The Obama administration is trying a new system to try to prevent doctors from prescribing expensive drugs to medicare patients when a cheaper similar drug is available.
Doctors who are giving drugs to their patients in their office such as doctors treating eyes, cancer and arthritis are required by Medicare to purchase the drug and then to get a re-reimbursement from Medicare. When Medicare pays them back, doctors also receive an incentive of 6% of the cost of the drug. Therefore if doctors have a choice between a $50 drug or a $2,000 drug they may tempted to choose the most expensive one to make extra money.
Previous studies such as “Least Costly Alternative: Impact on Prostate Cancer Drugs Cover Under Medicare Part B” or “Does Reimbursement Influence Chemotherapy Treatment For Cancer” have shown that the actual Medicare system of reimbursement is indeed perversely encouraging doctors to prescribe the most expensive drug for their patients.