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MedPAC members consider arbitration to control drug prices


Members of the Medicare Payment Advisory Commission stressed that the panel needs to explore how to lower drug prices for hospitals covered under Medicare Part A, with some members floating binding arbitration as a possible idea.

The commission met on Friday to discuss the next set of recommendations on drug pricing to send to Congress in its June 2019 report. Members mulled over a slew of policy ideas on how to revamp Medicare Part B and Part D, but Chairman Jay Crosson said that the panel needs to consider the impact prices have on the “ability of hospitals to absorb cost increases over time.”

“To the extent that we address solutions here that we need to keep in mind that it is not simply part D or Part B, but Part A needs to be under consideration as well,” said Crosson, a former physician executive at Kaiser Permanente.

Other members echoed Crosson’s concerns. Jonathan Jaffery, a Senior Vice President and Chief Population Health Officer of UW Health in Wisconsin said that hospitals have started to curb use of the drug nitropress, a blood pressure drug that has been around since 1928.

“The average price rose from $27 to almost $900 and [we are] starting to see a decreased utilization drug that has a lot of clinical experience,” he said.

Hospitals have been forced to tackle higher drug prices overall. A recent report from several hospital groups found that more than 90% of about 1,200 hospitals surveyed said they had to find another drug to mitigate the impact of price hikes and shortages.

The panel explored a litany of ideas for its next slate of recommendations. Chief among them were excluding new drug products from Medicare coverage or from a formulary when it launches, a period where drug prices are often the highest. One idea was to create a new Medicaid-like rebate in Medicare, one that would be provided by drugmakers based on the price and the utilization of the drug. Another way giving Medicare the power to directly negotiate with drugmakers, an idea that is popular among congressional Democrats.

Crosson was skeptical about giving Medicare such power, saying that it would “fundamentally change the relationship between hospitals and drug manufacturers and change the structure of Part D.”

Another idea is to create a system of binding arbitration where an arbiter would set the price of a drug if negotiations between payers and the drug manufacturer break down.

Crosson said that binding arbitration has been discussed as a recommendation for Part B but it could “potentially include Part D and Part A.”

MedPAC also explored how drug prices are impacting other areas in the healthcare industry, chief among them nonadherence to medications.

The commission needs to research whether there is a link between nonadherence to medication because of a lack of access due to price and if that leads to a “readmission or potentially worse,” said member Dr. Jonathan Perlin, the chief medical officer of HCA.

The commission is expected to iron out its recommendations on drug pricing, including any changes to Part A, this spring.