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86–388 2014

EXAMINING REFORMS TO IMPROVE THE 

MEDICARE PART B DRUG PROGRAM FOR SENIORS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 28, 2013 

Serial No. 113–64 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 4 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 83 

Hon. Mike Rogers, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 83 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, prepared statement ........................................................................ 84 

WITNESSES

Cliff Binder, Health Care Financing Analyst, Congressional Research Service 9 

Prepared statement .......................................................................................... 12 

Barry Brooks, M.D., Partner, Texas Oncology, on Behalf of the U.S. Oncology 

Network ................................................................................................................ 21 

Prepared statement .......................................................................................... 23 

Answers to submitted questions ...................................................................... 107 

Nancy Davenport-Ennis, CEO and President, National Patient Advocate 

Foundation ............................................................................................................ 37 

Prepared statement .......................................................................................... 39 

Answers to submitted questions ...................................................................... 111 

Larry B. Melton, M.D., Ph.D., FACP, Medical Director, Kidney/Pancreas 

Transplantation, Baylor Medical Center ............................................................ 45 

Prepared statement .......................................................................................... 47 

James Cosgrove, Director, Government Accountability Office ............................. 50 

Prepared statement .......................................................................................... 52 

SUBMITTED MATERIAL

Materials submitted by Mr. Burgess 

Article entitled, ‘‘Penny Wise, Pound Foolish? Coverage Limits on 

Imunosuppression after Kidney Transplantation,’’ New England Journal of Medicine, 10.156/NEJMp1114394 ..................................................... 85 

Statement of the National Kidney Foundation .............................................. 89 

Statement of the American Society of Nephrology ........................................ 91 

Letter of March 25, 2013, from the American Society of Transplant Surgeons to Hon. Michael C. Burgess and Hon. Ron Kind ............................. 93 

H.R. 460, submitted by Mrs. Capps ....................................................................... 95 

Statement of the California Healthcare Institute, submitted by Mr. Pitts ........ 100 

Statement of the American Society of Clinical Oncology, submitted by Mr. 

Pitts ....................................................................................................................... 102 

Statement of the American College of Rheumatology, submitted by Mrs. 

Ellmers .................................................................................................................. 105 

(1) 

EXAMINING REFORMS TO IMPROVE THE 

MEDICARE PART B DRUG PROGRAM FOR 

SENIORS 

FRIDAY, JUNE 28, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Burgess, Whitfield, Lance, 

Cassidy, Griffith, Bilirakis, Ellmers, Engel, Capps, Green, Barrow, 

Caster, and Waxman (ex officio). 

Staff Present: Clay Alspach, Chief Counsel, Health; Gary Andres, 

Staff Director; Sean Bonyun, Communications Director; Matt 

Bravo, Professional Staff Member; Julie Goon, Health Policy Advisor; Sydne Harwick, Legislative Clerk; Robert Horne, Professional 

Staff Member, Health; Carly McWilliams, Professional Staff Member, Health; Monica Popp, Professional Staff Member, Health; Andrew Powaleny, Deputy Press Secretary; Heidi Stirrup, Health Policy Coordinator; Brian Cohen, Staff Director, Oversight and Investigations, Minority Senior Policy Advisor; Alli Corr, Minority Policy 

Analyst; Elizabeth Letter, Minority Assistant Press Secretary; 

Karen Lightfoot, Minority Professional Staff Member; and Stephen 

Salisbury, Minority Special Assistant. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The time of 10:00 o’clock having arrived, the subcommittee will come to order. The chair will recognize himself for 

an opening statement. 

Today’s hearing is an opportunity for us to examine Medicare’s 

part B drug benefit and to assess how well it is working for both 

seniors and providers. While most prescription drugs are covered 

under Medicare part D, certain outpatient prescription drugs and 

biologics are covered under part B. Covered part B drugs are usually those administered in a physician’s office or hospital outpatient 

setting, including injectable and infused drugs, drugs used in conjunction with durable medical equipment, oral drugs for cancer or 

end stage renal disease, and some self-administered drugs in the 

hospital outpatient setting. As a result of the 2003 Medicare ModVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
2 

ernization Act, MMA, Medicare reimburses providers for the cost of 

part B drugs and their administration at what is known as the average sales price, ASP, plus 6 percent, with Medicare paying 80 

percent of that amount and beneficiaries paying the remaining 20 

percent. I would like to commend members on both sides of the 

aisle for their work on the part B drug benefit. And I will highlight 

a few pieces of legislation. 

H.R. 800 by Congressmen Whitfield and Green, which seeks to 

exclude prompt pay discounts from manufacturers to wholesalers 

from the calculation of ASP; H.R. 1416 by Congresswoman Ellmers, 

which would terminate application of sequestration to certain physician-administered part B drugs; and H.R. 1428 by Dr. Burgess 

and Representative Kind which seeks to provide coverage for immunosuppressive drugs for kidney transplant recipients. 

And there are other issues as well. For example, reimbursement 

rates have caused a shift of some patient populations, such as 

those with primary immune deficiency diseases and other rare diseases, from treatment in the physician’s office, treatment in the 

hospital outpatient department, arguably the worst setting for 

someone with a compromised immune system. We should also examine the variation in reimbursement rates for the same drugs 

and services across various settings to ensure that patients are 

being treated at the most clinically appropriate and cost effective 

site. While some drugs and biologics must be administered in the 

hospital outpatient setting, it is also the most expensive site of care 

for the Medicare program itself and for the beneficiary, who pays 

a 20 percent copayment. 

I would like to welcome our witnesses today. They represent perspectives from the Federal Government, providers, and patients. 

And I look forward to their testimony. Thank you. 

I yield the remainder of my time to Dr. Burgess. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

Today’s hearing is an opportunity for us to examine Medicare’s Part B drug benefit and to assess how well it is working for both seniors and providers. 

While most prescription drugs are covered under Medicare Part D, certain outpatient prescription drugs and biologics are covered under Part B. 

Covered Part B drugs are usually those administered in a physician’s office or 

hospital outpatient setting, including injectable and infused drugs, drugs used in 

conjunction with durable medical equipment, oral drugs for cancer or End-Stage 

Renal Disease, and some self-administered drugs in the hospital outpatient setting. 

As a result of the 2003 Medicare Modernization Act (MMA), Medicare reimburses 

providers for the cost of Part B drugs and their administration at what is known 

as the Average Sales Price (ASP), plus 6%, with Medicare paying 80% of that 

amount and beneficiaries paying the remaining 20%. 

I’d like to commend Members on both sides of the aisle for their work on the Part 

B drug benefit, and I’ll highlight a few pieces of legislation: 

• H.R. 800, by Reps. Whitfield and Green, which seeks to exclude prompt-pay discounts from manufacturers to wholesalers from the calculation of ASP; 

• H.R. 1416, by Rep. Ellmers, which would terminate application of sequestration 

to certain physician-administered Part B drugs; and 

• H.R. 1428, by Dr. Burgess and Rep. Kind, which seeks to provide coverage for 

immunosuppressive drugs for kidney transplant recipients. 

There are other issues, as well. 

3 

For example, reimbursement rates have caused the shift of some patient populations, such as those with primary immune deficiency diseases and other rare diseases, from treatment in the physician office to treatment in the hospital outpatient 

department - arguably the worst setting for someone with a compromised immune 

system. 

We should also examine the variation in reimbursement rates for the same drugs 

and services across various settings, to ensure that patients are being treated at the 

most clinically appropriate and cost-effective site. 

While some drugs and biologics must be administered in the hospital outpatient 

setting, it is also the most expensive site of care for the Medicare program itself, 

and for the beneficiary, who pays a 20% copayment. 

I’d like to welcome our witnesses today. They represent perspectives from the federal government, providers, and patients, and I look forward to their testimony. 

Thank you, and I yield the remainder of my time to Rep. 

—————————————————. 

Mr. BURGESS. I thank the chairman for the recognition. 

So there is no question the part B drug coverage has improved 

the lives of patients. But Federal regulations can really stand in 

the way of compassionate patient care and common sense. After 

the Medicare Modernization Act, now nearly 10 years ago, we saw 

dramatic consolidations in the oncology space such that now the 

purchase and storage of drugs is regarded as physician service for 

the purposes of sequestration. Well, this ruling does not serve patients well. In fact, it is contrary to the statute itself, I believe. It 

is contrary certainly to any flexibility the agencies are supposed to 

have. And it is contrary to basic math. 

Mr. Chairman, thank you for working with myself and others on 

both sides of the dais here to pursue answers from the Centers for 

Medicare & Medicaid Services on this important issue. 

The math is also problematic and doesn’t add up in how we pay 

for patient care after kidney transplantation. Medicare pays for 

50,000 kidney transplants each year at a cost per patient of well 

over $125,000. So do the math on that, and it is over $60 billion 

a year. Kidney transplantation offered end stage renal disease patients an alternative to a lifetime of costly, time consuming, and 

sometimes painfully dialysis treatment. However, the government’s 

protection of its investment arbitrarily ceases after 36 months, 

when Medicare suddenly refuses to pay for the life-sustaining 

immunosuppressant drug coverage needed to keep a transplanted 

kidney alive and functioning. So oddly, it is Federal policy—not the 

disease itself—that is the greatest threat to these patients. So instead of ensuring the investment, the government would rather 

lose patients or rather patients lose their graft, lose their kidney, 

return to dialysis, and get back in line for another transplant, taking another organ out of circulation for someone else. Instead of 

protecting the transplant, we further limited supply of donors’ organs, and we burden the Federal budget while jeopardizing patient 

lives. 

I challenge every member on this committee to support the bipartisan H.R. 1428 to correct this irrational and arbitrary policy. 

Our patients are waiting. I think they have waited long enough. It 

is time for us to put common sense in front of arcane policy. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

4 

Now filling in for the ranking member of the subcommittee Mr. 

Pallone, we have Mr. Green from Texas, who is recognized for 5 

minutes for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Chairman Pitts, for holding this important hearing. And thank you to the witnesses for taking the time 

to be with us, particularly Dr. Brooks and Dr. Melton. And we have 

so many Texans on here, you will hear we are from the great State 

of Texas many times, although sometimes that is redundant. 

The part B drug program, which helps pay for chemotherapy and 

other services, is an important piece of Medicare. I have had a long 

interest in preserving seniors’ access to quality care by ensuring 

Medicare pay at a rate that will retain a robust network of providers. This is what we are trying to do with the SGR reform. And 

I think part B rates are part of this larger discussion. 

Today we are discussing at least three bills. The first, a bipartisan bill offered by my colleague from Texas Dr. Burgess, will provide Medicare coverage for immunosuppressive drugs for kidney 

transplant recipients. This bill has earned support from both sides 

of this committee. And it is my hope we can act on it and move 

to the full House for a vote. 

The next bill offered by Mrs. Ellmers has earned support from 

both sides of this committee. Also it is imperative that we examine 

the impact of sequestration on cancer patients. And I am pleased 

this bill has been introduced because it highlights the shortcomings 

of using sequestration as a tool to accomplish our much needed 

goal of balancing the Federal budget. I am proud to lead the letter 

to CMS with my colleague from Texas, Congressman Pete Sessions, 

that was signed by 124 Members of Congress expressing concerns 

that cuts resulting from sequestration to critical cancer medications 

are forcing oncologists to turn cancer patients away. We asked 

CMS to do something about this problem with their existing authority but haven’t gotten the answer we wanted. I should point 

out that I do not believe Mrs. Ellmers’ bill goes far enough as part 

of the discussion around restoring the reimbursement rates. It 

must also be restoring funding for after-school lunches, medical research, education funding, Corps of Engineers, and other critical 

funding. 

Finally, H.R. 800 is also known as the prompt pay bill that is 

being discussed today. I am proud to have introduced this bill in 

past sessions of Congress. I am pleased my colleague and friend 

Chairman Whitfield decided to introduce it most recently. We have 

worked together over the years to move this issue forward. The bill 

simply excludes the prompt pay discounts offered by manufacturers 

to wholesalers for the average sales price for drugs and biologics 

covered under Medicare part B. This became an issue when the 

Medicare Modernization Act was enacted. It reduces the amount 

doctors are reimbursed, sometimes below the amount they actually 

pay for administering cancer treatment and the result is fewer doctors participating in Medicare. Reducing the number of options for 

cancer patients reduces access, and that is just bad policy. 

5 

While some of my colleagues have pointed out that sequestration 

has also done this—and they are right—this is a separate issue. 

The prompt pay discount has negatively affected cancer patients 

for many years before sequestration. Whether we adopt legislation, 

repealing it, replacing it or otherwise altering sequestration, without adopting H.R. 800, the underlying issue will still exist. H.R. 

800 is noncontroversial and has been supported by virtually every 

member of this committee. In fact it was adopted by this committee 

during the consideration of the Affordable Care Act by a voice vote, 

only to be unfortunately left out in the bicameral negotiations. The 

prompt pay bill deserves this committee’s support. And I ask that 

Chairman Pitts move forward by marking up this legislation in the 

near future. Moving this bill or including it in a larger package 

makes sense. 

And now, Mr. Chairman, I would like to yield my remaining time 

to my colleague, Congressman Engel. 

Mr. ENGEL. Thank you. Thank you very much. I appreciate it. 

As Wednesday’s hearing highlighted, the current Medicare benefit structure is very complicated. It is particularly true with the 

drug benefit, where some drugs are covered if infused by an infusion pump under the part B benefit while others are covered under 

the part D benefit. Unfortunately, the part D benefit does not cover 

the supplies, equipment, and professional services necessary to deliver infusion drugs safely in the house. The nursing component for 

infusion therapy can only be performed under part A through a certified home health agency if the patient meets the definition of 

‘‘homebound.’’ As a result of this fractured benefit, many beneficiaries that could safely receive treatment at home are relegated 

to being served in a skilled nursing facility or hospital which adds 

unnecessary costs to the health care system and exposes patients 

to hospital-acquired infections. Unfortunately, Medicare stands virtually alone in denying coverage for home infusion even though the 

private sector has proven for decades that infusion in the home can 

be cost effective as well as done in a setting that best meets the 

patient’s wishes. While Medicaid covers the drugs used in home infusion therapy and while that payment is important, we cannot 

continue to look only at the silo of drug payment without also looking at the need for full coverage of the associated equipment, supplies, and services for infusion therapy provided in the home or 

other alternate site settings. In the past, I have included legislation 

to make sure that the least costly clinically appropriate environment for infusion services is covered rather than forcing individuals to obtain these services in the hospital or nursing homes. And 

it is my hope that the committee and Congress work with me in 

that effort. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

We are voting on the floor. We have 11 minutes left. We will try 

to finish the opening statements of members at this time. 

The chair yields to Mr. Whitfield for 5 minutes. 

6 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. Well, Chairman Pitts, thanks very much. And I 

really appreciate the witnesses being with us today as we discuss 

these important topics. I certainly want to thank Gene Green and 

others who have been involved in our efforts to resolve the so-called 

prompt pay issue. As many of you know, manufacturers give discounts to distributors that help offset costs of shipping, handling, 

and reflects the time value of money and risk incurred in the distribution process. But when Medicare calculates how much a physician will be reimbursed for drugs under the part B program, it includes them in the sales price. And doing this artificially reduces 

the reimbursement to the physician, the oncologist, which places 

even more stress on these practices. In cancer, for instance, we 

know that four out of five patients that are treated are treated outside of a hospital, within a physician’s practice. And over the past 

few years, there has been a trend of closings and consolidation of 

these practices. And any time I meet with an oncologist today—it 

makes no difference where they are from—they all cite reimbursement as one of the primary reasons for this consolidation and closing. But it is ultimately the patient that suffers the consequence 

of this problem, as clinics close or consolidate, access to care for the 

treatment of cancer is diminished, and patients are shifted into the 

hospital which we all know is the most expensive type of treatment. So I hope that as we work on this physician payment reform 

that we also take a serious look and solve the so-called prompt pay 

issue. 

So I look forward to working with you, Mr. Chairman, and others 

as we try to resolve this very serious problem. And at this time, 

I would like to yield whatever time she may consume to Mrs. 

Ellmers of North Carolina. 

Mrs. ELLMERS. Thank you to my colleague and thank you, Mr. 

Chairman, for holding this subcommittee hearing on these very important pieces of legislation. I have sponsored H.R. 1416, which is 

the Cancer Patient Protection Act. This benefit to our seniors, our 

Medicare recipients, is essential. We all know sequester went into 

effect. We needed those funding cuts at the Federal level. However, 

I believe wholeheartedly that as an unintended consequence of this, 

we have now harmed one of our most vulnerable populations, Medicare patients who have now received the diagnosis of cancer. You 

know we have wonderful cancer treatment centers in our communities. And I would like to point out also that it isn’t just about 

cancer patients. It is also about patients with rheumatoid arthritis, 

osteoporosis, lupus, any autoimmune disease that medication has 

to be given under the direction of a physician. 

We have to restore this sequester cut because it is the drugs that 

have been cut. And these drugs are very, very expensive. The physicians have received their 2 percent cut in reimbursement. But we 

have to restore that drug cut because we will not be able to continue to provide that benefit to them within their communities. 

I can’t imagine a family in crisis finding out about cancer to their 

loved one and then knowing that they are going to have to travel 

20 miles outside of their community to go to a hospital. Many of 

7 

these individuals are on fixed incomes. They are low income. They 

will not have the ability to be transported to those facilities where 

the cost actually increases which, as we all know, defeats the purpose of the sequester to begin with. 

So I feel very strongly we need to pass this piece of legislation. 

We have a bipartisan list of cosponsors. I am very proud of that. 

And we will continue in this effort, again, to protect those seniors 

in this way. It is very important. 

And I yield back the remainder of my time. 

Mr. PITTS. The chair thanks the gentlelady. 

We have a little over 6 minutes left. At this time, the chair recognizes the ranking member of the full committee, Mr. Waxman, for 

5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. I want to thank our 

witnesses for coming here today. And I want to thank you for holding this hearing. It is our first time in quite a while that we have 

looked at the Medicare part B drugs. And this is a worthwhile 

focus because we spend, according to the GAO, almost $20 billion 

for these drugs each year, including some of the most expensive 

drugs on the market. We should be looking carefully at where the 

money goes. 

We will be hearing about several pieces of legislation. We have 

already heard about them. And I know for several years oncologists 

and other providers have raised concerns about whether payments 

under the part B program are adequate. Their focus has been on 

legislation that would increase the Medicare average sales price 

and part B reimbursements by excluding prompt pay discounts. 

The Obama administration has a different view. Its budget proposes cuts in reimbursement rates. And I hope our witnesses can 

give us some insight on both the adequacy of part B drug reimbursement rates and whether there are opportunities to save 

money for taxpayers by modifying these rates. 

We have already heard a little bit about Congresswoman 

Ellmers’ bill. It would exempt part B drug reimbursement from the 

effects of the sequester. As part of the broad sequestered Medicare 

payments, part B drug reimbursement rates were reduced by 2 percent. We are going to hear from other witnesses today that will say 

that this cut will have a disproportionate impact on administrative 

reimbursements. Cancer clinics have reported that due to these 

payment cuts, they will have to turn patients away. Well, that 

would be a terrible outcome. These drugs are essential to cancer 

patients, and the arbitrary payment cuts undermine patient health 

and the entire Medicare program. This illustrates once again why 

an arbitrary and automatic sequester is such a bad policy. 

My concern with Mrs. Ellmers’ bill is that it only addresses one 

problem. We need a comprehensive and balanced sequester fix, not 

a piecemeal fix that increases payments for cancer drugs and ignores cuts to Head Start or Pell Grants or physician reimbursements or vaccines for children or vital defense programs. Sequestration was supposed to never happen. It was supposed to be so riVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
8 

diculous that we were to avoid it. And now it is in place, and we 

ought to correct it. 

Mr. Chairman, we shouldn’t pretend the consequences of the part 

B payment cuts are an isolated example. They highlight the broader reality. When you take the hatchet to the Federal budget, there 

are going to be serious consequences. This is not an unintended, 

unforeseeable consequence. I also hope we can learn about other 

ways to cut part B drug spending. As I said earlier, part B drugs 

pay for $20 billion worth of drugs annually, including many expensive biological and specialty drugs. In some cases, these drugs can 

cost tens and even hundreds of thousands of dollars per patient per 

year. The Medicare program is the primary purchaser of these expensive drugs. Drugs save lives. We need these drugs, and we need 

to keep developing new ones. But we should also make sure that 

Medicare is getting a good deal. 

I supported legislation in the past that ends the pay for delay 

abuses and brings generic biologics to market faster. My legislation, requiring part D drug manufacturing rebates, would save over 

$140 billion in the next decade, and we should be looking to see 

if there are other ways, like negotiations or rebates, that would 

help make sure taxpayers are getting their money’s worth on part 

B drugs. 

Let me give an example: For those people who are on Medicare 

and Medicaid, the dual eligibles, we used to pay for their drugs 

under Medicaid and we got a rebate. When the prescription drug 

part D bill was adopted, they said, let’s take them out of Medicaid 

and put them under Medicare. Suddenly we are paying a higher 

rate for the same drugs, often for the same people. The drug companies love it. But why should we be spending that extra money 

when we can be using that for worthwhile purposes by making 

sure that the cancer drugs and the physicians who deal with those 

cancer drugs get adequately reimbursed. It is very frustrating to 

see people wanting to protect the drug companies’ profits, wanting 

to protect every special interest group until they find one that they 

are sympathetic to. And we all are sympathetic to this issue because it deals with the most vulnerable people who have cancer. 

I look forward to the hearing and am looking for some solutions. 

Mr. PITTS. The chairman thanks members. That concludes the 

members’ opening statements. 

For information of the members, I am looking at the screen here, 

we have 1 1⁄2 minutes left in the first vote but still 314 Members 

haven’t voted. So we will have time to get over. We have a series 

of votes. We will reconvene after the last vote, which should be 

around 11:00. So at this point, the subcommittee stands in recess. 

[Recess.] 

Mr. PITTS. The recess having expired, we will reconvene. 

On our panel today, we have five witnesses. Mr. Cliff Binder, 

Health Care Financing Analyst, Congressional Research Service; 

Dr. Barry Brooks, Partner at Texas Oncology on behalf of the U.S. 

Oncology Network; Ms. Nancy Davenport-Ennis, President and 

CEO of the National Patient Advocate Foundation; Dr. Larry 

Melton, Medical Director of Kidney/Pancreas Transplantation from 

Baylor Medical Center; James Cosgrove, Director of the Government Accountability Office. 

9 

Thank you for coming. Thank you for your patience as we were 

interrupted by votes on the floor. 

Your written testimony will be entered into the record. You will 

each be given 5 minutes to summarize your testimony. And so at 

this time the chair recognizes Mr. Binder for 5 minutes for his 

opening statement. 

STATEMENTS OF CLIFF BINDER, HEALTH CARE FINANCING 

ANALYST, CONGRESSIONAL RESEARCH SERVICE; BARRY 

BROOKS, M.D., PARTNER, TEXAS ONCOLOGY, ON BEHALF OF 

THE U.S. ONCOLOGY NETWORK; LARRY B. MELTON, M.D., 

PH.D., FACP, MEDICAL DIRECTOR, KIDNEY/PANCREAS 

TRANSPLANTATION, BAYLOR MEDICAL CENTER; NANCY 

DAVENPORT–ENNIS, CEO AND PRESIDENT, NATIONAL PATIENT ADVOCATE FOUNDATION; AND JAMES COSGROVE, DIRECTOR, GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF CLIFF BINDER 

Mr. BINDER. Chairman Pitts, Congressman Green, and distinguished subcommittee members, I appreciate the opportunity to be 

here today. My name is Cliff Binder. I am a Health Care Financing 

Analyst at the Congressional Research Service. I was asked to provide an overview—— 

Mr. PITTS. Pull the mic a little closer, if you could. 

Mr. BINDER. I was asked to provide an overview of Medicare part B prescription drug payments. In 2010, Medicare spent about $81 

billion on most prescription drugs; and about a quarter of these expenditures, $19 billion, were for part B drugs. There are two broad 

principles that determine if a drug is covered under part B. The 

drug is furnished incident to physician services, and it is usually 

not self-administered. Most part B drugs are administered to patients by injection or infusion, but there are exceptions. Cancer 

drugs account for a large portion of part B drug expenditures. Providers—mostly physicians—but also hospital outpatient departments, clinics, and durable medical clinic suppliers buy part B 

drugs, then bill Medicare when they administer the drugs to patients. Physicians and other providers receive two payments from 

Medicare for part B drugs, one payment for administering the drug 

and the second payment for purchasing and supplying the drug. 

The Balanced Budget Act of 1997, BBA, set the payment rate for 

Medicare part B drugs at 95 percent of the average wholesale price, 

AWP. In spite of BBA changes, however, Medicare drug payments 

increased rapidly between 1999 and 2003, rising nearly 25 percent 

a year. In response to the part B drug price escalation, Congress 

modified the payment methodology in the Medicare Prescription 

Drug Modernization Act, MMA. MMA changed part B reimbursement in two ways. It increased the amount physicians received for 

part B drug administration and it decreased the amount physicians 

were paid for supplying part B drugs. Beginning in 2005, Medicare 

began paying for the majority of part B drugs based on a formula 

of 106 percent of the drug’s average sales price, ASP. ASP includes 

most price concessions, such as volume and prompt pay discounts 

and rebates. When manufacturers factor price concessions into ASP 

data, the effect is to lower a drug’s ASP. Drug manufacturers are 

10 

required to submit data to CMS on ASP and the companion price 

used mostly for Medicaid rebates average manufacturer price, 

AMP. CMS sets the part B drug prices for each quarter based on 

sales data submitted by drug manufacturers from two previous 

quarters. If drug manufacturers raised prices in the two quarters 

after they submitted their ASP data, providers might be unable to 

purchase drugs below what Medicare pays. When prices decline 

after manufacturers submitted their ASP data, such as when generic products are introduced, providers often are able to purchase 

these drugs for prices significantly below Medicare’s payment rate. 

Medicare part B drug payments have increased at a slower pace 

since 2004, posting average increases of less than 5 percent a year. 

MMA also required the Inspector General to conduct drug price 

monitoring to determine if ASP is more than 5 percent higher than 

AMP. If Medicare part B drug payments exceed ASP by 5 percent 

or more, the Secretary has authority to substitute a different payment methodology that would reduce Medicare drug reimbursement. OIG has reported that there was at least a 5 percent difference between ASP and AMP for some part B drugs. There has 

been concern that part B drug reimbursement may be inadequate 

for some providers. Provider groups contend that discounts manufacturers give drug wholesalers have the effect of reducing ASP, 

making it difficult for these providers to cover the cost of purchasing some drugs. In addition, some in Congress and other 

groups have questioned whether drug shortages have been complicated by the part B drug pricing methodology and whether 

these, along with manufacturers’ production problems, speculation, 

industry consolidation, and other factors have contributed to drug 

shortages, particularly for sterile injectable drugs, a part B drug 

category. Moreover, questions have been raised whether the twoquarter lag between the time when manufacturers report ASP and 

the time when CMS releases Medicare part B drug prices make it 

difficult for some providers to purchase drugs at competitive prices. 

Most recently, some providers have raised concerns that the effect 

of applying the mandatory Budget Control Act of 2011, BCA, reductions to Medicare part B drug reimbursement will further reduce 

payments to providers, potentially reducing Medicare beneficiaries’ 

access to services. 

In general, sequestration is the permanent cancelation of budgetary resources by a uniform percentage, but certain programs and 

activities are exempt from sequestration, and special rules may be 

applied to programs such as Medicare. 

Even though there are special Medicare rules that would limit a 

reduction in program benefit spending to 4 percent, BCA limits the 

Medicare program benefits reduction to 2 percent; thus beginning 

April 1, 2013, Medicare payments for covered services, including 

physician services and part B drug payments, are subject to 2 percent reductions. According to CMS, the 2 percent reduction applicable to Medicare only applies to Medicare’s provider payments. Beneficiary cost sharing amounts and amounts paid by other health insurance are not reduced. 

This concludes my statement. I would be happy to answer questions. 

Mr. PITTS. The chair thanks the gentleman. 

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[The prepared statement of Binder follows:] 

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Mr. PITTS. I now recognize Dr. Brooks for 5 minutes for an opening statement. 

STATEMENT OF BARRY BROOKS, M.D. 

Dr. BROOKS. Chairman Pitts, Congressman Green, members of 

the committee, thank you for the opportunity to testify on behalf 

of the U.S. Oncology Network and community oncology in general 

on the Medicare part B drug program. 

I am Barry Brooks. For 31 years, I have been taking care of cancer patients. Being an oncologist is intellectually and emotionally 

challenging, but I think it is the best job in the world, and I love 

it. As a community oncologist, I feel I am part of a dying breed. 

Our way of life and practice is being squeezed out of existence. We 

are struggling to make ends meet and continue to care for our beloved cancer patients in the private practice setting. But the way 

red ink is spreading over our ledgers, there won’t be many of us 

left in a few years. Instead, we will all be employed in arrangements we don’t like in institutions where doing the right thing requires executive approval. But I am not here to complain about my 

job prospects. I am here to talk about demographics and math. 

Medicare covers over 60 percent of cancer patients and the Medicare population is growing every day. And worse, the expensive 

care these patients need are shifting from my low cost realm into 

higher cost arenas. You all know the problem, cancer care costs 

more in the hospital outpatient department. And hospital-based 

care is growing by leaps and bounds. The root of the problem has 

two parts. One, Medicare doesn’t adequately cover the cost of community oncology practice care; and, two, Medicare payments and 

rules are tilted in favor of the hospital. Since 2005, community 

oncologists have been slowly bleeding to death. After MMA, Medicare pays us for cancer patients an average sales price plus a 6 percent service payment for the costs and risks associated with purchasing, storing, mixing, administering, disposing these drugs. The 

6 percent is the only Medicare payment for the significant work to 

prepare chemotherapy for administration. And even if the drugs 

are ready for infusion on arrival to our practice, paying acquisition 

costs would not reflect the cost of inventory and the systems needed to manage it. 

Even prior to sequestration, Medicare drug reimbursement did 

not cover our costs. Due to technical flaws in the ASP formula plus 

six in theory does not equal plus six in reality. Wholesaler prompt 

pay discounts reduce ASP values that are not extended to our clinics. ASP values always take 6 to 8 months to be reflected in our 

price. We cannot collect the entire copay allowable and Medicare 

does not reimburse us for uncollectible beneficiary coinsurance. 

These issues are not new. As far back as 2007, MedPAC reported 

the reimbursement for some drugs was below market price. This 

means that we have to give away our services for free or, worse, 

we have to pay for seniors’ cancer drugs out of our own pockets. 

Since April 1, we are living under ASP plus 4.3 percent. While controlling deficit spending is important, the Administration’s decision 

to apply the sequester both to our 6 percent payment services part 

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ment by 28 percent. It forces us to subsidize Medicare patients or 

send them elsewhere for care. 

Oncologists around the country are making these difficult decisions, and I respect each practice’s choice. But one thing is certain, 

operating at a loss on more than half your patients is not a sustainable model. While tweaks to the Medicare reimbursement rates 

would go a long way towards shoring up community cancer care, 

variations in reimbursement for the same services in different outpatient services tilt the competitive landscape in favor of the hospital and encourage inefficiency. One-third of U.S. hospitals purchase chemotherapy drugs through the 340(b) program and enjoy 

margins of over 30 percent on their Medicare cancer drugs. It is no 

wonder drug spending in hospitals is increasing so rapidly and patients and oncologists alike are migrating to these settings. Pushing patients with expensive to treat conditions into more expensive 

settings to get the same care and the same result makes as much 

sense as adding a trap door to a canoe. The patients get lost in this 

setting. The hospitals get lower drug costs. They get higher reimbursements. The patients have to travel further. They have to wait 

longer. They have to pay more out of pocket. This is just not right, 

and it is not necessary. 

I know I am preaching to the choir here. Members of this committee have introduced and supported legislation like that from 

Congressmen Green and Whitfield to help with prompt pay; Congresswoman Ellmers’ H.R. 1416; 30 members of the committee 

have signed a letter questioning how the Administration handles 

sequester cuts on Medicare part B for oncology; and others have 

just signed a recent leadership letter to the so-called LancePascrell. We also want to thank Congressman Rogers and others 

working with him to implement site-neutral payment, as recommended recently by MedPAC. The world’s best cancer care delivery system is struggling to take care of our patients. We and they 

need your help. 

Thank you for letting me talk today. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Dr. Brooks follows:] 

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Mr. PITTS. I now recognize Ms. Davenport-Ennis for 5 minutes 

for an opening statement. 

STATEMENT OF NANCY DAVENPORT-ENNIS 

Ms. DAVENPORT-ENNIS. Thank you, Chairman Pitts, and thank 

you, Congressman Green, and thank you also, members of the committee. I have submitted previously written testimony to the committee. And so what I would like to do now is to simply have a conversation with you and share with you what we see happening to 

the Medicare patients in the United States that we have been taking care of for the past 17 years. 

To date, we have closed over 750,000 cases dealing with Medicare and Medicaid patients in the United States. And what we see 

is that since the passage of MMA, when we stripped away the reimbursement between the drug margin and the services with the 

commitment that there would be additional codes put in place in 

2004 to bring the reimbursement for physicians up to where they 

had been so they can maintain their practices, we have seen a waterfall of changes and reductions to reimbursement to physicians. 

And why do our patients care? Why is that our battle? It is our battle because the number one asset we have in winning our individual war on cancer or any other chronic disease is a physician 

who is there to treat us. What I can say to you is that we look at 

the destabilization of the workforce today as a result of things like 

a prompt pay discount which loses a 2 percent or the imposition 

of sequestration which is a 2 percent cost cut across both the drug 

and the service. We look at the continued threat of ASP reduction. 

So there is no stability when a practice is trying to plan for the future. And the result to the patients that we serve is really simple. 

They are now facing a reduction in actual practices available in 

their community to see them. And when we lose a practice in the 

community, not only does the senior or the disabled lose it, so does 

every man, woman, and child living in that community. We are 

seeing patients being shifted to hospitals for site of care. It may 

mean longer distances for them to travel. It may mean longer wait 

times for them. We have had it documented that it means an additional cost of $6,000 to the system for each patient that is shifted 

to the hospital outpatient setting for care. And because the patient 

is responsible for a 10 percent copayment, it means $600 to $650 

for the patient. 

We have seen the formularies change within Medicare part B 

and we have seen many of our newer drugs that our patients need 

are now being put out on a specialty tier. And at that level when 

we did an analysis of 996 of our Medicare patients, what we found 

is that they were paying on average out of pocket for specialty tier 

drugs through Medicare $684 per prescription that represented 

50.2 percent of the cost of the drug. 

Let me describe to you the Medicare patients that we handle. 

Traditionally, their household incomes are under $23,000. They are 

very proud people, many of whom have worked their entire lives 

to save and to live independently throughout the final years of 

their lives. The seniors that we treat come to their diagnosis and 

seek support through copay even though for them to do that it is 

such a transgression against their independent living. We had 

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$447.6 million donated to nine copay programs in the United 

States of America over the past year, and it was not sufficient to 

meet the demands. As your committee has looked at remedies for 

the prompt pay issue and you are looking at remedies to solve 

many of the Medicare part B reimbursement issues, I want to 

thank you on behalf of the Medicare patients that we represent. 

And I want to also commit to you that our foundations are here to 

work by your side to see that these bills that have been introduced 

through your committee are passed. 

I am pleased to answer in great detail what is happening with 

our patients going through shifts in site of care. But as my closing 

remark, I would like you to note that since April 1, we have started 

tracking the number of patients being shifted from a community 

practice to a hospital outpatient setting. In 90 days, we have had 

10 States that have reported shifting patients from the community 

practice setting into the hospital setting. So I would urge the committee to do what you do best, and that is to look at how do we 

minimize financial devastation for Medicare part B beneficiaries? 

I thank you for the opportunity to answer questions. 

Mr. PITTS. The chair thanks the gentlelady. 

[The prepared statement of Ms. Davenport-Ennis follows:] 

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Mr. PITTS. And now recognizes Dr. Melton for 5 minutes for an 

opening statement. 

STATEMENT OF LARRY B. MELTON, M.D., PH.D., FACP 

Dr. MELTON. Thank you, Chairman Pitts, Congressman Green, 

and Congressman Burgess, for this opportunity to briefly address 

the Energy and Commerce Committee as it examines reforms to 

improve the Medicare part B drug program. I applaud this committee for its leadership and ongoing commitment to strengthening 

our Nation’s health care system. I am Dr. Larry Melton, Medical 

Director of Kidney and Pancreas Transplantation at Baylor University Medical Center. In my many years of practice and work at Dallas, Texas, I have become familiar with a variety of Medicare program challenges and policy imperfections that could be improved to 

save both lives and Federal resources. Within my field of organ 

transplantation, the most obvious and flawed Medicare policy is the 

program’s arbitrary 36-month coverage restriction for patients’ immunosuppressive drugs post-transplantation. As you may know, 

organ transplant recipients must take immunosuppressive medications for the lifetime of the transplanted organ. If immunosuppressive medications are discontinued, rejection and loss of the 

transplanted organ are almost certain to occur. 

Since 1972, Medicare has covered people with end stage renal 

disease without regard to age or SSDI status. There is no Medicare 

coverage limit for a dialysis patient. By contrast, kidney transplant 

recipients lose Medicare coverage at an arbitrary 36 months after 

transplant. In 1972, it was estimated that the ESRD program 

would cost $250 million. Today the program costs in excess of $250 

billion. These figures are staggering, and there is no question that 

a functioning transplant with immunosuppressive drug coverage is 

vastly less expensive than the cost of dialysis. When renal transplants fail, patients again require dialysis, and may even be candidates for retransplantation, both of which would be covered by 

Medicare. Extending immunosuppressive coverage beyond the 36- 

month limit would decrease the risk of organ failure due to patients not taking their immunosuppression. 

The New England Journal of Medicine highlighted a survey conducted by the American Society of Transplantation that found 70 

percent of U.S. kidney transplantation programs reported that 

their patients had an extremely serious or very serious problem 

paying for immunosuppressive medications and 68 percent reported 

deaths and graft losses attributable to cost-related nonadherence. 

The study further found that since patients with kidney failure 

need either long-term dialysis or a functioning renal transplant to 

survive, failing to pay for ongoing immunosuppression ensures that 

Medicare’s initial investment in kidney transplantation is squandered, that patients die prematurely, and the U.S. Taxpayers pay 

for more expensive but inferior therapy after some transplants fail 

unnecessarily. At present, Medicare spends approximately $70,000 

to $80,000 per year on a dialysis patient, which Medicare covers indefinitely. However, Medicare on average spends less than a quarter of that amount for a kidney transplant recipient after a year 

of the transplant. For more than a decade now, members of this 

committee have introduced and supported legislation, the ComVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
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prehensive Immunosuppressive Drug Coverage for Kidney Transplant Patients Act, to address Medicare’s deficiencies in this area. 

Most recently, Congressman Michael Burgess and Ron Kind have 

led the bipartisan and bicameral effort to secure passage of this reform. 

I strongly encourage everyone on this committee to cosponsor, 

support, and pass H.R. 1428 during the 113th Congress. The legislation saves lives, preserves life-saving donor kidneys, and reduces 

the cost burden to the Federal Government, a win-win for patients 

and the U.S. Treasury. The bill would allow individuals who are eligible for immunosuppressive drugs whose insurance benefits 

under part B have ended due to their 36 months running out to 

remain in the program only for the purpose of receiving immunosuppressive drugs. If they have group health insurance, they would 

not qualify for coverage beyond the 36 months. The legislation is 

intended to be a coverage backstop only for those who otherwise 

have no coverage. The legislation ensures that Medicare would remain the payer of last resort and would not usurp coverage offered 

by private insurers. It is not sound public policy or cost effective 

for Medicare to cover the initial costs of a kidney transplant and 

then stop immunosuppressive drug coverage after 36 months. It is 

unfair to living donors and to those families who have donated organs of the deceased loved one for the Federal Government not to 

do everything possible to maintain the transplanted kidney and the 

gift of life that they have provided. 

On behalf of kidney patients, families, physicians, surgeons and 

all involved in the transplant process, I ask that this committee 

make the 113th session of Congress the last Congress in which 

many patients will lose Medicare coverage after only 36 months. 

The Burgess-Kind legislation simply corrects a costly policy inequity. It covers transplant anti-rejection medicines only. 

I thank you for the opportunity to focus a few minutes on what 

we in the organ transplant community view as the necessary reform to the Medicare drug program. Thank you. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. Cosgrove for 5 minutes for his opening statements. 

[The prepared statement of Dr. Melton follows:] 

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STATEMENT OF JAMES COSGROVE 

Mr. COSGROVE. Chairman Pitts, Congressman Green, and members—— 

Mr. PITTS. Did you push the button? Is the light on? 

Mr. COSGROVE. It is on. 

I am pleased to be here today as you discussed Medicare’s payment for part B drugs and potential reforms. As you have heard, 

part B drugs are often an important part of treatment for cancer, 

autoimmune disorders, chronic kidney disease, and other serious 

conditions. In 2010, Medicare spent nearly $20 billion for part B 

drugs in all settings, including physician offices and hospital outpatient departments. That was about 9 percent of all part B expenditures that year. Last October, we issued a report that examined spending and utilization data for high expenditure part B 

drugs. Specifically, we analyzed the 55 drugs with the highest 

Medicare expenditures in 2010. We also examined spending and 

utilization trends from 2008 to 2010 for the same drugs. And then 

finally we estimated national spending for the total U.S. insured 

population for these drugs and calculated the share attributed to 

Medicare. So in my statement today, I would like to highlight several findings from our October report. 

First, we found that Medicare expenditures were highly concentrated among relatively few drugs. In 2010, the 55 highest expenditure drugs represented about 85 percent of all Medicare 

spending on part B drugs, or about $16.9 billion. Ten of those 

drugs accounted for approximately 45 percent of all part B drug 

spending. Most of the 55 drugs are under patent and can be purchased from only one manufacturer. At the time of our report, none 

of the 10 highest expenditure drugs and only nine of the 55 drugs 

we analyzed had a generic drug alternative. Of the 55 drugs in our 

analysis, 23 were used to treat cancer and its side effects. Others 

were used to treat various conditions, such as immune system disorders, cardiovascular disease, chronic kidney disease, and asthma 

or, as you have just heard, to prevent organ transplant rejection. 

Second, the number of Medicare beneficiaries who used each 

drug as well as the average cost per beneficiary varied widely. 

Some of the drugs were associated with high Medicare expenditures either because many beneficiaries used the drug or because 

the drug had a very high price. For example, Medicare spent about 

$193 million on influenza vaccines in 2010. The cost per beneficiary 

was only about $13. But more than 15 million beneficiaries were 

vaccinated. Medicare spent about $143 million on Factor VIII recombinant used to treat hemophilia A. In contrast to the influenza 

vaccines, Factor VIII recombinant was only used by 660 beneficiaries but it cost nearly $217,000 per beneficiary. Among the 10 

drugs with the highest cost per beneficiary, four cost more than 

$50,000 and five more than $20,000. 

Third, spending, utilization, and prices generally increased in the 

2 years. Medicare expenditures increased for 42 of the 55 drugs. 

The drugs with the greatest increases in expenditures also had the 

greatest increases in utilization. In particular, the four drugs with 

the largest in increases were new drugs that had been recently approved by the FDA. Expenditures for one of these drugs Lexiscan, 

a stress agent for beneficiaries who cannot take a stress test, grew 

51 

by approximately 10,000 percent over the 2-year period because the 

utilization grew by 11,000 percent. Prices for most drugs increased 

between 2008 and 2010, although the price changes were not as 

dramatic as utilization changes. The price of Ventavis, a drug used 

to treat pulmonary arterial hypertension, increased by 52 percent, 

which was the largest price increase we observed. Because utilization of Ventavis also increased, expenditures for the drug rose by 

nearly 94 percent over the period. The price of the vaccine used to 

prevent pneumonia increased by 36 percent. Some drugs did decrease in price. The largest decline was 38 percent, and yet still remained among the highest expenditure part B drugs. 

Finally, our findings show that Medicare is an important part of 

the national market for many of these high expenditure drugs. Specifically, we found that Medicare spending accounted for the majority of estimated total national spending on 35 of the 55 highest expenditure part B drugs. Almost $17 billion Medicare spent for the 

highest expenditure part B drugs, $11 billion, or 65 percent, was 

spent on drugs for which Medicare beneficiaries accounted for the 

majority of total U.S. spending. For 17 of the drugs, Medicare 

spending represented two-thirds or more of total spending. And for 

six part B drugs, Medicare’s share of national spending exceeded 

85 percent. 

This concludes my prepared remarks. I am certainly happy to respond to any questions. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Cosgrove follows:] 

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Mr. PITTS. That concludes the opening statements. We will now 

go to questioning. I will begin the questioning and recognize myself 

for 5 minutes for that purpose. 

Dr. Brooks, explain a little bit more what impact would removing 

the prompt pay discount from the Medicare formula have on patients and our overall health care system, if you would. 

Dr. BROOKS. Well, sir, obviously the weight of the sequester 

would not be removed just by removing prompt way but it would 

help us a great deal. Prompt pay diminishes ASP for our offices by 

approximately 1 to 2 percent. It is a floating number. It is not consistent. But it decreases our reimbursement by about 1 to 2 percent. As I like to tell my colleagues, my income in 2012 was 102 

percent from commercial insurance. And what that means is that 

we lost 2 percent on our Medicare patients in our office. So if we 

were to get rid of the prompt pay discount, that would restore us 

to baseline if the weight of sequester were also treated more uniformly in our space. 

Mr. PITTS. Now the President has proposed a 3 percent cut to the 

SP formula. What would happen to your practice if that were to go 

into effect? 

Dr. BROOKS. Well, sir, I don’t know whether to answer you seriously or with some humor. But we did not include in any of my remarks anything about disruption or drama or threats or anything 

of that sort. But I can assure you that if ASP plus 3 percent were 

to ever be enacted, that disruption and drama would occur. We 

would not be able to take care of our Medicare patients at that 

rate. We would immediately have to discontinue that because the 

losses would be enormous. The hospital outpatient departments 

that are currently taking our patients do not have the capacity to 

overnight take those patients in. And there would be an enormous 

access problem. 

Mr. PITTS. All right. Mr. Cosgrove, page 2 of your testimony 

states that ‘‘Medicare expenditures for part B drugs in 2010 were 

concentrated among relatively few drugs.’’ 

Is it fair to conclude then that the majority of drug expenditures 

under part B should not be considered high expenditure drugs? 

Mr. COSGROVE. Under part B, Medicare covers hundreds of 

drugs. So yes. I think the problem is just complex and it may not 

be a one-size-fits-all because you have some drugs that either because a lot of people use them or few people use them and they are 

very expensive or some combination are very expensive. And that 

is probably where the attention should be focused. 

Mr. PITTS. Ms. Davenport-Ennis, in reviewing the GAO testimony, I noticed that a number of the high expenditure drugs on 

the list under part B are drugs used to treat cancer and various 

autoimmune diseases. And I am reminded of the new lupus drug 

that was recently released, representing the first new treatment for 

patients with this disease in over 50 years. How important is it for 

patients with diseases like cancer to have access to new and 

ground-breaking treatments in your opinion? 

Ms. DAVENPORT-ENNIS. Thank you for the question. 

So from a patient’s point of view, often the traditional drugs that 

are in the marketplace are not going to continue to work for cancer 

patients that have been in therapies for years and years. If there 

67 

is a cancer patient that has a very advanced cancer, often you have 

to move them to the newer drugs in the marketplace that will stop 

that disease where it is. And whether it is cancer or whether it is 

another chronic debilitating or life-threatening condition, the new 

drugs hold the promise of independent living. They hold the promise that people can stay at work. They hold the promise that they 

can maintain their role as a parent, as a spouse, and as a member 

of society. So each time we create a regulatory hurdle that puts 

that new drug further away from the patient, the more likely we 

are to see earlier debilitation due to disease and less independent 

living and, therefore, additional cost to the system and other 

places. 

Mr. PITTS. Dr. Brooks, please describe for us some of the differences patients experience between being treated in a community-based oncology practice and receiving cancer treatment in a 

hospital outpatient department. 

Dr. BROOKS. Well, I briefly described the differences in convenience and financial commitments in my testimony. But just to review, patients often have to travel a bit further to get to a hospital 

outpatient department. They often have to wait a bit longer. And 

CMS’ costs in a hospital outpatient department are higher by at 

least 50 percent. Those are the superficial aspects of the problem. 

But, in fact, they are greater. I told my colleagues about a husband 

and wife pair that I used to take care of years ago and I ran into 

recently. And they told me about their follow-up care in another 

State. The husband goes to a private practice for his follow-up and 

he goes in for his appointment at 10:00 o’clock in the morning. He 

gets to the laboratory, sees his physician, and he is home by 11:00 

o’clock. His wife chooses to go to a nearby tertiary hospital outpatient department. And it is a very well run and well respected 

institution. She has an appointment for a laboratory at 10:00 

o’clock and an appointment for an x-ray at 11:00 o’clock, an appointment for a physician at 1:00 o’clock and outpatient counseling 

at 3:00 o’clock. And she is home by 4:00 o’clock. And she gets basically the same services as her husband does in a local community 

oncology office. 

Those are just—that is just an anecdote for you to understand 

that while they give good care in hospital outpatient departments, 

and we never say otherwise, it is just different. 

Mr. PITTS. Did you want to add anything, Ms. Davenport-Ennis? 

Ms. DAVENPORT-ENNIS. I would. I would like to add the human 

element to that. So when we have a Medicare patient that contacts 

us and says, I am now being moved from the community setting 

with my doctor, and I am going to need to travel 28 miles to get 

to the hospital, I am going to be in an infusion chair, and I may 

be there for an hour, I may be there for 6 or 8 hours, the journey 

when you leave that chair to return to home is indescribable. So 

if I may be personal with this body, I would like to. 

My husband is a stage 4 cancer survivor. We had to move him 

from a local oncologist, and we had him in a hospital setting. The 

simple 28-mile journey resulted in such acute emesis that we had 

to be rescued by an ambulance roadside. We are not a rare exception. The side effects for cancer treatment are serious, and they are 

not simply managed, and so when we move you to a community 

68 

hospital setting, you may indeed be able to handle that transfer no 

problem whatsoever, but we have many cases that document otherwise. 

We think that the hospital cost is something that is important 

to us. We have worked for 17 years to try to work with patients 

to handle the cost of care in a financially sound manner, and to 

exert the full limits of their insurance benefits, and to encourage 

them to get Medigap policies so that, indeed, they are protected as 

they move forward, and even though they play by the rules, the 

system is failing them. 

Mr. PITTS. The chair thanks the gentlelady. 

I now recognize the gentleman from Texas Mr. Green, 5 minutes 

for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Ms. Davenport-Ennis, can you expand on Dr. Brooks’ testimony 

and share the patient’s point of view how the prompt pay discount 

would affect access to Medicare beneficiaries? 

Ms. DAVENPORT-ENNIS. So as we have talked to many of the patients who have had their sites of care shifted, and as we have 

worked with the doctors that are handling them, what we know is 

that many of the practices started operating on reduced margins in 

2004 because we never got the codes back up to where they needed 

to be, and ASP has been unstable at best. So if we could, indeed, 

restore a 2 percent prompt pay discount to many of these practices, 

it would be the difference between adding back another oncology 

nurse case manager or not having one. It would be the difference 

between being able to have after-hours support for the patient and 

sending them to the hospital phone line for after-hours support. 

So there are many services that we think could be restored, and 

you could maintain practices. And for the record, I would like to 

report that to this point we have had 1,200 practices in the United 

States that have either closed completely or compressed their services into hospital settings in which we lost capacity because the 

number of chairs available for chemo at the hospital were not commensurate with what they had before the compression and equal 

to the practice as well. 

Mr. GREEN. OK. Dr. Brooks, can you walk through the importance of that 6 percent additional service fee and what has it accounted for? And I know cancer-treating drugs can be very expensive. For example, if it was a $100,000 treatment, that would be 

$6,000 that would be part of the service fee. Can you walk us 

through that? 

Dr. BROOKS. I would be delighted to, Congressman. 

Obviously, the sequester has definitely removed any incentive we 

have for prescribing expensive drugs, because a small percent on 

a large number cuts both ways. But the prompt pay discount takes 

that 6 percent of ASP and attenuates it by 1 to 2 percent, in our 

opinion. We have to have working capital for inventory, administration, storage, inventory management, systems for transport, 

pharmacy costs, clean room, equipment, waste disposal. We have to 

deal with the problem of inadequate copay collection from Medicare 

beneficiaries—that runs about 5 percent in most of our practices— 

drug denials. And then there is the problem of price increases 

which are not reflected in ASP for about 6 months. 

69 

This results in pretty much taking away our 6 percent service 

margin that we previously had, but with sequester we have attenuated that ASP by an additional 1.7 percent, or 28 percent of our 

services payment that we have gotten before. So now we are, as we 

say, breathing through a straw because we are under water. 

Mr. GREEN. OK. With prompt pay, now sequestration, what is 

the effective percentage? It is lower than the 6 percent? 

Dr. BROOKS. I am not sure I understand your question, but, yes, 

sir, if we were to restore both of those, we would be back to very 

close to break even on our cancer—Medicare cancer part B drugs, 

and we would be able to go back to life as we had it in 2012. Not 

great, it was a lot of migration into the hospitals, but it would be 

much better than we currently have. 

Mr. GREEN. And I know Ms. Davenport-Ennis talked about the 

impact on patients. In your practice have you seen the same situation that she talked about? 

Dr. BROOKS. Yes, sir. I thought that she was very eloquent describing the patient problems of the frail cancer patient having to 

travel great distances to a site of care. We see that a lot in our 

State of Texas, where people have to travel. When community practices close, my Texas oncology, if we were to lose our ability to take 

care of Medicare patients in rural, small-town, and in mediumsized Texas, cancer patients, Medicare beneficiaries would be traveling, 100, 200 miles each day for site of care that would take—— 

Mr. GREEN. I only have about 20 seconds. 

Mr. Binder, obviously Congressman Whitfield and I have introduced legislation on the prompt pay discount and the calculation. 

Isn’t it true that this was fixed within the Medicaid program, the 

prompt pay issue? 

Mr. BINDER. I am sorry, could you repeat that? 

Mr. GREEN. Was the prompt pay issue fixed within the Medicaid 

program? 

Mr. BINDER. The prompt pay—— 

Mr. GREEN. Is your mike on? 

Mr. BINDER. It doesn’t—to my knowledge, the prompt pay discount that is proposed in the legislation wouldn’t impact the Medicaid program directly. Medicaid prices, the Medicaid rebate is determined off of average manufacturer price, and that price excludes 

all discounts already. 

Mr. GREEN. OK. OK. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognize the vice chairman of the subcommittee Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. Before I get to questions, I would like to submit for the record a few things. The article 

from the New England Journal of Medicine from, I think, February 

of last year that Dr. Melton referenced on the impact of coverage 

limits on immunosuppression. I also have statements from the National Kidney Foundation, the American Society of Nephrology, and 

the American Society of Transplant Surgeons, and I would like to 

make those all part of our proceedings today. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

70 

Mr. BURGESS. Dr. Melton, frequently here on this committee we 

hear people talk about, you know, we only want sound science; we 

want to make our decisions based on sound science. So tell me, is 

there a good scientific rationale for the 36-month interval for covering immunosuppression after a renal transplant and then stopping that activity? 

Dr. MELTON. There is no rationale that that is based on at all 

that I am aware of. The patients that we transplant are required 

to take immunosuppressant medications for the life of the transplant. And it is true that many times they require more medications early on in their transplant course, and those can be reduced 

later on, but the need to take those medications continues to exist 

forever. 

Mr. BURGESS. So there is not some point at which a patient’s immune system just kind of accepts life as it is with this new graft 

that is sitting in the body, and the immune system just kind of 

turns off its recognition of this as a foreign object? That doesn’t 

happen, does it? 

Dr. MELTON. No, sir, that doesn’t happen. 

Mr. BURGESS. So since it doesn’t happen, then what happens to 

the graft when you run out of the immunosuppressive activity? 

Dr. MELTON. The body begins reacting against the graft, the immune system begins to reject that graft, and over a period of time 

the patient will lose the kidney transplant and will return to dialysis therapy. 

Mr. BURGESS. So you as a physician would see what, that the 

ability—the filtration rate of that grafted kidney would begin to diminish, so tests that you do or blood work that you do would begin 

to reflect a lower functionality of that transplanted kidney? 

Dr. MELTON. Yes, sir, that is correct. 

Mr. BURGESS. So what is the patient going to experience during 

that time? 

Dr. MELTON. The patient begins to develop symptoms of kidney 

failure: tiredness, loss of appetite, inability to concentrate. They 

will begin to have some pain over and around the kidney transplant itself, indicating that there is an inflammatory rejection process going on there, and many times that results in us having to remove that kidney transplant because of the discomfort and pain 

that the patient is developing. 

Mr. BURGESS. So it is not a silent activity as far as the patient 

is concerned; they are aware that there is a problem? 

Dr. MELTON. Yes, sir, they are. 

Mr. BURGESS. Well, let me ask you this: OK, 36 months go by, 

we stop immunosuppressive drugs because we think that is good 

Federal policy. The patient begins to reject their kidney. You do the 

right thing, which is bring that patient back in to the dialysis clinic 

or refer them back to the dialysis clinic. Does that take care of the 

problem? 

Dr. MELTON. Well, that keeps them alive. It doesn’t keep them 

healthy as they were, and it certainly doesn’t correct the problem 

of losing the drug coverage after 36 months. 

Mr. BURGESS. So what about the quality of life for that individual, does it get affected at that point? 

71 

Dr. MELTON. Oh, absolutely. Quality of life on dialysis is nothing 

compared to transplantation. Transplantation essentially makes 

someone a normal individual, if you will; they are able to work, 

they are able to travel, they are able to participate in sports activities, they can have families. Many patients who are on dialysis are, 

frankly, beat up by the procedure and are unable to hold a job, and 

they suffer a lot of complications from kidney failure and dialysis 

therapy that shortens their life span. 

Mr. BURGESS. Well, as I seem to recall, this is back in the 1970s, 

so it is probably much more frequent now that a patient could even 

successfully carry a pregnancy who has gone through a transplant. 

Dr. MELTON. Oh, absolutely. We have—at our institution we 

have about 40 patients now, 40 women, who have successfully had 

pregnancies with their transplants, most recent—well, not most recently, but recently a young woman with a combined kidney and 

pancreas transplant that delivered twins successfully. 

Mr. BURGESS. That is a remarkable story. 

So what about the—immunosuppressive drugs have been around 

for a while, cyclosporine, I guess. Is that still the main one? 

Dr. MELTON. Cyclosporine has been around since the mid-1980s. 

There are several others that have come into play since that time. 

Mr. BURGESS. So do we have generic—the availability of generics 

for those? 

Dr. MELTON. We do have generics for some of the drugs, not for 

all of them. 

Mr. BURGESS. Does the ability of generics reduce the overall price 

tag for providing immunosuppressant drugs? 

Dr. MELTON. Some of the generic drugs are less expensive, particularly if they are covered through some insurance plans. I had 

our social workers actually run a pro forma on that for me about 

a year ago, and surprisingly—cyclosporine was one of the drugs 

that you mentioned, and surprisingly the generic forms of 

cyclosporine came in only about a third less than the brand-name 

drug. So there was not a substantial—well, a third is a substantial 

reduction, but it was still a pricey drug for the patients. 

Mr. BURGESS. I guess the point would be the last time—you 

know, we have got to do stuff that the Congressional Budget Office 

tells us we can afford to do, so the last time the Congressional 

Budget Office scored this particular piece of legislation, they gave 

it a dollar score. Would it be fair to say that rescoring this with 

this information about the use of generic medications might result 

in a lower score? 

Dr. MELTON. I don’t know how they go about their scoring process. 

Mr. BURGESS. I don’t, either. 

Dr. MELTON. It is a mystery to me. The only comment I can 

make about that is it is—certainly relooking at these drug costs 

would be of benefit, I think, to our patients. 

Mr. BURGESS. It would also be a benefit if we could look longer 

than a 10-year window, because if you add the cost of dialysis in 

perpetuity to a patient who lost their graft after 3 or 4 years, clearly it is going to come down on the right side of the cost curve. 

Thank you, Mr. Chairman. I am going to yield back my time. If 

we have time for a second round, I will be willing to participate. 

72 

Mr. PITTS. The chair thanks the gentleman. 

Now recognize the gentlelady from Florida Ms. Castor, 5 minutes 

for questions. 

Ms. CASTOR. Well, Mr. Chairman, I appreciate you holding today’s hearing and all of the very insightful testimony from our witnesses. Thank you very much for being here. 

I want to talk about one fixable issue, the two-quarter price lag 

on the part B price calculations. 

Mr. Binder, one issue you discuss in your testimony is that twoquarter lag in part B price calculations for provider reimbursement. Can you elaborate on the issue? How does this come into 

play? 

Mr. BINDER. Well, manufacturers report their data, their ASP 

prices, to CMS, and then CMS has a period of time to process the 

information and apply it to the prices they are going to pay for 

those drugs. And it is done on a billing-code basis, so there is—for 

some billing codes there is a number of drugs included, and for 

some there is just one drug when it is a sole-source drug. But that 

process takes some time, and there is analysis involved, and so it 

is 6 months before the prices—— 

Ms. CASTOR. Six months? 

Mr. BINDER [continuing]. Are applied. 

Ms. CASTOR. What are some of the impacts of that 6-month lag? 

Mr. BINDER. Well, it varies. You know, if the drug price goes up, 

and, you know, certain buyers, say, for instance, buyers who don’t 

buy in very large volume, are more likely to be affected by this 

than large-volume buyers or purchasers, they could, you know, 

have to pay more for the drug than they can get from Medicare in 

payment. If the price goes down, purchasers, providers are more 

likely to have it—to buy it at a lower price than they are getting. 

Ms. CASTOR. Dr. Brooks, you discussed this in your testimony. 

Give us the real—what is happening in the real world with a 6- 

month lag? 

Dr. BROOKS. Well, the 6-month lag is a problem. There are a lot 

of the pharmaceutical and biologic firms that have a business 

model whereby they raise prices about once a year, and they put 

us under water for 6 months. And then before we quit prescribing 

their drugs, they allow 6 months where we can more or less hold 

when ASP comes back to respectability, and then they have another price increase again the next year. 

This is what we see, this up-and-down price sequences where we 

have 6 months under water, then 6 months to try to catch up, and 

then 6 months down again. It is a relentless process, and a more 

rapid reconciliation of those price increases that we have to pay 

with what we are actually reimbursed would be most helpful to our 

ability to deliver cancer care to our Medicare patients. 

Ms. CASTOR. That is consistent with what I am hearing from doctors back in Florida. And I know it seems like an arcane detail, but 

I think it is having big impacts. And sometimes in Congress we 

hear about problems that are difficult to solve, and sometimes we 

hear about problems that are easier to solve, and it seems like one 

that, Mr. Chairman, would fall into the easier category. In this day 

and age, when you can communicate with anybody anywhere in the 

world in seconds, and we can pull up any piece of data on our iPads 

73 

that we have here or our iPhones, it certainly seems to me like we 

should be able to determine accurate Medicare drug prices without 

a 6-month lag in time. 

The two-quarter lag is written into Medicare law, so this is a 

problem for Congress to solve. And, Mr. Chairman, I hope we can 

work together to find a solution on this. 

I would also like to talk about the impact of the sequester. It has 

been in place for several months now, but it is no longer front-page 

news, but that doesn’t mean that it is not causing real harm. One 

area where it has hit hard is in reimbursements for Medicare providers, including the part B drug providers. 

The sequester required a 2 percent cut in reimbursements. Earlier this year The Washington Post had quite an article on it identifying one cancer clinic that said that due to the sequester, they 

would have to stop treating as many as one-third of their 16,000 

patients. And this is consistent with the testimony here this morning. 

Dr. Brooks, can you tell us what—put us in the real world here. 

What is this 2 percent cut having—what impact is it having on patients that you see? 

Dr. BROOKS. Well, Congresswoman, thank you for the question. 

I only alluded to it briefly, but it is not a 2 percent cut for Medicare 

part B drugs in oncology. CMS has interpreted the rule perversely, 

in our view. They have cut not only our 6 percent services payment, but also the entire 100 percent drug acquisition costs that 

we do for CMS. So they cut us on all of Medicare’s expenditure so 

that it results in a 28 percent reduction in our services payment, 

and this has put us under water and has cost those of us—— 

Ms. CASTOR. It is so irrational. I mean, it really highlights the 

irrationality of the sequester, just across-the-board cuts that are 

not based on the real needs of the American people. And it is not 

just Medicare part B, it is cuts to NIH, and medical research funding, Head Start, Meals on Wheels. And I think the solution—I 

know that legislation has been filed particularly on this point, but 

the real solution are both sides of the aisle coming together to replace the sequester. 

Now, yesterday the—my side of the aisle, the Democrats, we appointed budget conferees. We are ready to go negotiate, and I 

would ask my friends on the other side of the aisle to please do not 

be afraid to come together and negotiate. We are seeing a realworld impact of the sequester. 

Thank you, Mr. Chairman. 

Mr. PITTS. The gentlelady’s time has expired. 

The chair recognizes the gentleman from Louisiana Dr. Cassidy, 

5 minutes for questions. 

Mr. CASSIDY. Dr. Brooks, Ms. Davenport-Ennis, I am struck, it 

seems like we have a trifecta of bad things driven by government 

policy. One, 340B program or something else is, among other 

things, driving community oncologists to go into a hospital outpatient network, that that hospital outpatient network charges 

Medicare more, that the patient pays more, and that they are less 

convenient. 

For folks who don’t know what emesis is, Ms. Davenport, vomiting. Your husband was so sick, he was vomiting on the way back 

74 

that he dehydrated in a half-hour drive and had to get an ambulance. This is like a quadrifecta of bad things. Did I hear that 

right, or am I misstating what the two of you said? 

Ms. DAVENPORT-ENNIS. So from my point of view, you have heard 

it exactly right. And I would like to comment, if I may, on 340B. 

Mr. CASSIDY. OK. You may want to elaborate what the program 

is for those who may not be familiar. 

Ms. DAVENPORT-ENNIS. So when we look at 340B, the intention 

of the program was well intended. We were phasing out Hill-Burton hospitals that were supplying support to the at-risk populations. We introduced 340B concept so that hospitals serving atrisk populations could buy drugs at a reduced price, could bill them 

at a standard price; the margin could therefore be used for that 

hospital to make certain they could continue to serve the at-risk 

populations. 

Initially the intent was to have 600 to 900 hospitals in the country as part of 340B. Today we have over 6,000 hospitals in the 

340B program, and the margins are not necessarily consistently offering support to the at-risk population. The margins are being 

used to recruit community oncologists to come into that hospital 

setting. 

Mr. CASSIDY. Now, is that allegedly, or do you have evidence of 

that? 

Ms. DAVENPORT-ENNIS. No, we have evidence of that, in talking 

with a number of the practices. We work with oncologists in 50 

States in the United States who work with us in case management 

services and in our copay relief services, and so it is not alleged, 

it is documented, and we—I would like to ask—— 

Mr. CASSIDY. So just to be sure, I am sorry to interrupt, but the 

program that supposedly is the subsidized care for the uninsured 

and for the Medicaid and Medicare patient to bring a set of services that otherwise they would not be able to have, you are saying 

that there is evidence that it is not being used for that, but rather 

to subsidize the purchase of community practices, bringing them 

into the hospital outpatient department, and in the meantime increasing costs to Medicare, to the patient, and decreasing convenience. Is that what you are saying? 

Ms. DAVENPORT-ENNIS. Yes. What I am saying is that indeed the 

340B hospital structure now allows it to offer very attractive packages to oncologists for them to leave their practices and associate 

or to bring their entire practices to the hospital setting, yes, sir. 

Mr. CASSIDY. Now, I will say that I work and I still see patients 

in the Louisiana public hospital system, and that there are some 

hospitals I will declare that are still doing the correct mission with 

the 340B program. 

Ms. DAVENPORT-ENNIS. You are exactly right. 

Mr. CASSIDY. Yes. A lot of my patients would not have drugs otherwise. 

Mr. Cosgrove, I have been struck anecdotally there is evidence 

that the drug shortages, for whatever the etiology of the drug 

shortage is, is leading to the need to substitute more expensive 

drugs for much less expensive generic drugs; that the shortage of 

sterile injectables in the oncologic space, for example, is requiring 

the use of more expensive drugs. Now, that is anecdotes. I read it 

75 

in the paper. Did you find evidence for that influencing utilization 

and cost? 

Mr. COSGROVE. We did not. We did not look at that specific—— 

Mr. CASSIDY. Did you look at that? Microphone, please. Did you 

specifically look at that, or you just—you looked at it and didn’t 

find it? 

Mr. COSGROVE. We did not look at that. GAO has a report it 

issued in November of 2011, I believe, looking at shortages and 

their causes. There is follow-up work going on right now. It is a 

mandated study to try to get behind what is exactly causing those 

shortages and what the trends are. 

Mr. CASSIDY. OK. Dr. Brooks, anecdotally are you seeing evidence for that or—because, again, I read about it in the paper, so 

that is why I am—— 

Dr. BROOKS. Well, sir, it is not anecdotal. We in US Oncology 

are—and with the help of our corporate partner, McKesson, we 

monitor the space extremely tightly, and I am actually involved in 

that monitoring. And your comment about steroids is spot on. We 

sent out an alert recently that methylprednisolone is in short supply. It costs pennies, but it is in very short supply because of the 

pressure of manufacturers. 

ASP plus 6, I believe—and I don’t know that the office of MMA— 

but I believe it was designed to curtail expenditures around expensive products. They never understood that they were going to create a race to the bottom in generic market so that our generic oncology drugs get lower and lower and lower prices, and then eventually it becomes not worthwhile to make these drugs. It costs only 

2 or $3. They are expensive, they are hard to store and all this 

other stuff. It just—the economic incentive vanishes. 

Mr. CASSIDY. We are out of time, but if I may say, so Mr. Waxman at the outset saying that we are saving money by price controls, it may be that we are saving money in the short run, but 

long term penny wise, pound foolish, because we are having to substitute far more expensive drugs. 

I yield back. Thank you for your indulgence. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognize the gentlelady from California Mrs. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman. I am very pleased we can 

come together for another bipartisan hearing to address some commonsense improvements to Medicare, including two important provisions that I have cosponsored. 

Medicare beneficiaries are a medically vulnerable population, 

and we have a responsibility to ensure that they have access to 

high-quality, community-based care and are not facing unreasonable financial burden. Unfortunately this isn’t always the case, but 

I am pleased to see we have a lot of good bills from this committee 

to help address some of these shortcomings. 

I have heard a lot from my constituents about challenges with 

continuity of care, access to providers, and the prohibitive costs of 

treatments for cancer and other chronic conditions. Cuts as a result 

of sequestration are taking a real toll on providers and have serious implications for access. For one oncologist in my district who 

sees a patient base that is over 90 percent Medicare beneficiaries, 

76 

this has meant letting staff go, the sequestration, making serious 

pay cuts, and taking out a home equity loan just to keep the doors 

open, because if she doesn’t do this, patients will have to travel 

more than 30 miles to the next closest provider. 

While I do have serious concerns about piecemeal approach of 

easing the impact of only one part of sequestration, that doesn’t 

mean that this issue isn’t an incredibly important one and does deserve our attention. I hope we can find a solution that minimizes 

the harm to patients and providers, especially in the context of an 

overall sequestration fix. I know it is not going to be easy, but I 

believe we can do this if the House majority will let us. 

I also wanted to highlight that there are other improvements to 

Medicare part B that do not involve drug benefit, but are also critical to address gaps in care that many patients face. Navigating 

complicated treatment options for yourself or a loved one, especially 

with a cancer diagnosis, this can be a full-time job and more, and 

without a plan it can be really overwhelming. And that is why this 

week my colleague from the Ways and Means Committee Mr. 

Boustany and I introduced H.R. 2477, the Planning Actively for 

Cancer Treatment Act, or the PACT Act. This bill would improve 

the health of Medicare beneficiaries with a cancer diagnosis while 

reducing inefficiencies in the Medicare system. 

The Medicare program spends over $55 billion each year to treat 

patients diagnosed with cancer, and too many of those patients do 

not receive a written care plan that explains the diagnosis, the 

prognosis, the treatment, and the expected symptoms. This leads to 

poor coordination among providers, reduced adherence rates, and 

increased stress or pain for the patient and their family. 

However, a strong body of research shows that care planning coordinates care between numerous providers, and it also encourages 

shared decisionmaking between doctors and patients about how to 

best move forward based on both medical evidence and patient 

wishes. It addresses both the cancer treatment, but also the side 

effects from treatment, while addressing the patient’s needs, and 

this can be done in a holistic way. Research has confirmed that this 

kind of coordinated care really does improve patient outcomes, increases patient satisfaction, reduces unnecessary utilization of 

healthcare resources. 

Ms. Davenport-Ennis, as someone who is very familiar with the 

challenges patients face—I know all of you are, but there is not 

much time—would you share how this bill could help patients as 

they navigate cancer care, something I have been advocating for for 

a very long time? 

Ms. DAVENPORT-ENNIS. You have, and on behalf of the cancer patients in the country, thank you for the work that you continue to 

do. 

What this would do is provide a road map to survival, and it 

would show them what the stops are going to be along the way, 

and it would identify to them what to do when you have reversals. 

It would also allow them to manage their resources and to plan accordingly. It would also allow us to have an opportunity for endof-life discussions when we need to have end-of-life discussions as 

part of planning for the full continuum. 

77 

It is, indeed, the beacon for the future, and it is something we 

have lobbied for in this city for more than 10 years, and we are 

very hopeful that you are going to make it happen this time. 

Mrs. CAPPS. Well, I am going to need a lot of help, as you know, 

and maybe—Mr. Chairman, this is a request. I have another whole 

topic to bring up on restraining excessive cost sharing, the Patients’ Access to Treatments Act, another bill that I have introduced with Mr. McKinley. I will just submit it for the record, and 

perhaps some of you may wish to comment on it. 

[The information appears at the conclusion of the hearing.] 

Mrs. CAPPS. But I kind of wanted to get just a nod from the rest 

of you about this kind of coordinated care plan that we are advocating to see if it fits your needs, yes or no, quickly. Thumbs up? 

Is that the verdict? 

I mean, it is kind of one of those no-brainers, isn’t it, that we 

should just set ourselves around to doing, and I appreciate very 

much this opportunity to discuss it. 

I yield back. 

Mr. PITTS. Without objection that will be entered into the record, 

and I would also like to ask unanimous consent that the following 

documents be submitted for the record: a letter from the California 

Health Institute, a letter from the American Society of Clinical Oncology. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mrs. CAPPS. Mr. Chairman, I was just informed by staff that I 

should ask, because we had a lot of nods, and I don’t think the recorder can—— 

Mr. PITTS. All right. The witnesses will please respond verbally 

to—— 

Mrs. CAPPS. Just really quickly yes or no. 

Dr. BROOKS. It would be a great asset, and as long as it wasn’t 

sort of an unfunded mandate, we would cherish it. 

Mrs. CAPPS. The question is whether there is agreement about 

the need for a coordinated care plan, a plan, a written plan. 

I guess one strong affirmative. We will note that. 

Dr. MELTON. In support of my oncology colleagues, absolutely. 

Ms. DAVENPORT-ENNIS. And in support of the patients that we 

serve in the United States, absolutely. 

Mrs. CAPPS. Thank you. 

Ms. DAVENPORT-ENNIS. Yes. 

Mrs. CAPPS. Thank you. 

Mr. PITTS. All right. That concludes the first round. We will have 

one follow-up. We will go on each side. Dr. Burgess for follow-up. 

Mr. BURGESS. Thank you, Mr. Chairman. 

You know, I know people watching these hearings sometimes get 

confused. We have got a representative from the Congressional Research Service here. We appreciate him being here. We also talk 

about the Congressional Budget Office, which does the scoring of 

legislation that is introduced in Congress. There is another budgetary body down at the White House called Office of Management 

and Budget. Certainly Center for Medicare and Medicaid Services 

makes its own determinations to some degree. 

But one of the main things, one of the main foci of today, has 

been the inclusion in the category of physician services the acquisiVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
78 

tion and storage of very expensive drugs. And I think, Mr. Binder—I don’t want to put you on the spot, but I think even CRS 

would agree that you have a family practitioner who diagnoses 

pneumonia, writes a scrip, tears it off, hands it to the patient, says 

go down to the pharmacy and buy these penicillin tablets and take 

them, and you will get better. If you were—it would be wrong to 

say we are going to include that cost in the physician’s service and 

then subtract 2 percent from that total bill and get that money 

back to the government. It just wouldn’t make good sense. 

So the acquisition—and this was part of my opening statement, 

that the math function doesn’t compute here. This is my beef with 

the Centers for Medicaid and Medicare Services. We sent them a 

letter signed by a lot of members of this committee; we got a nonresponsive response. Sorry, not good enough. We sent a follow-up 

letter to them that you really have to delineate to us how in the 

world that acquisition and storage requires a medical degree and 

a State license in order to do that, because otherwise it just opens 

the door for all other sorts of mischief. So I hope that we are able— 

Dr. Brooks, I hope that we are going to be able to get some sensibility surrounding that. 

More difficult aspect to undo the sequester. I mean, the sequester, after all, was bipartisan legislation, much more bipartisan than 

the Affordable Care Act; was signed by the President. Same President who signed the Affordable Care Act signed the sequester. So 

we are often told on this committee when we complain about the 

Affordable Care Act, hey, it is the law of the land, get over it. Well, 

the same statement could be made about the sequester: It is the 

law of the land. 

But we do need to be certain that it is administered properly, 

and in this case, I think Dr. Brooks is exactly on target, it is not 

being administered properly. And you may even want to address— 

you get some—I mean, your practice margin is pretty narrow, and 

there is lots of things that put pressure on your business model, 

but everyone on this dais would say it is a good business model. 

We want you to be focusing on what you do best, which is taking 

care of the cancer patient. A patient gets cancer, they want to go 

to a clinic where that is all they take care of. They don’t want to 

go to a clinic where they are also delivering babies and treating 

kids with runny noses. They want a cancer specialist, and I don’t 

blame them, and that is what you provide. 

But you are also, if I recall correctly, under State law and under 

our Texas law, with the franchise tax. This is something you also 

have to deal with with the acquisition and storage costs that also 

erodes your ability to take care of patients. 

But the big thing you brought up, and what I really want to perhaps ask you to comment on, you said 102 percent of your business 

is required to pay for all of your business, because the government 

doesn’t carry its fair share. Did I understand you correctly when 

you made that statement? 

Dr. BROOKS. Yes, sir. Those were numbers for 2012. That is our 

calculation. Our professional medical oncology payment for my salary is 102 percent from commercial payers, meaning that the Medicare and Medicaid are minus 2 percent. So we actually paid for the 

privilege of taking care of those patients, and that sounds like horVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
79 

rible or something, but we were oK with that. I mean, I hate to 

say it. Our mission is to take care of patients, and we are oK with 

a small loss to continue doing what we believe we should do. 

Now under sequester our incomes are falling like a stone, and I 

don’t—I can’t give you a number for how bad it is, but there is a 

multiplier effect going on here, and it is much worse than we—our 

accountants projected for us, the actual dollars coming in. And we 

are anticipating that the—everybody says, oh, there is no drama, 

nobody is losing access. We anticipate that there will be a twostage approach here. The smaller practices that are not taking adjustments will begin to have to turn out their lights for the last 

time in August or September, in our calculations, and our complicated larger practices are working quietly behind the scenes to 

arrange for transfer of these patients to other venues because we 

will not be able to continue to subsidize our Medicare beneficiaries. 

Mr. BURGESS. But I would just project that the entire—we also 

heard some discussion about consolidation of practices. Certainly 

cardiologists saw that with the consolidation of their practices moving to the hospital. The Affordable Care Act is going to put some 

pressure on practices of all sorts to consolidate. I mean, in fact, 

Zeke Emanuel, one of the principal architects of the Affordable 

Care Act over at the White House, said that he wanted doctors to 

work for a hospital or a health plan or the government; that was 

a better way, in fact, to practice; that you and I are dinosaurs in 

private practice. 

I do—we do need to keep a focus on this, because your comment 

that part of your practice pays for the other part, it is the government part that is not carrying its weight. As that level is expanded, 

and it will be, make no mistake about it, January 1st of this next 

year, by a year from now we will be seeing that in a big way, we 

won’t be crying about just the sequester, we will be crying about 

what a significant negative impact that has had on your practice. 

I want you to know we are prepared—we are trying to prepare 

for that, we are trying to make sure we are on top of that, but it 

is, indeed, a difficult question. But both sides need to be involved 

in this discussion. 

I will yield back, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognizes the gentlelady Mrs. Capps, 5 minutes for followup. 

Mrs. CAPPS. Mr. Cosgrove, your testimony provides us a broad 

overview of key part B drug spending facts. If I could briefly go 

over some of these facts with you? 

First, about how much does Medicare part B pay for drugs each 

year? 

Mr. COSGROVE. In 2010, it was almost $20 billion, $19.5 billion. 

Mrs. CAPPS. Your testimony indicates that many of these part B 

drugs can be particularly expensive, costing tens of thousands of 

dollars or more. Why is this? I know patients want to know. 

Mr. COSGROVE. Well, the price—I mean, Medicare is—working 

through physicians is accepting market prices, which are set by 

manufacturers. 

80 

Mrs. CAPPS. OK. Am I correct, Mr. Cosgrove, that for many of 

these drugs, Medicare part B is the largest single—single largest 

purchaser? 

Mr. COSGROVE. Yes, that is absolutely true. For 35 of the 55 

drugs that we looked at, Medicare was the majority purchaser, and 

there were a handful of drugs for which Medicare paid more than 

90 percent of the share of the total market. 

Mrs. CAPPS. And just to be clear here, we need to do all we can 

to keep the drug pipeline flowing. These new drugs are expensive, 

but they do save lives. And a thriving drug industry is important 

for Medicare and for patients, that goes without saying, but we also 

need to make sure that we are spending taxpayer dollars wisely, 

and we are spending so much on these part B drugs that I wonder 

if we are able to get the best deals possible. 

Do you have any thoughts here, Mr. Cosgrove? Does Medicare 

part B program have all the necessary tools that it needs to help 

reduce drug costs for taxpayers and beneficiaries? 

Mr. COSGROVE. Well, I think this is a lot of money when you are talking about $20 billion. 

Mrs. CAPPS. Yes. 

Mr. COSGROVE. And you are also talking about drugs that can be 

incredibly valuable on a wide variety of things, but that can be true 

for lots of parts of Medicare as well. And so I think that it is the 

responsibility of this committee and the rest of Congress to make 

sure that we are always getting the best deal, to make sure that 

providers are paid appropriately, and that beneficiaries have access 

to quality care, but that Medicare is not overpaying, and that 

would include making sure that we pay the right price and we set 

the right incentives for providers to do the right thing. 

Mrs. CAPPS. Mr. Binder, do you have any thoughts on this? 

Mr. BINDER. Well, I agree with what Mr. Cosgrove said. The 

drug-pricing methodologies are complicated, and in this case you 

are talking about overlaying a methodology on the market mechanism as well, the manufacturers price their drugs. So you are overlaying this methodology, this payment methodology, and that becomes complicated, and you add sequester on that, it becomes even 

more complicated. 

But there have been a number of proposals, including in the 

President’s budget and other places, for other fixes or adjustments 

to either the ASP plus 6 or other approaches that could potentially 

help alleviate some of these issues. 

Mrs. CAPPS. Thank you. 

I will just bring up again the second bill, H.R. 460, the Patients’ 

Access to Treatments Act, that I have introduced with Mr. McKinley, because it does address restraining the excessive cost sharing 

for specialty drugs, bringing medically necessary treatment within 

reach for average Americans. 

While this bill only addresses the private insurance, the problem 

isn’t unique to the commercial market. Under part B patients who 

face a serious diagnosis or are living with a chronic health condition are subject to significant financial burdens. Unlike the protection that many of us have with private plans, seniors who can’t afford supplemental coverage and have traditional Medicare part B 

plans have no out-of-pocket max. That means that they continue to 

81 

pay 20 percent out of pocket for every part B service, as you know. 

And for patients undergoing cancer treatments or requiring ongoing doctor-administered therapies, this cost can be prohibitive, especially when you realize that half of Medicare beneficiaries have 

incomes below $22,000 a year. 

I mean, this is a set-up for failure. Health expenses constitute almost 15 percent of household budgets for individuals who are on 

Medicare, nearly three times the spending of non-Medicare households. I sound like I am on a soapbox, but maybe I will ask just 

in conclusion, 15 seconds, Ms. Davenport-Ennis to comment. 

Ms. DAVENPORT-ENNIS. Certainly the Medicare beneficiary is not 

in a position to pay what is required in a 20 percent copayment 

into perpetuity in part B Medicare. 

Mrs. CAPPS. Thank you. 

Yield back. 

Mr. PITTS. The chair thanks the gentlelady. 

We are going to go to one more round on each side, one more follow-up on each side. So the chair recognizes Mrs. Ellmers from 

North Carolina, 5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and I apologize for 

coming in so late to this so important subcommittee hearing. 

I do have a couple of questions, and I would like to ask Ms. Davenport-Ennis and Dr. Barry Brooks this question. Earlier I made 

an opening statement regarding the Medicare part D and the effect 

that sequester has on those cancer drugs or chemotherapy agents. 

Given my discussion with the community oncologists and the numerous media reports that are going on now over the past few 

months, you know, we are now entering into about the third month 

of this affecting chemotherapy drugs. Basically patients are being 

forced out of their local community clinics to the more expensive 

hospital setting. What impact do you believe my bill would have in 

stopping this harmful trend? 

Ms. DAVENPORT-ENNIS. I believe that it will at least stop some 

of the hemorrhaging of what is happening now. I think ultimately 

the committee is going to need to look at a comprehensive approach 

to what can be done to stabilize reimbursement to the practices, 

but your bill is certainly going to take a significant step forward 

in resolving this. 

Mrs. ELLMERS. Thank you. 

Dr. Brooks? 

Dr. BROOKS. I agree that your bill would slow our hemorrhage 

and allow us to return to some semblance of stability. One-third of 

the market of community oncology has migrated to the hospital in 

the last 7 years, and that has been accelerated in the last 3 months 

under the weight of the sequester burden, and were we to relieve 

that, hopefully access could be maintained, and community oncology could continue to be practiced the way it has for the last two 

decades. 

Mrs. ELLMERS. Thank you. 

I would also like to pose another question to the entire panel. Basically, as you know, the whole point of sequester is to reduce the 

spending at the Federal level; however, treating people in the hospital is actually more expensive than providing the same service in 

a physician’s office or clinic setting. In fact, studies show that proVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
82 

viding chemotherapy costs Medicare and the taxpayers $6,500 

more per patient per year in the hospital setting and $650 out of 

the patient’s own pocket. 

Basically also, and I will just add this, just last night I saw attacks from doctor—a doctor from Tulsa, Oklahoma, that read, 

quote, We have sent 50 percent of our chemo to hospitals in the 

past week, even patients with good insurance, because drugs are 

unaffordable for us at this point. 

Given that the application of sequester by CMS is actually costing taxpayers money instead of saving it, shouldn’t Congress be 

doing everything in our power to reverse this and make a change 

where we see a need? And I will just ask a basically yes or no answer from the entire panel. 

Mr. BINDER. I am sorry, could you repeat that? 

Mrs. ELLMERS. Basically—I caught you off guard. Basically my 

point is as a result of more patients going to the hospitals and 

being treated in the hospital setting, it actually costs Medicare and 

the hard-working taxpayers of America $6,500 more per patient per 

year, but then also, and this is the truly, you know, shameful part, 

another $650 out of pocket for that patient. In your opinion, 

shouldn’t we be doing everything we can to fix that? 

Mr. BINDER. Yes. 

Mrs. ELLMERS. OK. Perfect. 

Dr. Brooks? 

Dr. BROOKS. Absolutely. 

Ms. DAVENPORT-ENNIS. Completely. 

Dr. MELTON. I would agree. 

Mr. COSGROVE. Medicare needs to save money. 

Mrs. ELLMERS. Thank you. I appreciate that from all of you. 

And, Mr. Chairman, I would like to submit for the record a statement from the American College of Rheumatology. It is actually a 

publication examining reforms to improve the Medicare part D 

drug program for seniors. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mrs. ELLMERS. Thank you, Mr. Chairman, and I yield back the 

remainder of my time. 

Mr. PITTS. The chair thanks the gentlelady. 

That concludes the questioning from the Members. The Members 

may have additional questions that we will submit to you in writing. We ask the witnesses to please respond promptly to the questions that we send you. I remind Members that they have 10 business days to submit questions for the record, and Members should 

submit those questions by the close of business on Tuesday, July 

16th. 

Very informative hearing. Thank you very much for your patience as we had to delay due to floor votes. Without objection, the 

subcommittee is adjourned. 

[Whereupon, at 12:50 p.m., the subcommittee was adjourned. 

[Material submitted for inclusion in the record follows:] 

83 

PREPARED STATEMENT OF HON. FRED UPTON

Today our work continues in the ongoing effort to enhance the quality of health 

care for our nation’s seniors. We will examine the Medicare Part B drug program 

and reform proposals aimed at improving the important program. 

We owe it to our seniors to evaluate the effectiveness of Medicare and suggest improvements to the program. Earlier this week, this subcommittee examined Medicare’s traditional benefit design and sought input from experts on how to modernize 

it. 

The Medicare Part B drug program is essential to our nation’s seniors, especially 

those who are battling cancer. The invaluable role that these drugs play in the 

treatment of chronic illness cannot be overstated. As we look to examine the program, we must ensure that the program, and seniors’ access to these essential 

drugs, only continues to get better. 

When Congress changed the Part B drug reimbursements to track their average 

sales price in 2003, there were questions as to whether that average sales prices 

was an appropriate pricing mechanism. Since then, MedPAC has weighed in on the 

issue by noting that Congressional movement to the ASP system has resulted in 

substantial price savings for Medicare on nearly all drugs covered by these reimbursements, and was contributing to decreased Part B spending. 

Recently, members of Congress and the administration have proposed changes to 

the Part B drug program. Some of the changes seek to improve the program; others, 

like the president’s call to cut physician reimbursements for these drugs, may not 

have such positive effects. 

As we examine reform proposals to improve the Medicare Part B drug program, 

I want to commend all of my colleagues who have offered such proposals, including 

Representatives Whitfield, Green, Rogers, Capps, Lance, Ellmers, and Burgess. I 

look forward to hearing testimony on their proposals today. 

With that Mr. Chairman, I yield the balance of my time 

to——————————————————. 

PREPARED STATEMENT OF HON. MIKE ROGERS

Thank you Mr. Chairman for holding this important hearing. 

The United States is home to the most effective and successful cancer care in the 

world, creating an environment that has resulted in the best cancer survival rates 

across the globe. 

According to the National Cancer Institute (NCI), overall cancer death rates have 

continued to decline in the United States among both men and women -as well as 

among all major racial and ethnic groups -for all of the most common cancers, including lung, colon and rectum, female breast, and prostate. 

However in the last five years, a troubling change in the delivery of cancer care 

has begun to emerge - a change that has been directly affecting not just the continuing rise in the cost of Medicare, but also the ability for cancer patients to access 

treatment. 

Since 2008, community oncology clinics have seen the steady shift from the physician office setting to the hospital outpatient department (HOPD) as a result of 

flawed Medicare payment policies that reimburse hospitals at higher rates than oncology clinics for the exact same service. 

Due to the significant changes in Medicare payment policies and the eroding revenues to community oncology clinics, physician practices are suffering from serious 

financial difficulties and struggling to keep their doors open. 

The most recent Practice Impact Report from the Community Oncology Alliance 

(COA) reports that oncology clinics have closed or consolidated at a 20 percent faster 

in the past year than they did a year before - a statistic that should give us all 

pause. 

In the past year 288 clinic sites closed, 407 practices were financially struggling 

and 469 practices had entered into a contractual relationship or had been acquired 

by a hospital. 

The consolidation of cancer treatment services to the hospital outpatient setting 

has serious implications for patient access especially in rural areas where radiation 

therapy is not always available through local hospitals. Patients may be forced to 

travel long distances to receive care, posing a considerable barrier to care for beneficiaries who require radiation treatment therapy daily for months at a time. 

Moreover, this shift in setting for cancer treatment poses a threat to the solvency 

of Medicare as the current disparities in payment have created incentives for hosVerDate Nov 24 2008 13:39 Feb 28, 2014 Jkt 037690 PO 00000 Frm 00089 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-64 CHRIS
84 

pitals to buy physician practices, driving up costs for the Medicare program and for 

cancer patients. 

Reimbursement should be equal for the same service provided to a cancer patient 

regardless of whether the service is delivered in the hospital outpatient department 

or a physician office. 

I look forward to working with my colleagues to ensure the future of community 

cancer care. 

Thank you Mr. Chairman, I yield back. 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Thank you Chairman Pitts, and thank you for holding this hearing today. Medicare reimburses for prescription drugs in two settings. Outpatient prescription drugs 

are covered by Medicare Part D, while prescription drugs administered in a physician’s office are paid for by Medicare Part B. This is a critical benefit that allows 

seniors to have access to physician-administered drugs which are most commonly 

cancer drugs used for chemotherapy and its related side effects or drugs to treat 

other serious illnesses. 

Congress has debated for years on whether Medicare can save more money on the 

drugs it pays for through the Part B program. Under the Medicare Modernization 

Act of 2003, to address widespread spending growth, we changed paying physicians 

based off of the manufacturer’s Average Wholesale Price (AWP), which was often inflated, to a payment based on a manufacturer’s Average Sales Price, or ASP. Today, 

a doctor is reimbursed ASP + 6%-an amount much more reflective of the actual 

price manufactures receive for their products. 

The new system has been working. But according to stakeholders and industry 

leaders, challenges with the ASP+6% reimbursement policy still exist. In addition, 

some believe that there is a growing shift from receiving this care in a community 

physician setting to a hospital outpatient setting-a trend which, if based on fact, 

would have implications to the overall spending of the Medicare program. 

Now, I know there are a number of members of our Committee who have taken 

an interest in this area, some who would like the current system to be amended 

further. In addition, many stakeholders, some of who are here today, have outlined 

additional challenges with the reimbursement structure of Part B. 

For example, Oncologists are concerned about prompt pay discounts provided to 

wholesalers by manufacturers for paying within a specified time window. These discounts are not necessarily passed on to physicians when they purchase drugs from 

the wholesalers, but do have the effect of lowering the ASP reimbursement rate. Accordingly, Oncologists would like to see prompt pay discounts excluded from the 

ASP calculation. Of course, when it comes to seriously ill cancer patients, we want 

to ensure they have access to the best care and the best drug for their individual 

circumstances. So we should certainly tread with caution if there is credible evidence that lowering reimbursement could create market disruptions and result in 

Oncologist practices closing, thereby limiting Medicare access for seriously ill cancer 

patients. 

Now, as we all know, sequestration has resulted in a two percent across the board 

cut to Medicare. This includes a cut to Part B drugs. While I believe it is extremely 

important for seniors to have access to these lifesaving drugs, I do not agree with 

the approach that we should lift sequestration piecemeal like based on individual 

member bills. That approach is simply disingenuous. 

I opposed sequestration since it was first conceived. The idea that across the 

board, blind cuts could be used as a vehicle to reduce spending is foolhardy and dangerous. The case of Part B drugs shows just that. I recognized that sequestration 

would have real world effects, which is why I voted against the set of indiscriminate 

federal budget cuts. It is hypocritical that the same Members who voted in favor 

of the Budget Control Act of 2011 are now turning around and introducing legislation to reverse cuts on specific portions of the system. By pursuing a piecemeal approach to fix sequestration, we are being asked to place a higher value on some 

services than others. These cuts seriously hurt our economy, debilitate programs 

Americans rely on, and put our public safety at risk. Access to Part B drugs by our 

nation’s seniors is just one example of the negative impact of sequestration on the 

daily lives of constituents in every one of our districts. We need a long term fix that 

truly addresses the budget in its entirety. 

Thank you. 

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