The U.S. is mulling changes to how the Medicare program pays physicians for administering expensive cancer drugs and other medications given in doctors’ offices, according to a memo from the Centers for Medicare and Medicaid Services.

QuickTake Drug Prices

The memo tells Medicare contractors who process payments to set up a system allowing the government to vary by geographic location how much it reimburses doctors for the drugs they administer. The government could then set up a pilot program to test how limiting reimbursement in Medicare Part B, which pays for seniors’ medical services and supplies, affects doctors’ choice of drugs, according to the memo that was posted on the CMS website.

The document’s release was “premature,” according to CMS, and it’s no longer visible on the agency’s website.

The current methodology “does not take into account the effectiveness of a particular drug, or the cost of comparable drugs, when determining the Medicare payment amount,” according to the memo. It “has been criticized for encouraging the use of more expensive products because the add-on to the drug’s cost is a percentage of the sales price while handling and overhead costs may not vary.”

Part B covers drugs that are given in doctors’ offices, such as cancer treatments that are delivered via an infusion. It doesn’t include pills and other pharmaceuticals that patients take at home.

Medicare typically pays doctors the average sales price of a drug plus an additional 6 percent for treatments administered in their offices, including cancer treatments ranging from chemotherapy to expensive new therapies that can cost $100,000 or more a year. The system has been criticized for giving doctors a financial incentive to administer drugs that are most expensive.

InsideHealthPolicy reported on the memo’s contents earlier.

“As we have said, we are examining potential ways to support increased access to information, drive innovation, and strengthen incentives to improve quality care,” the agency said when asked about the memo. “We continue to look at a number of options in this area.”