Under the IPI model, Medicare’s payments for select physician-administered drugs would shift to a level more closely aligned with prices in other countries. 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 percent of the country and would cover most drugs in Medicare Part B, which includes physician-administered medicines such as infusions.
Physicians currently purchase the drugs that they administer to patients and receive payment from Medicare for those drugs at an amount equal to the average sales price plus a 6 percent “add-on” fee. Under the model, instead of the current percentage-based add-on payment, physicians and hospitals would receive a set payment amount for storing and handling drugs that would not be tied to drug prices.
The IPI model would also create a system in which private vendors procure drugs, distribute them to physicians and hospitals, and take on the responsibility of billing Medicare. This system would be similar to the previous Competitive Acquisition Program but has distinct differences. Vendors would aggregate purchasing, seek volume-based discounts and compete for providers’ business, thereby creating competition where none exists today.
CMS plans to begin implementing this proposal as a mandatory demonstration in select geographies beginning in 2020.