On April 6-7, 2017, the Medicare Payment Advisory Commission (MedPAC) held their final public meeting of this term. The Commissioners finished out this term by voting on draft recommendations presented at previous meetings and discussing a wide range of topics, including Medicare Part B drug payment, a unified payment system for post-acute care, and payment in Medicare Part D.

The most notable discussion at this meeting was about Part B drug payment policy issues. The Commission has been working on this area for 2 years and approved the following recommendation for Congress:

The Congress should change Medicare’s payment for Part B Drugs and biologicals (products) as follows:

(1) Modify the average sales price (ASP) system in 2018 to:

• Require all manufacturers of products paid under Part B to submit ASP data, and impose penalties for failure to report;
• Reduce wholesale acquisition cost (WAC)-based payment to WAC plus 3 percent;
• Require manufacturers  to pay Medicare a rebate when the ASP for their product exceeds an inflation benchmark, and the beneficiary cost-sharing and the ASP add-on to the inflation adjusted ASP; and
• Require the Secretary to use a common billing code to pay for a reference biologic and its biosimilars.

(2) no later than 2022, create and phase in a voluntary drug value program (DVP) that must have the following elements:

• Medicare contracts with a small number of private vendors to negotiate prices for Part B products;
• Providers purchase all DVP products at the price negotiated by their selected DVP vendor;
• Medicare pays providers the DVP-negotiated price and pays vendors an administrative fee, with opportunities for shared savings;
• Beneficiaries pay lower cost-sharing;
• Medicare payments under the DVP cannot exceed 100 percent of ASP; and
• Vendors use tools including a formulary and, for products meeting selected.

MedPAC staff estimates that this proposal could possibly save between $250 and $750 million over one year and between $1 and $5 billion over five years. The chairman of MedPAC noted that this recommendation is intended to strengthen market dynamics and provide physicians with an alternative that they can more broadly participate in. In addition, the chairman stated that the Commission felt it should work on ways to lower rising drug costs and consider the overall solvency of the Medicare program.

While the recommendation was approved unanimously, commissioners did raise some concerns. Amy Bricker of Express Scripts voiced her concern about the binding arbitration provision of the DVP, stating that it could be counterproductive and result in an artificially high “market price” by an outside party. Other concerns from commissioners included if providers would be protected against price changes occurring in the middle of a contract year and whether the shared savings portion of the DVP would affect provider behavior in a meaningful way and

Later during the meeting, MedPAC discussed implementing a unified payment system for post-acute care (PAC). Although it does not require implementation, the IMPACT Act of 2014 required reports on a PAC PPS and MedPAC has been considering this unified payment system throughout the current term. During the meeting commissioners were presented the following recommendation:

Congress should direct the secretary to:

• Implement a prospective payment system for post-acute care beginning in 2021 with a three-year transition;
• Lower aggregate payments by five percent, absent prior reductions to the level of payments;
• Concurrently, begin to align setting-specific regulatory requirements; and
• Periodically review and rebase payments, as needed, to keep payments aligned with the cost of care

Commissioners unanimously voted in favor of this recommendation and in discussion, many expressed vocal support. Some commissioners noted opportunities for this to be patient-centered and suggested that the commissioner keep up with the progress of this policy, particularly how it impacts vulnerable groups, like those on ventilators.

This meeting also included sessions related to the medical device industry, the role of Medicare policy in provider consolidation, measuring low-value care in Medicare, and payment and plan incentives in Medicare Part D. The presentations given to commissioners about these topics were broad and suggested areas of the topic for further discussion. For example, in the medical device industry, commissioners expressed an interest in exploring unique device identifiers (UDIs) and physician-owned distributorships (POD). All four session topics (medical devices, provider consolidation, low-value care, and payment and incentives in Part D) are likely to be explored further during the next MedPAC term. Finally, staff gave a presentation about using premium support in Medicare, a topic that will be the subject of a chapter in the June 2017 report to Congress.