Medicare Reform Advisor, April 27, 2004

April 27, 2004 Vol. 1, No. 10 Weekly news and analysis

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© 2004 HCPro, Inc.

Special interests lobby for 'replacement' drug coverage
Advocates for patients with multiple myeloma, multiple sclerosis, rheumatoid arthritis, and pulmonary arterial hypertension challenged CMS officials during a call April 23 to include the drugs that their patients need as part of a critical Medicare reform demonstration project that will have a tremendous impact on Medicare's future coverage decisions under Part D. With only 50,000 allowed to take part in the project, interest groups made a pitch for the drugs that would treat their patients.

"For us, it's about getting coverage," said Kevin Brennan, the spokesman for the Arthritis Foundation. The foundation asked CMS to cover three drugs, including Enbrel and the injectable therapy Kineret.

Citing time constraints and limited resources, CMS' chief medical officer Sean Tunis, MD, said the agency would not cover drugs with off-label FDA indications. This stirred up several groups, including the following:

• The Multiple Myeloma Foundation said the oral drug Thalidomide merits coverage since it's pending FDA approval, it's well published in compendia, and it's widely used. A spokesman told CMS that the current FDA approved drugs for multiple myeloma don't guarantee the most access.

• Several people pushed hard for coverage of Tracleer tablets to improve the exercise ability of patients with the fatal lung disorder Pulmonary Arterial Hypertension. The alternative, according to one caller, is infusions that require hospitalizations. "Covering this will save Medicare money."

• Stephanie Simon of the MS Foundation wants CMS to cover the four multiple sclerosis injectables and to pick patients randomly. There are 32,000 patients with multiple sclerosis who could be helped here, which represents more than half the number of patients allowed in the demonstration. "Cover these drugs and you'll prevent their disease from entering the untreatable phase," a urologist urged the CMS panel in the most effective speech of the afternoon. "MS patients already feel like a burden," he said. "They have to ask someone from their family to take off work to drive them for their injection. Some won't go at all because of this. Then you hear physicians saying they won't participate in administering the injections. They're being asked to be pharmacists, to buy, store, and inject the drug."

The urologist asked CMS to cover all four MS drugs and establish criteria so each patient in the project gets the one that's best for them, "that's most tolerable."

Next steps
CMS plans to cover drugs and biologics that will eliminate the need for a currently covered drug, according to its criteria, though that could change as several groups pushed for softer language, such as "drugs and biologics that will be used in lieu of" currently covered drugs.

It appears CMS will give preference to low-income beneficiaries. For example, more than half of patients with rheumatoid arthritis have incomes below $15,000 a year, Brennan said. Benefits for this demonstration will likely start in the summer, CMS officials said. The study will run through 2005. CMS is expected to release final selection criteria in May.

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Winners: Hospital clinics treating HIV, kidney disease
Medicare reform will bring changes for biotech drugs, which have been administered in hospital outpatient settings and then reimbursed as so-called pass-through drugs that carried temporary additional payments. The drugs will be reimbursed under a new system in 2006 at an increased rate. This is good news for biotech manufacturers as well as hospital-based clinics that treat HIV, cancer, and kidney disease. The Centers for Medicare and Medicaid Services is expected to issue its initial regulation by this summer.

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CMS issues instructions for critical access hospitals
Hospitals in rural areas offering limited services-known as critical access hospitals-may set aside inpatient psychiatric and rehabilitation units with up to 10 beds each as part of a Medicare reform provision, according to instructions CMS issued April 23. Units would not count toward a critical access hospital's 25-bed maximum. Medicare will pay for inpatient rehabilitation services in these hospitals based on the inpatient rehabilitation facility prospective payment system. Medicare will pay for psychiatric services on a reasonable cost basis, until CMS implements a new prospective payment system for inpatient psychiatric facilities. Of note: These hospitals can now designate up to 25 beds as either acute care beds or swing beds for acute or post-acute care.

Source: Section 405(g) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

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Gov't to examine drug-plan marketing
The government, concerned about clinical decisions related to formulary management, is expected to increase scrutiny of prescription-drug and Medicare Advantage plans offering drug benefits starting in 2006. Beneficiaries will have less flexibility than they did with Medicare+Choice, according to Medicare reform experts. "Expect the government to scrutinize the marketing activities of these plans," says Max Reynolds, an attorney with McDermott Will & Emery in Washington, DC. The government will closely monitor the accuracy and thoroughness of marketing presentations, disclosures, and materials, Reynolds reports.

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First part of chronic care initiative rolled out
Department of Health and Human Services (HHS) Secretary Tommy Thompson unveiled last week in Washington the first phase of the Voluntary Chronic Care Improvement Program, which was authorized under MMA to help about 150,000 to 300,000 Medicare beneficiaries with multiple chronic conditions in fee-for-service plans better manage their conditions.

For the first phase of the initiative, HHS is accepting applications from entities--including disease management organizations, health insurers, integrated delivery systems, and physician group practices--through August 6 to operate chronic care improvement programs in approximately 10 areas that represent in aggregate 10% percent of the Medicare fee-for-service population.

These 3-year pilot projects will focus primarily on providing services to beneficiaries with congestive heart failure, diabetes and/or chronic obstructive pulmonary disease who have other significant chronic conditions. "We want private entities to come to us saying that this is the plan [they] have devised to give these patients the highest quality care at the most affordable, efficient pricing," Thompson said.

Those beneficiaries with five or more chronic conditions represent 20% of the Medicare population but account for 66% of all Medicare spending. Or viewed another way, Thompson said, 92% of the Medicare dollars now used are related to illness, while only 8% of Medicare money is spent on preventive efforts.

Putting chronic care management programs on the line
The new pilot project is "a completely voluntary project," and it will not restrict benefits to participating beneficiaries, said the Centers for Medicare & Medicaid Services (CMS) Administrator Mark McClellan, MD, PhD, at the briefing.

The idea is that the participating organizations will use improvement strategies--such as self-care guidance, evidence- based guidelines, and telemonitoring--that have been used in the private sector to better coordinate care among providers and enhance the quality of care that the beneficiaries receive. The programs will not be able to restrict beneficiary access to care- -for instance, through utilization review, gatekeeper functions, or confining beneficiaries to a limited number of physicians in a network.

However, there is a caveat. The successful chronic care improvement programs must demonstrate that they are improving the health of the population they serve. "And they must improve the health care costs at the same time--or Medicare doesn't pay them," McClellan said.

"This is something new, but it is something fundamental and very important. We are aiming for specific improvements in measures of clinical quality of care for conditions such as diabetes by adherence to proven practice guidelines that prevent complications [such as dialysis or blindness]," McClellan said.

Beneficiary and provider satisfaction will be monitored as well. "If these programs don't work well for the beneficiaries--or for the health care professionals who are treating them--they are not going to succeed," he added. "In order to get paid, these programs are going to have to achieve 5% reductions in overall patient costs. This is a fundamental change in Medicare."

The HHS notice about the program appeared in the April 23 Federal Register.

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Watch for brand-name and generic code differences
Be careful when billing Medicare for multiple-source drugs. You need to make sure your billing system has different codes for the brand-name and generic versions of the drugs.

The Centers for Medicare & Medicaid Services (CMS) issued separate codes for innovator and non-innovator multiple-source drugs paid under the Outpatient Prospective Payment System (OPPS), meaning you could receive different reimbursement if you use a brand-name drug instead of a generic. CMS issued the codes in Transmittal 112, Change Request 3144 on February 27. The codes affect billing Medicare for services provided after April 1. Go online to cms.hhs.gov and see Transmittal R112 for a table of the codes and the different payment rates.

Hospitals enter drug names only once in the chargemaster, says Ernest Anderson Jr., MS, pharmacy director at Lahey Clinic in Burlington, MA. The process creates a billing problem because you need to make sure you have the proper code for either the brand-name or generic version of the drug to bill Medicare.

"This isn't how the system works," Anderson says. "It doesn't fit into how hospitals buy drugs, and it doesn't fit into how we bill."

Different rates for different drugs
CMS will reimburse innovator multiple-source drugs-brand-name drugs with more than one therapeutic use-at 68% of average wholesale price (AWP). CMS will reimburse non-innovator multiple-source drugs-generic drugs with more than one therapeutic use-at 46% of AWP.

For example, CMS will reimburse hospitals $2.56 for 100 milligrams of the brand version of cyclosporine and $2.41 for the generic, according to the code table in the CMS transmittal.

The codes for each drug are different. The generic cyclosporine uses code J7502, and the brand cyclosporine uses code C9438.

Billing headaches
One hospital told the American Society of Health-System Pharmacists (ASHP) that it uses the generic version of a particular drug one month and the brand-name version the next because of its purchasing agreement, says Gary Stein, PhD, director of federal regulatory affairs for ASHP. But the process created a problem because the codes changed every month.

"It's just a big headache in terms of reimbursement and billing," Stein says.

Tip: Make sure you switch the coding in your billing system, depending on whether you use the brand-name, innovator drug or the generic, non-innovator drug, Anderson says.

ASHP has heard similar complaints from a few other members, Stein says. The association will look into the issue further and bring it up with CMS once it has more information, he says.

Compiled from the Hospital Pharmacy Regulation Report, an HCPro monthly newsletter

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