New Medicare Payment Policy on Drug Shortages

CMS’s new Medicare add-on payment for hospitals to maintain 6-month buffer stocks of essential medicines is an important step but is unlikely to meaningfully reduce drug shortages given its narrow hospital eligibility and the limited reimbursement (about 11% of costs). The authors argue that more durable solutions, such as quality-based purchasing and reform of inflation rebates for generics are needed to stabilize the US drug supply.