HHS Advances Payment Model to Lower Drug Costs for Patients

November 1, 2018
Policy Snapshot

On October 25, the Centers for Medicare & Medicaid Services (CMS) announced and sought input on a new International Pricing Index (IPI) payment model to reduce what Americans pay for prescription drugs. Under the IPI model, described in an Advance Notice of Proposed Rulemaking (ANPRM), Medicare’s payments for select physician-administered drugs would shift to a level more closely aligned with prices in other countries. Overall savings for American taxpayers and patients are projected to total $17.2 billion over five years.

The move from current payment levels to payment levels based on international prices would be phased in over a five-year period, would apply to 50% of the country, and would cover most drugs in Medicare Part B, including physician-administered medicines. CMS is considering a randomized approach to determine which areas in the country would participate in the model. 

The IPI model would achieve several goals: 

  • Reduce costs for Medicare beneficiaries, and thereby increase adherence and access to prescription drugs
  • Introduce competition to the system of paying for physician-administered drugs by bringing in private-sector vendors
  • Reduce providers’ burden and the financial risk associated with managing drug inventories, so physicians can focus on patient care
  • Maintain financial stability for physicians, while removing incentives for higher drug prices
  • Address the disparity in drug prices between the United States and other countries
  • Reduce costs to the American taxpayers and Medicare beneficiaries who fund these programs

CMS will carefully review comments and consider issuing a proposed rule for the IPI in the spring of 2019, with a potential model start in spring 2020. CMS will accept comments on the ANPRM until December 31, 2018.