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Study: Cost of Medicare drugs varies greatly by region

  • Where Medicare doctor dollars go

    Where Medicare doctor dollars go

  • FILE - This Jan. 31, 2010, file image released by Miami Dade College shows Dr. Salomon Melgen, posing for a photo at the book signing of "Growing American Roots", a book by Sen. Robert Menendez, D-N.J., at the college in Miami. Topping Medicare's list of highest paid physicians from it's claims database was Florida ophthalmologist Salomon Melgen, whose relationship with Sen. Robert Menendez, D-N.J., made headlines last year after news broke that the lawmaker used the doctor's personal jet for trips to the Dominican Republic. Medicare paid Melgen $20.8 million. (AP Photo/Miami Dade College, Phil Roche, File)

    FILE - This Jan. 31, 2010, file image released by Miami Dade College shows Dr. Salomon Melgen, posing for a photo at the book signing of "Growing American Roots", a book by Sen. Robert Menendez, D-N.J., at the college in Miami. Topping Medicare's list of highest paid physicians from it's claims database was Florida ophthalmologist Salomon Melgen, whose relationship with Sen. Robert Menendez, D-N.J., made headlines last year after news broke that the lawmaker used the doctor's personal jet for trips to the Dominican Republic. Medicare paid Melgen $20.8 million. (AP Photo/Miami Dade College, Phil Roche, File)

  • Where Medicare doctor dollars go
  • FILE - This Jan. 31, 2010, file image released by Miami Dade College shows Dr. Salomon Melgen, posing for a photo at the book signing of "Growing American Roots", a book by Sen. Robert Menendez, D-N.J., at the college in Miami. Topping Medicare's list of highest paid physicians from it's claims database was Florida ophthalmologist Salomon Melgen, whose relationship with Sen. Robert Menendez, D-N.J., made headlines last year after news broke that the lawmaker used the doctor's personal jet for trips to the Dominican Republic. Medicare paid Melgen $20.8 million. (AP Photo/Miami Dade College, Phil Roche, File)

An analysis of government data released yesterday shows that the cost of drugs administered by doctors accounts for a growing piece of Medicare’s spending and varies widely from region to region in the United States, raising questions about whether some physicians may be misusing the pharmaceuticals.

Most of the 4,000 doctors who received at least $1 million from Medicare in 2012 billed mainly for giving patients injections, infusions and other drug treatments, those records show.

The data, an unprecedented trove of millions of billing records from Medicare – as well as interviews with doctors – highlight the role of pharmaceuticals in the nation’s staggering health care costs.

Of $64 billion Medicare paid to doctors in 2012, $8.6 billion was used to cover drugs, an amount that has been rising for years.

Yet Medicare bureaucrats seeking to rein in drug costs have been stymied by rules that forbid the government from negotiating lower prices and in 2010, they even lost the ability to mandate, when two equivalent drugs are available, that physicians be paid only for the cheapest.

At the same time, pharmaceutical companies have offered physicians incentives, such as discounts, to use large volumes.

Now, with the data released by Medicare, the public has a clearer view of individual doctors’ drug practices.

Many of the physicians who have submitted multimillion-dollar bills to Medicare blame high drug prices and say the pharmaceutical industry is taking most of the money. Typically, Medicare reimburses a physician for the price of the drug plus 6 percent.

John Welch, an ophthalmologist in Hastings, Neb., ranks eighth on the list of top billers, receiving $9.5 million from Medicare in 2012. Like most ophthalmologists on the list, a majority of his billing came from the shots he gave patients with an eye disease known as macular degeneration – and that money was passed on to the drug firms, he said.

“I don’t control what Medicare decides to pay the drug company,” he said yesterday.

The chief lobbying group for the pharmaceutical industry said the idea that medicine prices play a significant role in the nation’s health care costs is “off base and not supported by the data on health care spending,” Josephine Martin, executive vice president of Pharmaceutical Research and Manufacturers of America said in a statement.

“The spending growth rate in several important areas of health care exceeds that of medicines, which has dropped significantly in recent years and is lower than growth in medical costs overall,” she said.

Immense variety

The data reflect what appears to be an astonishing variety in how and when physicians in different parts of the country use drugs.

For example, Medicare spends far more on drugs administered by physicians in some areas than in others, leading to questions about whether pharmaceuticals may be overused in some areas or underused in others.

Medicare doctors near Huntsville, Ala., for example, annually bill for nearly $600 in physician-administered drugs per Medicare patient. This is about the same as places such as Sarasota, Fla., and Fresno, Calif.

But that amount is about five times what Medicare doctors around Boise, Idaho, and Mason City, Iowa, bill for drugs, according to a Washington Post analysis of the data.

There could be differences in the rates of disease, “but that’s not enough to explain a $500 difference” between what Medicare pays for drugs in those cities, said Jonathan Skinner, an economist at Dartmouth College, where researchers were the first to analyze geographical variations in medical practices. He added that there may be differences in medical opinion not “supported by medical evidence.”

Jonathan Blum, principal deputy administrator of the Centers for Medicare and Medicaid Services, said, “If we see more procedures, more spending going to one part of the country than another, without necessarily a difference in quality or satisfaction of care, that’s an important question to be asking.”

Some oncologists say they tend to treat cancer more aggressively, and may tend to use a drug such as Neulasta, which helps fight infection during chemotherapy.

Jeremy Hon, 63, one of a dozen oncologists at a Huntsville practice, received $4.26 million in reimbursements from Medicare in 2012, about $880,000 of that for administering Neulasta.

“We take care of high-risk Medicare patients with numerous medical problems,” he said yesterday. “We’re a little more liberal in the way we’re using it,” he added, referring to Neulasta.

If some patients aren’t treated aggressively, he said, they don’t survive as long.

By using “a little more” of the drugs, “our patients live longer.”

Hon said he doesn’t deal with the business aspect of the practice and doesn’t factor the drug cost into his thinking, because that would cause bias and be unfair to patients.

“We run an honest operation and we are proud of it,” he said.

Hon said that the majority of the money he received from Medicare was to pay for the drugs.

“I don’t think I have that in my pocket,” he said.

Likewise, Constantine Saadeh, a rheumatologist in Amarillo, Texas, played down the amount of money he received from Medicare, noting that so much of it goes toward paying for the drugs.

He received about $1.4 million from Medicare for his use of Remicade, for moderate to severe rheumatoid arthritis. He stands among the most prolific dispensers of the drug in the Medicare records, the data show.

“If you want to know who makes the money, it’s the drug company and the middleman,” he said.

Saadeh said he receives a discount for using large volumes of the drug but dismisses the notion that there’s much money for physicians who administer it. He notes that another practice in the area routinely sends Medicare patients to him for the drug and keeps the patients who have private insurance.

“We are not doing this because we make tons of money,” he said. “We are taking the referrals that no one wants.”

Economic incentive

Because Medicare generally has paid a doctor the sale price of a drug plus 6 percent, economists and some doctors have long noted that this system gives physicians an economic incentive to use a more expensive medicine: After all, the 6 percent take for doctors rises when the drug’s price does.

Most physicians say financial matters do not affect their drug choices, however.

But the case of epoetin alfa, a drug used to treat anemia in dialysis patients, shows that when the financial incentive is taken away, doctors may use less of the drug.

In 2011, a change by Medicare removed the 6 percent payment incentive; instead, dialysis centers were paid per overall patient treatment.

The use of the drug in dialysis patients has dropped 34 percent since then, said Dennis Cotter, president of the Medical Technology and Practice Patterns Institute, a nonprofit think tank based in Bethesda, Md.

The savings were not only financial, he said.

“The patients benefited by the change in that they are no longer being exposed to risky dosages,” he said.

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