Medicare Drug Price Negotiation Program Will Result in Financial Burdens for Community Oncology Practices

Debra Patt, MD, PhD, MBA, FASCO

Following publication of the Medicare Drug Price Negotiation Program Draft Guidance for Initial Price Applicability Year 2027, the Community Oncology Alliance (COA) has released a letter on consequences that will result from the negotiations.¹

“I’m concerned about the unintended consequences,” Debra Patt, MD, PhD, MBA, FASCO, said on how Maximum Fair Prices (MFPs) are being used in the Medicare Drug Price Negotiation. She noted concerns surrounding “its implications for the financial stability of community oncology practices, the access to care for patients with cancer, [and] investments in research. All those concerns have been voiced, but I certainly share them.”

Following implementation of the Inflation Reduction Act (IRA), the Centers for Medicare and Medicaid Services (CMS) issued draft guidance regarding the Medicare Drug Price Negotiation Program for the second cycle of negotiations in May 2024; negotiations will occur during 2025 and negotiated MFPs for drugs would become effective starting in 2027.²

A few key financial considerations are that the proposed retrospective effectuation model notes it may take up to 30 days for a plan to submit the Prescription Drug Event records to the Medicare Transaction Facilitator; relevant data must then be sent to the manufacturer, and it could take another 14 days for a refund to be issued. With a longer wait period for reimbursements, practices will face financial burdens. Additionally, add-on payments given to providers will be based on the negotiated MFP price of the drug, which COA notes will be significantly lower than current average sales prices.¹

Patt detailed implications of several changes that will be implemented as a result of the IRA in a concurrent interview. Below, she highlighted notable considerations with financial burdens that will be placed on community providers and oncology practices. Patt is executive vice president of Texas Oncology, vice president of COA, and medical director for public policy for The US Oncology Network in Austin, Texas.

OncLive: How will CMS’s implementation of the program’s MFP affect the ability of community practices to provide high-quality and affordable care to patients?

Patt: I’m concerned about the financial risk that could cause a decrease in access for Medicare beneficiaries. [Having] the financial risk of a delay in payment, variable acquisition costs with a lower MFP, and a reduced add-on payment, is a financial risk to patients and them getting care in private practices. It also poses a risk for private cancer practices to close and consolidate to their nearby hospital system. Hospital systems are reimbursed on a separate [fee] structure. If we consolidate to higher cost sites of service [the concern is] that it will increase costs for Medicare beneficiaries, and if practices close, [also increase costs] for Americans with cancer.

What additional burdens with the implementation of the program are important to note?

The increase in administrative burden is going to cause a need for more refrigerators, duplicative inventory, [and] more staff to manage it, and yet you’re reducing the [add-on] reimbursement to community oncology practices. COA did a study last year in collaboration with Avalere, and they estimated that there would be an approximate 42% reduction in the add-on fee for community oncology practices.

[Therefore,] you’re asking practices to do more for Medicare beneficiaries [and there] was a good [step made with the introduction] of the Barrasso amendment, which would hold providers harmless to some of these endeavors. There’s [additional] legislation that has been proposed to do the same thing. That’s important. It does not deal with all the challenges of implementation of the IRA, but for community oncology practices it’s a necessary first step.

What could the effects be of the proposed implementation of the IRA in Part D MFP and in Medicare Part B reimbursement?

There are some good things [including] the decrease in out-of-pocket costs for Medicare beneficiaries in the Part D program and the ‘price smoothing.’ Part B has many hazards because of the decreasing add-on payment [for provider] reimbursement, the variable nature of the acquisition cost, [and] the increases in the costs of managing inventory. All of those pose great risk.

Are there any other notable considerations with these recent changes brought about by the IRA?

I’ve been practicing as a cancer specialist for more than 20 years, and it’s a remarkable time in cancer care. We have seen so much innovation that has led to either cures of cancer or chronic control of cancer, where patients can often live relatively normal lives because of this tremendous innovation.

I’m concerned that if we decrease that innovation, we will see a lessoned trajectory of success in the future. Part of the success is in patients getting great cancer care where they are. There are implications of the IRA on oncology practices and our sustainability. Our sustainability is very important for patients to [have] modern cancer therapy. I want to see that for all my patients, and I’m worried that it’s [going to be affected by these changes].

How will COA and the Community Oncology Pharmacy Association work together to serve patients in the community setting?

Most importantly, we provide a forum for discussion of the challenges that we see in community practice. We all want to optimize cancer care delivery for the patients we serve. By collaborating and communicating about the challenges we face, we’re able to collaborate well on solutions; that’s very helpful in aggregate to understand what’s going on in different practices, so we can work with our policymakers and others to try to formulate and suggest solutions to continue to provide the best care for patients in our communities.

References

1. Community Oncology Alliance. Re: Medicare Drug Price Negotiation Program draft guidance. July 2, 2024. Accessed August 30, 2024. https://assets.mycoa.io/1720450300582_COA_CMS_IRA-DrugPriceNegotiation_Comments_7-2-2024-Final.pdf
2. Centers for Medicare & Medicaid Services. Fact Sheet: Medicare Drug Price Negotiation Program draft guidance for 2027 and manufacturer effectuation of the Maximum Fair Price in 2026 and 2027. Medicare Drug Price Negotiation Program. May 2024. Accessed August 30, 2024. https://www.cms.gov/files/document/fact-sheet-medicare-drug-price-negotiation-program-ipay-2027-and-manufacturer-effectuation-mfp-2026.pdf