CMS Proposes New Rules to Pay for Medicare Covered Drugs

August 20, 2003

CMS Proposes New Rules to Pay for Medicare Covered Drugs

The Centers for Medicare & Medicaid Services proposed new rules that would improve the way that Medicare pays for covered drugs and is asking for public input on the best way to achieve that goal. While Medicare, by law, generally does not cover most outpatient prescription drugs, the program does cover certain drugs, including many cancer drugs and others that cannot be self-administered or that are administered through durable medical equipment.

CMS is asking for public comments on four approaches that could be used to change how Medicare currently pays for drugs:

  1. Medicare would pay the same amounts for covered drugs that private insurers pay;
  2. Medicare would apply a discount of 10 to 20 percent from the inflated average wholesale price in 2004 and then establish more reasonable payment updates in future years;
  3. Medicare would use existing sources of market-based prices and would develop additional sources to monitor market changes over time, such as drug price catalogs; or
  4. Medicare would establish a competitive bidding process for drugs and would also require drug companies to report their average sales prices.

The comment period will end October 14, and a final rule will be published later this year.