The Medicare Board of Trustees expects Part B reimbursement for physician-administered drugs will more than double to $46.2 billion by 2030.

Medicare Trustees Say Part B Drug Payments Will More than Double by 2030

Medicare Part B reimbursement for physician-administered drugs is projected to rise from $18.7 billion in 2020 to $21.7 billion this year, and then to more than double to $46.2 billion by 2030, the Medicare Board of Trustees reported to Congress Tuesday.

In their Aug. 31 report, the Medicare trustees did not explain why they predict Part B payment for physician-administered drugs will rise so sharply in the coming decade. They said only that per-capita charges for the combined category of physician-administered drugs, durable medical equipment, laboratory services, and other practitioner services have grown due to factors including “increased number of services provided, demographic change, more expensive services, and certain administrative actions.”

A large and growing but still less-than-majority share of Part B drug payments is for 340B-purchased medicines that hospitals administer. Berkeley Research Group (BRG), which often works for the drug industry and independent oncologists, reported in June 2020 that, in 2017, physician offices accounted for more than half (56%) of all drugs reimbursed by Part B. 340B hospitals were the next largest site of care (30.2%), followed by non-340B hospitals (13.8%). According to BRG, the share of Part B drug payments going to 340B hospitals has risen (from 9.6% in 2008) while the share going to doctors’ offices has declined (from 73.2% in 2008).

Drug companies and private practice oncologists accuse 340B hospitals of predatorily buying oncology practices, so they can maximize billings for 340B purchased drugs, and of using more expensive drugs than necessary, so they can maximize profits. Hospital groups dispute such claims strenuously.

The Medicare Payment Advisory Commission (MedPAC) said in a report to Congress last year that the shift in site of care from doctors’ offices to hospitals has increased Medicare spending, but that it is hard to know by precisely how much. MedPAC also found that in metropolitan areas, as the share of chemotherapy patients treated by 340B hospitals grows, spending grows modestly on drugs for some types of cancer (lung and prostate) but not on drugs for others (breast, colorectal, and leukemia/lymphoma). Those 340B effects, it said, “were much smaller than the effects of the general increase in oncology spending.”

“The overall effect on beneficiary cost sharing is likely to be modest and vary by beneficiaries’ supplemental coverage,” MedPAC said.

In 2018, the Trump administration began cutting Part B reimbursement for hospitals’ 340B-purchased drugs by nearly 30%. The reason, it said, was to better align reimbursement with 340B acquisition costs and to reduce Medicare beneficiaries’ cost-sharing obligations (beneficiaries are liable for 20% of Part B drug costs).

The Biden administration proposes to continue the nearly 30% payment cut next year. Sept. 17 is the deadline for comments on the new administration’s proposal and hospitals are urging the administration to scrap the cuts. They are also challenging them in court. In its term that begins in October, the U.S. Supreme Court will consider hospital groups’ appeal of a lower court’s July 2020 ruling upholding the legality of the cuts.