Medicare Part B Reimbursement of Prescription Drugs . Direct Impacts of the Medicare Modernization Act


Following the MMA changes to the Medicare Part B drug payment system, MedPAC issued two Congressionally-mandated reports, which found that health care providers could still purchase most covered drugs at prices below the Medicare Part B reimbursement rate.15, 16

As had been expected, the change in the Medicare Part B drug payment system had immediate impacts on the revenues of the affected providers. There is also some evidence that physicians changed their prescribing patterns in response to the lower reimbursement rates, either by providing more services or by substituting more profitable services for less profitable ones. MedPAC studied how physician specialties responded to the MMA reimbursement
change. 15, 16   Overall, MedPAC found, oncologists and rheumatologists responded to the payment change by providing more services, urologists provided fewer services, and infectious disease specialists shifted some services back to hospital settings where drugs are typically purchased by the hospital. A more recent study found that the percentage of lung cancer patients who received chemotherapy within one month of diagnosis increased by 2.4 percentage points shortly after the January 2005 payment change.17

We reviewed stock analyst reports and assessments by the drug manufacturers at the time of the MMA change. None of the reports at the time anticipated any effect of the reimbursement mechanism change on the prices paid to manufacturers.

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