Medicare Reform Advisor, March 16, 2004

March 16, 2004 Vol. 1, No. 6 Weekly news and analysis

SUBSCRIBE
to Medicare Reform Advisor

© 2004 HCPro, Inc.

Senate approves McClellan for CMS chief
FDA Commissioner Mark McClellan was approved by the Senate on March 12 to head the Centers for Medicare & Medicaid Services (CMS) despite his reluctance to permit the import of inexpensive prescription drugs from Canada, a concept gaining increasing currency among lawmakers and cash-strapped senior citizens. During a Senate Commerce Committee meeting March 11, McClellan promised that if confirmed, he would try to release a study on safe import of Canadian drugs earlier than the December 2004 date mandated by the MMA and that he would work diligently with Congress to ask for more appropriations dollars to set up a complete program for approving safe imports of drugs from Canada. Pressed by Senator Ron Wyden (D-OR) as to the costs of such a program, McClellan estimated that it would run "several hundred million dollars."

CMS promises $10 million to states
Health and Human Services Secretary Tommy Thompson promised a House panel March 10 that CMS would increase state funding by $10.6 million in Fiscal Year 2005 to help State Health Insurance Assistance Programs (SHIP) improve one-on-one advice and counseling for Medicare beneficiaries. The SHIP's program will be able to reach even more Medicare beneficiaries and provide more training and resources to state volunteers this year and next so that they can counsel more low-income and hard-to-reach beneficiaries about the potential costs savings on prescription drugs under the MMA, Thompson said.

But the administration's budget proposal is not so kind to states trying to administer their Medicaid programs under the changed regime set out in MMA, charged Representative John Dingell (D-MI), ranking member of the committee. "The budget slashes the Medicaid program by $23.5 billion under the guise of eliminating unspecified fraud and abuse," Dingell said.

Back to top

Some managed-care plans will require direct drug supply
Big changes ahead in 2005, study says

More managed-care organizations (MCOs) will require physicians to use direct supply for office-based drugs, and some will require the same for non-chemotherapy drugs, due to the MMA, according to a survey by law firm Tag & Associates in Washington, DC. "This is clearly going to increase," Howard Tag told physician and pharmaceutical executives during a meeting in February. Tag's group interviewed medical directors from 15 MCOs earlier this year. Collectively, the companies cover about 60 million people across all regions. Eleven offer Medicare+Choice, which changed to Medicare Advantage under the reform law.

Check out the following key survey results:

• Eight MCOs will increase payments for infusion and injection procedures
• 11 said Medicare's conversion to an average sales price model will influence their private insurance reimbursement rates
• Three companies will lower the average wholesale price reimbursement
• Five will likely re-categorize infusables and/or /injectables from a medical benefit to a prescription benefit (this group expects to use tiered formularies for office-based infusables and injectables)

"This will make it easier for the insurers to subject the benefit to a formulary, and for them to determine which brands will be favored," Tag says.

Editor's note: U.S. Health and Human Services Secretary Tommy Thompson defended Medicare Advantage last week, saying it will "provide seniors with more choices, improved benefits and provide beneficiaries a choice for integrated care -- combining medical and prescription drug coverage." The HHS Secretary predicted that 32% of Medicare beneficiaries would leave their traditional Medicare plans and enroll in Medicare Advantage by 2010.

Back to top

Contractors must give physicians code stats
Medicare must create a new process by December to notify providers and suppliers when there are certain diagnosis codes being overused, according to section 935 of the MMA. CMS, presumably through its contractors, would send the codes to the providers and suppliers suspected of overusing the codes, not to all physicians.

Back to top

Can reps educate physicians on reimbursement?
There's a fine line, and both sides need to document the extent of the education, prosecutors warn. The Office of Inspector General says it is appropriate to provide reimbursement "understanding" for a particular drug. Some doctors, however, want education on everything they do, and tips on how to get reimbursed for every procedure. And they want money to attend classes. But pharmaceutical detail reps are being told to say no to these requests, particularly in preparation for the Medicare drug benefit. Prosecutors will look for patterns of improper education that border on "buying prescriptions," says one fraud prosecutor. Both the providers and the manufacturers need to do some training here to make sure everyone is on the same page. Follow this guideline: "The more they link the less they stink," says Elizabeth Carder-Thompson, a law partner with Reed Smith in Washington, DC. If, for example, a doctor asks for reimbursement assistance on a drug, the drug company is probably okay giving it. If there's no link, then don't provide the assistance, she says. "You can tell them which code to use for your drug, but that's about it."

Back to top

Doc-owned hospital expanding surgical services
There may be an 18-month moratorium on specialty hospitals, but the American Surgical Hospital Association is advising its members to avoid the "specialty hospital" designation in the MMA by broadening their service range. The U.S. General Accounting Office says a facility is a specialty hospital if more than two-thirds of its services or surgical procedures fall within the same major diagnostic category. Mountain View Hospital, a doctor-owned, for-profit facility in Idaho Falls, ID, which opened with a focus on obstetrics and orthopedics, is now saying that its scope includes a wide variety of surgical procedures, according to a report in the Idaho Falls Post Register. If necessary, the hospital may expand its services to include neonatal intensive care and emergency services, says a hospital official.

Back to top

FDA finds 88% of drugs flawed at border investigation

Seniors and politicians who want their constituents to take advantage of cheaper prices for prescription drugs reimported from Canadian pharmacies face two major obstacles: language in the Medicare Modernization Act that gives the Secretary of Health and Human Services the only authority to allow such reimportation, and the opinions of the secretary himself, Tommy Thompson, who is squarely against the idea. Thompson told reporters recently that two recent investigations of over 1,800 drugs stopped by Food and Drug Administration investigators and customs officials at the Canadian-U.S. border found that 88% of the prescriptions were "flawed," and potentially dangerous. Thompson said that problems with the imports included the following:

• Mispackaging of the drugs in the wrong containers
• Erroneous label directions about dosages and when and how to take the drugs
• Drugs such as insulin, that need to be refrigerated, were not kept cool
• Some drugs approved only for animal use were substituted for human use

"We need to investigate further how to make it safe for Americans to buy and use drugs reimported from Canada," Thompson said. He promised to release a report on reimportation safety by Dec. 1, and said that the man who has been nominated to replace him, FDA Commissioner Mark McClellan, would oversee development of the report.

Back to top

Bills would bolster govt's drug price negotiating authority

White House projections that paying for part of seniors' drug expenses will cost taxpayers $139 billion more than Congress estimated when the MMA was signed in early December 2003 have spurred the senate to create new measures to lower drug prices.

Two bills are gaining support in the Senate:

1. S. 2053, introduced by Senators Olympia Snowe (R-ME), Ron Wyden (D-OR), and Dianne Feinstein (D-CA). The bill gives the secretary of the Department of Health and Human Services (HHS) authority similar to the Veterans Administration (VA), which buys drugs in bulk at a significant discount for use in VA hospitals, to negotiate contracts with pharmaceutical manufacturers to buy prescription drugs.
2. S. 1999, introduced by Senators Tom Daschle (D-SD), Debbie Stabenow (D-MI), and Bob Graham (D-FL) and 11 other senate supporters, contains identical language.

Several hospital associations have praised the bills. So has the Consumers Union, a Washington, DC-based public-interest group. "If Congress and the administration truly want to help Medicare beneficiaries with their prescription-drug costs, they should include a provision allowing the government to use its enormous purchasing power to make drugs more affordable," says Gail Shearer, health policy director for Consumers Union.

HHS Secretary Tommy Thompson is opposed to any specific change to MMA that would give his department the purchasing power to dictate lower drug prices from manufacturers. He says once the full prescription-drug benefit for Medicare recipients begins in 2006, both market forces and competition among manufacturers would drive the price of prescription drugs lower. He notes that under the new bill, the Centers for Medicare & Medicaid Services will routinely post on their Web sites the average sales prices of prescription drugs by different manufacturers. "That transparency on the Web page will spur competition," he says.

Back to top

Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com