The Medicare Payment Advisory Commission released its yearly report to Congress on Medicare and the healthcare delivery system.

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June 21, 2019


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Yesterday, the proposed rule for the International Pricing Index Model for Medicare Part B Drugs was sent to the Office of Management and Budget for regulatory review.


Splish, No Splash:
MedPAC Recommendations Mirror What Policymakers Were Already Considering


Late last week, the Medicare Payment Advisory Commission (MedPAC) released its yearly report to Congress on Medicare and the Health Care Delivery System. The annual report includes recommendations for changes to the Medicare program and the status of current programs. Two of the recommendations focus on tackling the continued increase in drug spending in Medicare Parts B (typically in-office) and D (typically retail or mail order).

Establishing Parameters for Medicare Part B Drug Pricing
Medicare Part B spending has increased in recent years. To deter the continued growth, MedPAC explores 2 potential strategies in its report: referencing pricing and binding arbitration. Through implementing a reference pricing policy, Medicare would create an internal reference pricing list for single-source drugs that provide similar health effects. The reference price would be the highest Medicare would pay for the group of drugs. If a patient chooses a treatment that is higher than the reference price, they would pay the difference. The Commission feels reference pricing would encourage providers and patients to consider the less costly treatments.
While a reference pricing policy may help control costs for products with multiple competitors, binding arbitration may help control costs for products that are novel or have little competition. Through arbitration with a neutral third party, under certain circumstances, the Health and Human Services (HHS) Secretary could enter into a binding agreement with the manufacturer. An arbitrator or arbitration panel could review information from both parties to determine the binding price. Implementation of the agreement could come in the form of lowering Medicare payment rates or a rebate that the manufacturer would pay to Medicare. MedPAC recognizes the complexities of implementing these strategies but believes these policy changes could potentially reduce Medicare spending, although others would question the impact to patient access and future innovation.

Restructuring Medicare Part D Benefit
While generic utilization in the Part D program is high, since the inception of the program, there has been an increasing number of higher-cost specialty products approved that do not require provider administration. This change has resulted in an increase in spending on specialty drugs and biologics which has forced many more beneficiaries into the catastrophic phase and thousands of dollars a year in spending. It has also increased liability for the federal government because of the current structure of the program. MedPAC recommends changing the Part D benefit structure to incentivize better management in catastrophic spending and encouraging manufacturers to lower drug prices.

The recommended changes include:

  • Removing the coverage gap
  • Moving the manufacturer contribution to the catastrophic coverage phase
  • Setting a “hard overall out-of-pocket cap”
  • Applying the manufacturer discount for both low-income subsidy (LIS) and non-LIS beneficiaries

In parallel with these changes to the benefit design that increase the risk to plan sponsors, MedPAC recommends allowing plan sponsors more flexibility with selecting formulary tools for utilization management.

Additional topics and recommendations discussed in the report include improving the notification process for beneficiaries newly eligible for Medicare, expanding access to primary care physicians, and assessing the impacts of the Medicare Shared Savings Program, Medicare Advantage quality bonus program, and long-term-care hospital dual- payment rate structure. For more information, MedPAC released the full report, fact sheet, and news release.

As the Medicare population continues to boom, it will be important to continue bestowing a close eye on the Medicare program and ensure its efficiency, accessibility, and affordability for years to come. It is important to note that MedPAC’s recommendations are not binding but are often referred to in regulatory and legislative considerations.


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Orange Book: Never a Beach Read but Getting a Potential Summer Update


The Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing Tuesday on its draft legislation, the Lower Health Care Costs Act of 2019, introduced by Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) in May.

The bill is a package of nearly 3 dozen proposals from 16 Republican senators and 14 Democrat senators that is designed to reduce Americans’ healthcare costs. To date, the committee has received over 400 comments on that draft legislation, which has 3 major categories:

  1. Ends surprise medical bills
  2. Creates more transparency via 7 bipartisan provisions including eliminate gag clauses and anti-competitive terms in insurance contracts, designate a nonprofit entity to unlock insurance claims for employers, ban pharmacy benefit managers (PBMs) from charging more for a drug than the PBM paid for the drug, and require patients to be given more information on the cost and quality of their care
  3. Increases prescription drug competition via 9 bipartisan provisions to help bring more lower-cost generic and biosimilar drugs to patients

The Senate bill is similar to a House bill that has already passed through the House Energy and Commerce Committee, setting up a potential bipartisan passage before the summer recess. It would be, by far, the most comprehensive health reform package passed by Congress during the Trump Administration, and even more remarkable given the rancorous political atmosphere.


Legislative Bytes


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Different Strokes for Different Folks, But IVI Tells ICER Our Way Is Better


Last week, the Innovation and Value Initiative (IVI) announced that it submitted comments to the Institute for Clinical and Economic Review (ICER) in response to a national request for public input on a methodological update to its Value Assessment Framework (VAF). IVI described a number of key features that it believes the practice of value assessment must incorporate to deliver credible and relevant information about value to decision makers:

  • Providing flexible models that can be fit to diverse contexts as updated evidence evolves
  • Being completely transparent to all stakeholders
  • Explicitly acknowledging and addressing uncertainty
  • Incorporating non-clinical attributes and outcomes in value estimates
  • Actively taking a patient-centered focus through all phases of the research process

To expand on these considerations, IVI also provided specific recommendations for ICER:

  • Moving value assessments to an open-source environment
  • Expanding evaluation of uncertainty in estimates of value
  • Improving incorporation of non-clinical attributes that are not generally captured in conventional cost-effectiveness analyses

On Monday, Value in Health (the official journal of ISPOR) published a themed section focused on curative therapies that featured several papers on value-related topics, including value-based prices for potential cures and applying a reference case to gene therapy. The journal also published a paper about equivalence measures in economic evaluations, which discusses the use of disease-specific equivalence values as an alternative to the quality-adjusted life-year.

Additionally, on Thursday, Value in Health published a supplement focused on new approaches to value assessment. Topics included value-based pricing, recent developments in value frameworks, novel approaches to value assessment, and next steps for improving value measurement.

As always, if you need assistance with all things ICER or value-related, please contact

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If a Rule Drops in June, Does It Make a Sound? HRA Final Rule.


Last week, the departments of HHS, Labor, and the Treasury issued a rule expanding the use of health reimbursement arrangements (HRAs) to make obtaining coverage on the individual market more accessible for eligible workers. Workers who receive the newly expanded HRAs could use the employer-funded account to purchase individual coverage on or off the federal health exchange.

Republican policy adviser Avik Roy believes the HRAs could dramatically expand the market for individually purchased health insurance:

The [President’s National Economic Council] found an elegant way to give employers the opportunity to voluntarily convert their health benefits from a defined benefit into a defined contribution. For example, an employer could fund an HRA for each worker and their family, which they could then use to shop for a plan that best suits their needs.

This flexibility will allow workers to enroll in Affordable Care Act (ACA) plans as well as non-ACA plans through private exchanges; however, those who enroll in ACA plans and use HRA funds would not be eligible for premium subsidies from the federal government.

Critics of the rule believe the HRAs could exert a negative effect on the individual markets established by the ACA if companies with sicker workforces offer HRAs. Such migration would increase costs of individual plans.

The Administration projected 800,000 otherwise uninsured Americans would gain coverage through the HRAs, potentially boosting enrollment to the individual market by roughly 50%.

Those interested in learning more can review the FAQs.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

  • The Centers for Medicare & Medicaid Services issued a proposed rule that would direct Medicare Part D drug plans to use the National Council for Prescription Drug Programs’ SCRIPT standard for prior authorization purposes.
  • Merck, Eli Lilly, and Amgen filed a complaint against the Trump Administration’s rule to require drug prices in advertisements.
  • A survey published in The New England Journal of Medicine suggested that Medicaid work requirements implemented in Arkansas were associated with a decrease in the number of people in the state with Medicaid coverage and an increase in the number without health insurance.
  • An article published in The Washington Post discusses a shortage of the gold-standard treatment, called BCG, for early-stage bladder cancer, due to prices being too low to spur companies to produce it.
  • A Kaiser Family Foundation health tracking poll found many Americans misunderstand the implications of Medicare-for-All.


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Put down the iPad…you’ll get horns?

“Mobile technology has transformed the way we live—how we read, work, communicate, shop, and date. But we already know this. What we have not yet grasped is the way the tiny machines in front of us are remolding our skeletons, possibly altering not just the behaviors we exhibit but the bodies we inhabit.

“New research in biomechanics suggests that young people are developing hornlike spikes at the back of their skulls—bone spurs caused by the forward tilt of the head, which shifts weight from the spine to the muscles at the back of the head, causing bone growth in the connecting tendons and ligaments.”

Source: “Horns Are Growing on Young People’s Skulls. Phone Use Is to Blame, Research Suggests,” The Washington Post, June 20



56% and 43%


Almost 60% of Americans aged 60 and over are concerned that healthcare costs (56%) are outpacing their retirement savings, and 43% have the same concerns about prescription drug costs.

Source: “Financial Insecurity Is a Major Concern for Women Approaching Retirement,” National Council on Aging, June 18 


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Vice President,
Reimbursement and
Policy Insights,

Scott Shields
Associate Director,
Health Policy



Doug Cook
President | Commercialization Services & Animal Health

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Commercial Consulting | Xcenda


Jennifer Le | Cliffrey Li | Scott Shields | Linnea Tennant


Laurie Kozbelt | Ellen Olson


June 21, 2019


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