Medicare Could Save $1 Billion by Considering Added Benefit of Expensive Part B Drugs

A Medicare pricing policy that takes into account a drug’s added therapeutic benefit could be used to reduce costs for expensive Part B drugs with low added benefit, according to study results published online ahead of print in Value in Health.

Researchers defined expensive Part B drugs as those requiring annual spending higher than the average social security benefit per beneficiary, or $17,532 in 2019. Between 2015 and 2019, the study found, the number of expensive Part B drugs grew from 56 to 92. 

However, when researchers referenced benefit assessments conducted by the French Haute Autorité de Santé, or National Authority for Health, for the high-cost drugs, they discovered more than a third offered low added benefit. 

The Haute Autorité de Santé report also identified comparator drugs. Researchers computed the average annual spending per Part B beneficiary for each comparator. Then, to model policies that integrate added benefit assessment and domestic reference pricing, they calculated potential savings from two reimbursement scenarios. The first model reimbursed expensive, low-added-benefit drugs at the level of the drug’s lowest cost comparator drug. The second model reimbursed expensive, low-added-benefit drugs at the average cost of all comparator drugs.

“Implementing reference pricing for these expensive drugs with low added benefit could have saved an estimated $2.1 billion if prices were set based on spending for their lowest cost comparator, or $1 billion if prices were set based on the weighted average of spending for comparators,” wrote corresponding author Michael J. DiStefano of the University of Colorado Skaggs School of Pharmacy and Pharmaceutical Sciences in Aurora, Colorado, and study coauthors.

Reference: 
Anderson KE, DiStefano MJ, Liu A, Mattingly TJ 2nd, Socal MP, Anderson GF. Incorporating added therapeutic benefit and domestic reference pricing into Medicare payment for expensive Part B drugs. Value Health. Published online June 5, 2023. doi:10.1016/j.jval.2023.05.018