In 2003, the Medicare Modernization Act required the Centers for Medicare & Medicaid Services (CMS) to establish payment rates for a set of new pharmaceutical products--drugs and radiopharmaceuticals--provided to beneficiaries in a hospital outpatient setting. These products were classified for payment purposes as specified covered outpatient drugs (SCOD). The legislation directed CMS to set 2006 Medicare payment rates for SCODs equal to hospitals' average acquisition costs and included requirements for GAO. As directed, GAO surveyed hospitals and issued two reports, providing information to use in setting 2006 SCOD rates. To address other requirements in the law, this report analyzes SCOD price variation across hospitals, advises CMS on future surveys it might undertake, and examines both lessons from the GAO survey and future challenges facing CMS.
Recommendations for Executive Action
|Department of Health and Human Services||To ensure that Medicare payments for SCOD products are based on sufficiently accurate data, the Secretary of Health and Human Services should validate, on an occasional basis, manufacturers' reported drug ASPs as a measure of hospitals' acquisition costs using a survey of hospitals or other method that CMS determines to be similarly accurate and efficient.|
|Department of Health and Human Services||To ensure that Medicare payments for SCOD products are based on sufficiently accurate data, the Secretary of Health and Human Services should use unit-dose prices paid by hospitals when available as the data source for setting and updating Medicare payment rates for radiopharmaceutical SCODs.|