No Repeal, Replacement of Medicare's IPAB Provision in Sight, Despite 2017 Reprieve

In its annual report, issued earlier this week, the Medicare program’s trustees said that Medicare will remain solvent until 2029, allowing the program to forestall triggering an Affordable Care Act (ACA) provision to convene the Independent Payment Advisory Board (IPAB).

The IPAB, a 15-member panel (or the HHS if such a panel cannot be convened), will be called upon when Medicare spending exceeds statutory benchmarks. The body will be required to provide recommendations to Congress on mandatory cost-cutting measures to control Medicare spending.

The IPAB provision of the ACA has been widely criticized by stakeholders, including the American Medical Association (AMA), which has advocated for a repeal of the provision. The AMA calls IPAB an “inflexible mandate to impose arbitrary across-the-board cuts to physicians and other providers that could adversely affect access to health care services for Medicare patients.” Pharmaceutical industry trade group PhRMA echoed the AMA’s views, saying that proposals made by IPAB would be “…likely to restrict patients’ access to needed health care services and treatments by disproportionately targeting new treatments as a way to cut spending—prioritizing cost-cutting ahead of a medicine’s benefits to patients.”

The announcement that the IPAB would not be formed this year came welcome news to the biotechnology industry, which was bracing for the board’s implementation. The 2016 report from the same body projected that 2017 spending levels would trigger the IPAB provision this summer, and many in the industry feared that IPAB’s primary recommendations to reduce Medicare costs would target expensive biologic treatments, forcing biopharmaceutical companies to make substantial price concessions on their products.

Despite broad industry criticism of IPAB, a growing bipartisan push in the House and Senate to repeal the deeply unpopular provision, and Republicans’ promises to repeal and replace the ACA, Senate healthcare reform legislation leaves the IPAB provision untouched. According to the original legislation’s language, Congress would have to pass a joint resolution to repeal the IPAB provision before August 15 of this year. Such a resolution would have to be passed by a three-fifth’s majority in both chambers, and that is an unlikely scenario as Senate Majority Leader Mitch McConnell (R-Kentucky) focuses on gaining enough votes to pass the latest version of the healthcare reform bill.

Even though IPAB will not be be enforcing mandatory cost controls on Medicaid, other deep cuts are on the way. The Centers for Medicare and Medicaid Services (CMS) has proposed a rule, due to be published in the Federal Register on July 20, that would revise the Medicare hospital outpatient prospective payment system and the Medicare ambulatory surgical center payment system for 2018.

The rule would cut the applicable payment rate for separately payable drugs and biologics acquired under the 340B program from the average sales price (ASP) plus 6% to the ASP minus 22.5%. These cuts are part of a CMS effort to curb the growth of spending, which CMS says grew faster among hospitals that participated in the 340B program than among hospitals that did not, noting that Medicare beneficiaries at 340B hospitals were either prescribed more drugs or were prescribed more expensive drugs than were beneficiaries in other hospitals.