Fair Drug Payments for Patients

Better health care for less money is what many Americans may enjoy, thanks to a new, better Medicare and Medicaid plan for reimbursing doctors for the cost of drugs used to treat patients in the physician's office.

The reforms eliminated re-imbursement policies that let patients be overcharged and ended a practice that could mean patients don't get the best new medications.

The culprit, experts say, was the Average Wholesale Price (AWP)-a theoretical pricing fiction sometimes compared to the "sticker price" of a new car. Widely regarded by government experts as having no connection to actual drug costs, AWP is supposed to represent the average price at which wholesalers sell drugs to physicians. Unfortunately, AWP formed a flawed basis for the amounts pharmacies and physicians were reimbursed for their drug costs.

Physicians such as oncologists, urologists and hematologists often administer drugs to patients in their offices. Under AWP, the accepted reimbursement rate for chemotherapy drugs includes a much higher pricing "spread" that supposedly covers the added cost of administering the treatment. Because these added drug-delivery costs vary considerably, numerous lawsuits have challenged the assumptions used by doctors and pharmacies. While doctors should be paid for delivery costs, excessively high drug prices should not be the vehicle.

It makes more sense, many say, for both public and private health care insurers-Medicare, Medicaid and private HMOs-to reimburse doctors for the actual cost of the drug, using Average Sales Price (ASP) as the standard.

Fortunately, Congress acted and the public sector changed for the better. Medicare and Medicaid now reimburse more, on the actual cost of the drug. Congress also authorized reimbursement of some drug-delivery charges, thus fairly and openly compensating physicians for their costs.

As a result, Medicare reports paying less for chemotherapy drugs, while patient co-pays are declining as well, although the drugs provided to beneficiaries increased and physicians tended to substitute newer, more expensive drugs for older products.

Many private health insurers, however, continue to rely on the old system. The faster they move toward market-based payments based on actual costs for drugs and related services, health care experts say, the more efficiently the system can operate.

Many patients with private insurance are asking their doctors about drug costs and how they are determined. The answer could save them money and more.

The system used to reimburse doctors for in-office treatments could seriously affect both cost and outcome.

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