By Dan Culhane, Special to the Register

Photo: David Purdy/ Register photo

Photo: David Purdy/ Register photo

When it comes to a cure for cancer and other life-threatening ailments, researchers are thinking small. Really small.

Scientists at NewLink Genetics, a biopharmaceutical company located in the Iowa State University Research Park, as well as researchers at the Nanovaccine Initiative, coordinated by Iowa State University, are working to develop vaccines and nanovaccines — particles that are 23 times smaller than a red blood cell.

This research has the potential to save thousands of lives. If some within the federal government have their way, however, their innovative findings and products may never even make it out of the lab.

Federal officials are preparing to launch a new Medicare cost-cutting plan for “Part B” medicines — those that doctors administer in their offices or clinics. These include radiation therapy for cancer and injectable drugs for osteoporosis. Lowering reimbursements for these drugs will make it harder for doctors to administer them. Sick Americans would lose access to the best medicines, and drug firms would have little incentive to create unusable treatments.

Currently, doctors are reimbursed for the average sales price of the Part B drugs they use, plus a 6 percent markup to cover their own administrative and handling costs.

This payment formula is controlling costs. Part B drug spending has been growing at a moderate 4 percent per year.

That’s apparently not good enough for some federal officials, however. Administrators at the Center for Medicare and Medicaid Services (CMS) want to implement a new payment scheme. In phase one of their proposal, the doctor markup would be reduced to 2.5 percent and supplemented with a flat fee per treatment. Then, in phase two, officials would impose a new, as yet undefined, “value-based” pricing system.

These cuts are being called a “demonstration,” but phase one would affect half of all Medicare providers as early as this fall. When phase two kicks in early next year, it will sweep in three quarters of Medicare providers. In effect, CMS is taking the liberty of rewriting the carefully crafted law governing Medicare reimbursements without any meaningful input from Congress, seniors, or doctors and other healthcare professionals.

The new payment scheme would reward doctors for treating seniors with older drugs. CMS makes this perfectly clear in a chart that breaks down the new reimbursement rates for different medications. Doctors would receive a payment worth 339 percent of an older drug’s average sales price, but just a 4 percent markup on an innovative breakthrough treatment. That tiny markup wouldn’t be enough to cover labor and administrative costs at many clinics.

This difference will likely lead doctors to avoid providing newer and better drugs — because they’ll end up losing money if they do, which will have a corresponding negative effect on innovation and research and development of cutting-edge treatments and technologies.

Doctors already are struggling to keep their clinics solvent. Since 2008, more than 300 cancer clinics nationwide have closed, including two of Iowa’s 11. Some 400 others report difficulty making ends meet.

Sharply cutting reimbursement rates will only drive more of them out of business, or into the arms of big hospital chains. The losers will be seniors who have to travel much farther for treatments. And given that 41 percent of Iowa’s population lives in rural areas, the trek to hospitals will be difficult for many.

The second phase of the new proposal, “value-based” pricing, creates additional risk and uncertainty. Here, CMS would peg reimbursements for various treatments to a government-determined measure of cost-effectiveness. The plan is supposed to encourage providers to use the drugs that provide the best “value for the patient.” But in effect, it substitutes the judgment of regulators in Washington for that of doctors and their patients.

Both phases of this so-called demonstration project seem to be designed with a single motive: to prevent doctors from using new innovative breakthrough treatments by making it economically infeasible to do so. That will have ruinous effects on patient health and innovation as a whole.

Medical research wouldn’t be financially viable without robust demand among doctors for cutting-edge medicines. The proposed reimbursement cuts will indirectly create a huge disincentive for researchers here in Iowa and throughout the country to continue their search for the next generation of cures.

The oath that every doctor takes before they begin practicing medicine is “first do no harm.” Someone needs to remind officials at CMS of that duty — before their Medicare modifications adversely affect those whose lives depend on a robust and innovative human health and pharmaceutical industry.

Dan Culhane is president and chief executive officer of the Ames Chamber of Commerce and Economic Development. Contact:

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