Excluding Noncovered Versions When Setting Payment for Two Part B Drugs Would Have Resulted in Lower Drug Costs for Medicare and its Beneficiaries

WHY WE DID THIS STUDY

A limited number of prescription drugs—generally those that are injected or infused in physicians' offices or hospital outpatient settings—are covered under Medicare Part B. With certain exceptions, Part B does not cover drugs that are self-administered by patients, including drugs administered by self-injection. However, in a small number of cases, self-administered drugs that typically would be used in situations not covered under Part B are being included by CMS when setting payment amounts.

HOW WE DID THIS STUDY

Using CMS's Part B drug files, data from national drug compendia, and information from manufacturer websites, we identified drugs with payment amounts based in part on self-administered versions that would not typically meet Part B coverage criteria. For these drugs, we recalculated the Medicare payment amounts from 2014-2016 with the self-administered versions removed. We calculated the difference between the actual and alternate payment amounts in each quarter. To determine how much Medicare and its beneficiaries would have spent for each drug had CMS not included self-administered versions, we multiplied the alternate payment amount in each quarter by the total number of units reimbursed by Medicare Part B in that quarter. We then subtracted the results from actual quarterly Part B expenditures for each drug to determine how much less Medicare and its beneficiaries would have spent.

WHAT WE FOUND

CMS and a Federal court interpret the law to require the inclusion of noncovered versions of drugs in limited circumstances when setting payment amounts under Medicare Part B. As a result, CMS included noncovered, self-administered versions when calculating payment amounts for two Part B drugs. The inclusion of these noncovered versions caused Medicare and its beneficiaries to pay an extra $366 million from 2014 through 2016.

WHAT WE RECOMMEND

We recommend that CMS seek a legislative change that would provide the agency flexibility to determine when noncovered versions of a drug should be included in Part B payment amount calculations. CMS did not concur with our recommendation.