Part B Losses to Oncologists Due to IRA Could Total $12B Through 2032 Across Medicare, Commercial Plans

Payments to community oncology practices to administer complex cancer drugs could be sliced by $12 billion through 2032, because the Inflation Reduction Act (IRA) fails to separate these costs from negotiations over the prices of the drugs themselves.

That’s the finding of a new analysis by Avalere Health,¹ which was commissioned by the Community Oncology Alliance (COA) to examine how the IRA would affect “add-on” payments under Part B to member practices.

Avalere logo | Image credit: LinkedIn

A report released Monday shows the loss of these payments to all physicians could reach $25 billion across both Medicare and commercial plans. Because cancer drugs are so expensive and difficult to administer, oncology/hematology practices would be hardest hit, the report shows.¹

The analysis evaluated how the IRA’s Medicare Drug Negotiation Program would cut into reimbursements for providers, including oncologists, who administer any of the 10 products analyzed. The report anticipates oncologists/hematologists will see $12 billion to $19 billion in losses. This equates to a 39% to 64% decrease in Medicare add-on payments and a 13% to 21% reduction in commercial and Medicare Advantage (MA) add-on payments.

If no change occurs, the IRA Part B losses would add to the reduced reimbursements and revenue losses that COA leaders have said threaten the viability of independent practices. At their recent COA Payer Exchange Summit, speakers sounded frustrated that members of both parties in Congress recognize threats from vertical integration and the rise of powerful pharmacy benefit managers (PBMs), as well as a 340B drug discount program that exceeded its intended mandate. Yet, change has been hard to come by.

COA called the results a “wake up call” and called on Congress to pass a technical change to exclude provider payments from drug negotiations between the government and pharmaceutical manufacturers. In a statement, COA said, “This would still achieve savings for the government while ensuring independent practices are not unnecessarily hurt by the unintended consequences of the IRA.”²

“A financial hit of this magnitude to cancer practices’ reimbursement is staggering and may well limit practices' ability to offer life-saving treatments to patients with cancer, regardless of their coverage types.” COA Executive Director Ted Okon, MBA, said in the statement.² “Without Congressional intervention, these cuts will absolutely impact community oncology practices, already facing other Medicare payment cuts. Bit by bit, our government is pushing care into the more expensive hospital setting, driving up costs for both patients and taxpayers.”

Avalere’s report centered on 10 commonly used Part B drugs administered by physicians. Under the IRA, these drugs are likely to be subject to CMS negotiations starting in 2028. Avalere’s report offers a range of discount scenarios for 2028 to 2032 estimated a range of discounted price scenarios (high, medium, and low) from 2028 to 2032. To evaluate the 10 likely drugs involved, analysts evaluated Medicare spending, FDA approval date, and expected biosimilar entry; 4 of the drugs are expected to be hematology/oncology products.

As COA explained in its statement, Medicare reimburses physician-administered Part B drugs based on the Average Sales Price (ASP) plus a 6% add-on payment, which is currently adjusted down to 4.3% due to sequestration. The add-on payment covers essential overhead costs for administering complex treatments, such as storage and safety requirements and, increasingly, ensuring that patients receive a formulation required by individual payers.

In oncology, the add-on payment covers infrastructure and staff costs related to drug procurement, storage, mixing, and disposal of complex chemotherapy treatments, and more. Practices rely on the add-on variable payment to cover all drug-associated procurement and handling costs, none of which will be reduced. By contrast, these have increased significantly since the pandemic due to inflation in staff salaries, materials, and supply chain issues.

Under the current format of the IRA, the add-on payment will be based on the new Maximum Fair Price negotiated by CMS, which is designed to be significantly lower than the ASP. This will lead to significant cuts in payments to physicians, even though law’s intent is to save consumers money by reducing their out-of-pocket costs.

“As Medicare ASP is also tied to commercial market reimbursements, the spillover impact will compound the financial burden on providers,” COA predicted in its statement.²

The Avalere analysis also found that across the broader set of 10 physician-administered drugs likely to be targeted by the IRA, the total loss in add-on payments could reach as high as $37 billion under more aggressive negotiation scenarios. Products in the fields of immunology, neurology, and respiratory care are also at risk of severe reimbursement cuts, with immunology treatments facing potential reductions of up to 74% in Medicare payments.¹

References

1. Sullivan M, Dilmanian M, Isaiah E, Frazier L, Krupp G. Commercial spillover impact of Part B negotiations on physicians. Avalere Health. September 16, 2024. Accessed September 17, 2024. https://avalere.com/insights/commercial-spillover-impact-of-part-b-negotiations-on-physicians
2. Analysis: Oncologists could face more than $12 billion cut in Medicare and commercial Part B payments due to IRA regulations. Community Oncology Alliance. September 16, 2024. Accessed September 17, 2024. https://mycoa.communityoncology.org/news-updates/press-releases/analysis-oncologists-could-face-over-12-billion-cut-in-medicare-and-commercial-part-b-payments-due-to-ira-negotiations