ASP) plus add-on fee of 

$16.80 may lead to unintended consequences and hardships for providers and suppliers who merely dispense medications. Under the model, the dispensing of higher 

cost medications will result in a significant reduction in reimbursement. While this 

is the goal of the new payment methodology, it unfairly penalizes pharmacies that 

are only able to dispense medications as prescribed by the physician. Pharmacies 

have little control over the medications prescribed to beneficiaries under Medicare 

Part B, forcing them to dispense the prescription for a reduced payment amount. 

Because the pharmacy would be the one dispensing and getting reimbursed for the 

medications, there would be no impact on the prescribing practices of providers for 

those medications dispensed outside of the office setting. Prescribers would have no 

incentive to change their prescribing practices. In the alternative, policies should 

focus on testing payment methodologies that impact the incentives and the buying 

and billing practices of prescribers. This includes payment policies that incent the 

dispensing of generic drugs and biosimilars that would increase the uptake of generic drugs and biosimilars as a means of providing lower cost medications and reducing beneficiary cost sharing, which contribute to overall Medicare drug spending. 

This includes examining an enhanced reimbursement for these medications, such as 

an ASP + 8% or ASP + 6% and a flat fee each time a generic drug or biosimilar 

is prescribed. Unfortunately, the proposed Part B Drug Payment Model misses the 

opportunity to encourage the use of these lower cost medications that could ultimately lower drug spending for the Medicare program. 

Waiver of Statutory Requirements for Infusion Drugs 

Payment for drugs infused with a covered item of durable medical equipment 

(DME), such as insulin used with a covered insulin pump, are statutorily reimbursed based on the average wholesale price (AWP) in effect on October 1, 2003. 

As the Office of Inspector General noted in a 2013 report: 

These payment-related issues could significantly affect drug utilization and 

acquisition. For example, excessive payments could present incentives for 

providers to overutilize a particular product, while payments that are below 

cost could contribute to an inability or unwillingness to provide a particular 

drug. 

While the goal of the proposed payment model is to reduce incentives for overutilization of higher cost products, NACDS is pleased that CMS recognized the issues related to underpayment for certain medications by proposing to waive the statutory 

requirement and include infusion drugs that are furnished through covered DME 

items in the model. However, in doing so, CMS is proposing to: 

. . . exclude this category of drugs from phase I of the model so that DME 

policy can focus on issues related to DME and so that the model does not 

interfere with decisions related to the inclusion or exclusion of these drugs 

in DME competitive bidding. 

NACDS believes infusion drugs that are furnished through covered DME should be 

included in Phase I of the payment model. The lack of updates to reimbursement 

amounts for more than a decade has serious implications for Medicare beneficiaries. 

This is particularly true in the case of insulin. 

Insulin that is self-administered by a beneficiary with an injection is covered under 

Part D, whereas the same insulin administered through an insulin pump is covered 

98 

under Part B. However, reimbursement to a pharmacy for dispensing insulin under 

Part D is almost twice as much as Medicare reimbursement for the same insulin 

under Part B. The disparity has increased to the point that a pharmacy dispensing 

insulin under Part B is doing so below their acquisition cost. 

As a result, this may mean that beneficiaries with an insulin pump find it harder 

and harder to find locations able to fill their Part B insulin. This likely would lead 

to poorer beneficiary health through decreased adherence and increased Medicare 

costs through increased hospitalizations and utilization of other more expensive 

services. 

CMS’s proposal to exclude infusion drugs, such as insulin administered via an insulin pump, from Phase I of the model may contribute to access issues for Part B 

beneficiaries. For this reason, NACDS recommends the inclusion of these drugs in 

both phases of the model. 

Administration, Supplying, and Dispensing Fees in Phase II 

NACDS is concerned with CMS’s proposal that Phase II of the model may incorporate changes to the furnishing, supplying, and dispensing fees that are associated 

with dispensing drugs under the payment model. These include inhalation drug dispensing fees and supplying fees to pharmacies for certain immunosuppressive, oral 

anticancer, and oral antiemetic drugs. 

It appears the proposal for Phase II of the model envisions decreasing or eliminating 

dispensing and supplying fees for drugs included in the model. NACDS believes 

such a step would be very troubling. NACDS believes steps should be taken to ensure dispensing and supplying fees are fair and adequate, and providers and suppliers are paid at rates that are sufficient to cover the cost of dispensing prescriptions drugs to Medicare beneficiaries. This is particularly true in the Part B program where increasing supplying or dispensing fees for Part B drugs would help offset burdensome administrative costs incurred in Medicare Part B claims submission. 

CMS has not updated supplying and dispensing fees since 2005, even though the 

cost of providing services to Medicare patients continues to increase. CMS’s failure 

to increase supplying and dispensing fees results in community pharmacies’ reimbursement falling below the actual cost to dispense Part B prescriptions. Fair and 

adequate Medicare dispensing fees help to ensure that pharmacy providers are paid 

at rates that are sufficient to cover the cost of dispensing prescriptions drugs to 

Medicare beneficiaries. Such rates could allow for a reasonable return above the 

pharmacies’ costs of acquiring and dispensing prescription drugs, encouraging pharmacies to agree to participate in the Medicare program and thereby promoting patient access to their Part B medications. 

In fact, CMS has recently acknowledged the important role fair and adequate dispensing fees play in maintaining patient access. In releasing the Final Medicaid 

Program Covered Outpatient Drugs Rule earlier this year, CMS stated that: 

We agree that pharmacy providers should be reimbursed adequately for 

their professional services. . . . 

Furthermore, CMS stated that the proposal to revise the term from ‘‘dispensing fee’’ 

to ‘‘professional dispensing fee’’ was: 

. . . designed to reinforce our position that the dispensing fee should reflect 

the pharmacist’s professional services and costs to dispense the drug product to a Medicaid beneficiary. 

In recognizing the negative impact inadequate dispensing fees can have on beneficiary access, CMS required that: 

. . . states must provide information supporting any proposed change to either the ingredient cost or dispensing fee reimbursement which demonstrates that the change reflects actual costs and does not negatively impact access. 

NACDS believes the importance of supplying and dispensing fees in the Medicare 

Part B payment model should be recognized and increased to properly reflect the 

costs to providers and suppliers in dispensing and administering Part B drugs. 

Conclusion 

NACDS thanks the committee for consideration of our comments. We look forward 

to working with policymakers and stakeholders on these important issues. 

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NATIONAL RURAL HEALTH ASSOCIATION (NRHA) 

Headquarters 

4501 College Blvd., #225 

Leawood, KS 66211–1921 816–756–3140 Fax: 816–756–3144 http://www.ruralhealthweb.org/ 

Government Affairs Office 

1025 Vermont Avenue, Suite 1100 

Washington, DC 20005 202–639–0550 Fax: 202–639–0559 

May 9, 2016 

Andy Slavitt 

Acting Administrator 

Centers for Medicare and Medicaid Services 

Hubert H. Humphrey Building 

200 Independence Avenue, SW, Room 445–G 

Washington, DC 20201 

RIN 0938–ASSS: Medicare Program; Part B Drug Payment Model Proposed 

Rule 

Dear Administrator Slavitt, 

The National Rural Health Association (NRHA) is pleased to offer comments on 

the Medicare Part B Drug Payment Model Proposed Rule. We appreciate your continued commitment to the needs of the 62 million Americans residing in rural and 

underserved areas, and look forward to our continued collaboration to improve 

health care access and quality. While we support the inclusion of rural providers 

in the proposed part B drug payment model, rural hospitals must be excluded to 

avoid exacerbating the existing rural hospital closure crisis. 

NRHA is a non-profit membership organization with more than 21,000 members 

nationwide that provides leadership on rural health issues. Our membership includes nearly every component of rural America’s health care infrastructure, including rural community hospitals, critical access hospitals, doctors, nurses and patients. We work to improve rural America’s health needs through government advocacy, communications, education and research. 

Access to quality, affordable health care is essential for the 62 million Americans 

living in rural and remote communities. Rural Americans are more likely to be 

older, sicker and poorer then their urban counterparts. Specifically, they are more 

likely to suffer with a chronic disease that requires monitoring and follow up care, 

making convenient, local access to care necessary to ensuring patient compliance 

with the services that are necessary to reduce the overall cost of care and improve 

the patients’ outcomes and quality of life. Yet, many rural Americans live in areas 

with limited health care resources, restricting their available options for care, including primary care. 

Rural hospitals provide beneficiaries a local access point for health care close to 

home. Though rural seniors are often forced to travel significant distances for care, 

especially specialty services, rural hospitals are able to accommodate a variety of 

patient needs through the use of telemedicine and local follow up care for specialty 

care received elsewhere. Rural physicians and hospitals work around a plethora of 

challenges to provide high quality personalized care to their patients. Services such 

as providing local infusions of medications ordered by distant specialists to ensure 

patients are able to adhere to medication schedules that would be prohibitive if the 

patient was required to travel, often hours in each direction, to a distant specialist. 

Rural hospitals are closing. Seventy-one rural hospitals have closed since 

2010. Right now, 673 additional facilities are vulnerable and could close— 

this represents over 1⁄3 of rural hospitals in the U.S. In fact, the rate of closure 

has steadily increased since sequester and bad debt cuts began to hit rural hospitals; resulting in a closure rate six times higher in 2015 compared to 2010. Continued cuts in hospital payments have taken their toll, forcing far too many closures. 

Medical deserts are appearing across rural America, leaving many of our nation’s 

most vulnerable populations without timely access to care. 

While the Sole Community Hospitals (SCH), Low Volume Hospital (LVH) and 

Medicare Dependent Hospital (MDH) programs have helped stabilize some rural 

hospitals, rural hospitals paid at a Prospective Payment System (PPS) rate are more 

100 

1Thomas, Sharita R.; Holmes, G. Mark; and Pink, George H. (March 2016). 2012–14 Profitability of Urban and Rural Hospitals by Medicare Payment Classification. Available at https:// 

www.ruralhealthresearch.org/alerts/113. 

vulnerable to closure. Sixty-five percent of the closures have been of PPS hospitals, 

though these hospitals are less than one-third of all rural hospitals. A recent study 

out of the Sheps Center at University of North Carolina found that overall ‘‘profitability of rural hospitals decreased while the profitability of urban hospitals has increased since FY 2012.’’ 1 Specifically of concern is that ‘‘R[ural] PPS hospitals with 

26–50 beds and MDHs had the lowest profitability compared to other hospitals,’’ 

both had negative median operating margins. MDHs had median operating margins 

less than negative 2 percent. This result is unsurprising considering the MedPAC 

March 2016 report indicating that ‘‘average Medicare margins are negative, and 

under current law they are expected to decline in 2016.’’ For rural hospitals that 

on average serve an older, sicker, and poorer population, negative Medicare margins 

often mean negative overall margins. These vulnerable hospitals are unable to absorb further cuts without exacerbating the closure crisis. 

Rural hospitals must be excluded from the proposed Part B Drug Payment model to avoid additional rural hospital closures and maintain continued access by vulnerable populations. The proposed rule estimates a net 

negative impact for rural hospitals (¥0.3% overall, 2.2% of drug payments for a 

total loss of $322 million). While this cut may appear small on its own, it must be 

taken in context of other Medicare cuts already leading to the closure crisis, including sequester, bad debt reductions, and Disproportionate Share Hospital (DSH) cuts. 

At a time where extensive Medicare cuts are already causing far too many rural 

hospitals to close, this additional cut would be one additional cut causing more hospital closures. These rural hospitals often provide safety-net services for vulnerable 

populations that have little or no capacity to travel great distances for care. 

NRHA appreciates that the proposed rule specifically requested comment on ‘‘the 

potential effect that this model may have on rural practices, how rural practices 

may differ from non-rural practices and whether rural practices should be considered separately from other practice locations,’’ as well as the recognition that ‘‘this 

proposed rule may have a significant impact on small rural hospitals [located outside of a metropolitan statistical area and has 100 or fewer beds] selected for the 

model.’’ The regulatory impact analysis on the effects on small rural hospitals provided in the proposed rule coupled with the uncontroverted evidence of the hospital 

closure crisis caused by the already enacted Medicare cuts which disproportionately 

impact rural PPS hospitals supports the exclusion of these vulnerable hospitals from 

this proposed model. 

Thank you for the chance to offer comments on this proposed rule, and for your 

consideration on our comments. We very much look forward to continuing our work 

together to ensure our mutual goal of improving quality of and access to care. If 

you would like additional information, please contact Diane Calmus at 

dcalmus@nrharural.org, or 202–639–0550. 

Sincerely, 

Alan Morgan 

Chief Executive Officer 

National Rural Health Association 

Æ