Loophole in Drug Payment Rule Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollars

With certain exceptions, self-administered drugs are typically not covered under Medicare Part B. However, in a November 2017 report, OIG found that CMS and a Federal court interpret relevant statute to require the inclusion of versions of drugs not generally covered under Part B in limited circumstances when setting Medicare payment amounts. As a result, CMS included noncovered, self-administered versions of Orencia and Cimzia when determining payments for those two drugs. The inclusion of these noncovered versions caused Medicare and its beneficiaries to pay an extra $366 million from 2014 through 2016. OIG recommended that CMS seek a legislative change that would provide the agency with flexibility to determine when noncovered versions of a drug should be included in the calculation of the Part B payment amount. CMS did not concur with our recommendation and, to date, no action has been taken to close the payment loophole.