Still Possible: Hospitals Overcharge Health Plans for Specialty Drugs

Over the years on Drug Channels, I have explained the two primary reasons a drug’s list price doesn’t reflect what a third-party payer actually spends for that drug: (1) channel intermediaries and providers add markups that account for the costs, profits, and value of the services, and (2) manufacturers provide rebates and discounts to third-party payers. Two recently-released reports confirm the often-overlooked magnitude of provider markups. As you will see below, commercial payers use reimbursement approaches that permit hospitals to inflate specialty drug costs by thousands of dollars per claim when compared with physician offices. This is not about differences … Continue reading Still Possible: Hospitals Overcharge Health Plans for Specialty Drugs

The Mysteries of Pass-Through Status: Why Medicare and Seniors Are Now Paying More for Lower-Cost Biosimilars at Hospitals

An unanticipated combination of government policy changes has led to a truly bizarre circumstance: The Medicare program and individual Medicare patients are paying more for lower-cost biosimilars. Further, hospitals are earning windfall profits from these lower-cost biosimilars, though physician offices can’t access the same financial benefits. Sound bonkers? You bet. To understand this strange turn of events, I delve into the vagaries of Medicare Part B reimbursement and the recently implemented outpatient prospective payment system (OPPS) rule for drugs acquired under the 340B Drug Pricing Program. As I explain below, the Centers for Medicare & Medicaid Services (CMS) recently made … Continue reading The Mysteries of Pass-Through Status: Why Medicare and Seniors Are Now Paying More for Lower-Cost Biosimilars at Hospitals

Remicade: A Case Study in How U.S. Pricing and Reimbursement Curb Adoption of Biosimilars (rerun)

This week, I’m rerunning some popular posts during the pre-holiday week. Click here to see the original post and comments from September 2017. This post is good reminder that biosimilar products have unanticipated channel dynamics. CMS’s policy change will further alter the 2018 market. Effective January 1, 2018, each biosimilar will have its own J-code. See Final Policy, Payment, and Quality Provisions in the Medicare Physician Fee Schedule for Calendar Year 2018. Drug Channels will return on January 3. Until then, have a great holiday and happy new year! The Centers for Medicare & Medicaid Services (CMS) has just released … Continue reading Remicade: A Case Study in How U.S. Pricing and Reimbursement Curb Adoption of Biosimilars (rerun)

Thanks, California! SB17 Will Trigger Massive Speculative Buying, Windfall Pharmacy Profits, and Supply Chain Disruption

California governor Jerry Brown has just signed SB-17 – Drug Price Transparency into state law. Click here for the official summary. This law is truly nutty. It won’t accomplish much of what it purports to do. Below, I focus on the provision that requires manufacturers to provide 60 days’ advance notice of increases in a prescription drug’s Wholesale Acquisition Cost (WAC) list price. As I explain, this requirement ignores crucial drug channel and supply chain economics. Consequently, mandating advance notice of price increases will benefit pharmacies and hospitals, not third-party payers. The new law also ignores what we’ve learned from … Continue reading Thanks, California! SB17 Will Trigger Massive Speculative Buying, Windfall Pharmacy Profits, and Supply Chain Disruption

Remicade: A Case Study in How U.S. Pricing and Reimbursement Curb Adoption of Biosimilars

The Centers for Medicare & Medicaid Services (CMS) has just released the Average Sales Prices (ASP) reimbursement data for the fourth quarter of 2017. You can download the drug pricing files here. Below, I use these data to explore the reimbursement and payer dynamics behind the relatively slow adoption of Inflectra, the first biosimilar of Remicade. The introduction of Renflexis, a second biosimilar, will offer additional insights about pricing and channel strategies. The U.S. biosimilar market is highly underdeveloped compared with our European counterparts. As this case study shows, it’s pretty, pretty, pretty hard to launch a biosimilar. Read more … Continue reading Remicade: A Case Study in How U.S. Pricing and Reimbursement Curb Adoption of Biosimilars

New Part B Buy-and-Bill Data: Physician Offices Are Losing to Hospital Outpatient Sites

The Medicare Payment Advisory Commission (MedPAC), the independent agency that advises Congress on the Medicare program, recently released its June 2017 Data Book: Health Care Spending and the Medicare Program. The report is a 201-page wonktastic data dump. Chapter 10 focuses on prescription drugs. In 2015, the most recent year available, Part B spending on drugs reached $25.7 billion. Hospital outpatient sites now constitute more than one-third of Medicare spending and have been crowding out physician offices. Part B payments to physician practices are growing much more slowly than payments to hospitals. For some time, I have been tracking the … Continue reading New Part B Buy-and-Bill Data: Physician Offices Are Losing to Hospital Outpatient Sites