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July 27, 2004
Vol. 1, No. 23
Weekly news and analysis
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to Medicare Reform Advisor
| EXEC CORNER |
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New Medicare data source
MedPAC has released this month an updated version of "A Data Book: Healthcare Spending and the Medicare Program," which contains the type of information that it provides in its reports to Congress. It also combines data from other sources, such as the Centers for Medicare and Medicaid Services. The sections include: Medicare beneficiary demographics, access to care in the Medicare program, national health care and Medicare spending, drugs, acute inpatients services, ambulatory services, post-acute care services, and services such as dialysis, durable medical equipment, and hospice care. Web links to MedPAC publications or other sites are included after the table or figure, or on a "Web links" page at the end of each section. For more information, see www.medpac.gov/publications/. Look up the June 2004 congressional report.
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| LETTERS TO THE EDITOR |
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Send letters to bcote@hcpro.com. Include tips, ideas, questions, and problems related to Medicare reform. The editors reserve the right to edit letters for clarity. |
| DATEBOOK |
| Election Day, 2004--If John Kerry is elected president this November, expect changes to Medicare-reform that would guarantee wider access to pharmaceuticals. That said, an aide for a House Democrat last week told Medicare Reform Advisor that changes will never happen until the Democrats regain control of Congress. "Congress is considering too much other stuff and the Republicans feel too close to Medicare reform that they will do whatever they can to protect it," the aide said.
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© 2004 HCPro, Inc. |
Formulary rules limit drug company powers
Drug companies will be looking for avenues to challenge formulary determinations now that plans can limit the number of drugs by class to just two drugs-a reform-law provision that could cripple drug firms. "This is a tremendous sword in the hands of Part D plans," says William Sarraille, JD, an attorney with Sidney, Austin, Brown & Wood in Washington, DC. He says drug plans in the new Part D that rolls out in 2006 may want to cover no more than two drugs in a therapeutic class to lower their risk-and they have that option, under the law.
"A decision against our drug would be worse than a career-ending injury for a baseball team's top player," one drug-marketing executive said on condition of anonymity during a Center for Business Intelligence-sponsored Medicare Compliance conference July 20 in Arlington, VA.
In the Medicare-reform law, pharmacy and therapeutic committees can actually ignore consensus medical opinion when deciding whether to cover a drug. Some plans may say consensus medical opinion is enough to remove a drug from its formulary, or enough to deny it entry, Sarraille says; other plans won't care whether the drug will reduce hospital days. Sarraille expects drug companies to sue plans over their formulary decisions.
The irony in all of this is that, by law, CMS can't get involved in these formulary fights. The pharmaceutical industry lobbied for this as part of the reform law. So when prescription drug plans make drug class decisions that don't include a firm's drug, or remove it, that firm can't appeal to Medicare.
Check out next week's MRA for strategies to help win formulary fights.
| MEDICAREMURMURS |
- Increasing health care costs and higher premiums under the Medicare Modernization Act (MMA) could cut into Social Security cost of living adjustments (COLAs) for many beneficiaries, according to a report released last week by Democrats on the congressional Joint Economic Committee. Specifically, they said that about 7 million beneficiaries will have more than 25% of their COLA taken by Medicare premium increases in 2007; this would rise to 64% of beneficiaries (about 22 million) in 2014.
- The report also says that for an individual with a monthly benefit of $500 (in 2004 dollars), the annual increase in combined Part B (physicians' services) and Part D (prescription drugs) premiums will absorb about 60% of the annual COLA on average between 2007 2010 and nearly 70% of the COLA in 2011 2014. For those with larger monthly benefits, the increases in Medicare premiums still could absorb a fraction of the COLA.
- On the day the report was released (July 21), House and Senate Democrats introduced legislation that they say would guarantee beneficiaries could keep at least 75% of their Social Security COLA each year-regardless of increases for Medicare Part B and D premiums. However, there is disagreement on the other side of the aisle over the impact of the MMA on the Social Security COLAs. Senator Chuck Grassley (R IA), chairman of the Senate Finance Committee, said that Democrats' analysis did not account for COLA increases over the next 10 years, which he says will be larger than premiums for Part B and D benefits combined in 2004.
Washington correspondent Jan Simmons reporting
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Pharma: Inhalable insulin product could be Part D-covered
Drug companies and biotech firms should spend more time during the research and development phase on reimbursement, says Sharon Cohen, former vice president of government affairs for the Biotechnology Industry Organization.
Providers should take note of this shift and how manufacturers go about collecting answers to these questions:
- To what extent do we want our products to be administered by physicians?
- What should be the mode of administration?
- Will our drug be covered by Part B or Part D, and should we model it for Part D?
There's an inhalable version of insulin in the works by one company, and it could be a Part D drug, experts project. "The question is, what's the easiest means to access in different orbits," Cohen says. "Find out your quickest and most sustained route to reimbursement."
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Expect more off-label national coverage decisions
CMS will likely use its residual authority to trump federal statutes about off-label drug use to create consistent coverage policies among plans, including national coverage decisions (NCD). Expect guidance on this issue to drug companies. CMS will want to see scientific data-we're seeing evidence of that already. The Medicare-reform law's drug replacement study, which started in July, covers Thalidomide, an off-label drug to treat multiple myeloma. Data from various trade groups helped garner coverage. The FDA, CMS, National Institutes of Health, and the National Cancer Institute will coordinate efforts to enhance coverage decisions. Meanwhile, more coverage will mean greater enforcement of billing operations and reimbursement education. Pharmcos, for example, must continue to be careful about disseminating any information related to off-label uses, even though the companies are protected under various safe harb! ors.
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Dysfunction possible in contractor reform provision
There's good and bad news for providers in the contractor reform sections of the MMA law, some of which we outlined in the previous two issues of this newsletter. Here are two more implications:
The bad: CMS will split off certain payment functions from contractors (either fiscal intermediaries or carriers). "[CMS] may split off provider and beneficiary call centers, for example, but those people [at the call centers] don't process claims-and that's what those calls are about," says Michael Hamerlik, president of Noridian, which holds many Part A and B contracts. "Fragmenting is clearly allowed by the MMA, and splitting off functions could create disfunction," he says.
The good: Providers may write or call their contractor and request a coverage decision. The contractor must respond in writing and the provider may rely on that decision, according to the prior approval rules in the reform-law.
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PBMs may get plan administration after all
CMS may turn the administration of its prescription drug plans over to pharmacy benefit managers (PBMs), reform-law insiders project, if people delay or avoid entering stand-alone prescription drug plans (PDPs). PDPs are considered one of the big unknowns in the Medicare-reform puzzle. CMS will establish PDP regions for 2006; each region must carry two PDPs. With this, the plans will experience an influx of adversely selected beneficiaries, patients with higher cost and risk. "It'll be tough for the plans to sustain long-term profits if there's a delay," according to a senior manager for Covance. What's more, private insurers won't underwrite stand-alone PDPs for Medicare, according to one PBM executive.
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Reducing drug prices could erase Medicare 'donut hole'
The federal government could eliminate the "donut hole"-or the gap in beneficiary coverage under the new Medicare drug benefit when it starts in 2006-if Medicare pays drug prices that are similar to those paid in Canada, the United Kingdom, and France, says a new study posted last week on the Health Affairs Web site.
However, the trade off is less pharmaceutical research and development in the future, says the paper prepared by Gerard Anderson, a professor at the Johns Hopkins University Bloomberg School of Public Health, and his colleagues.
According to the study, when an average market basket of 30 popular drugs were compared with American prices, prices were 52% lower in Canada, 59% lower in France, and 47% lower in the United Kingdom. And, assuming if a 20% discount for American purchasers were applied, prices were 40% lower in Canada, 48% lower in France, and 34% lower in the United Kingdom.
The study notes that most other industrialized countries "have instituted a variety of mechanisms to limit drug spending, such as formularies, reference pricing, and price controls." If the Medicare drug bill did not preclude Medicare from directly negotiating with drug companies, Medicare could probably obtain prices similar to those in other countries, the researchers note.
To eliminate the donut hole, drug prices for Medicare beneficiaries would be 45% lower than they are now. But any lowering of prices might affect investment in the industry and consequently pharmaceutical innovation, the authors say.
In an accompanying study on the Health Affairs Web site, Patricia Danzon, a professor at the University of Pennsylvania's Wharton School, says that the price differences between the U.S. and other countries may not be as big as Anderson assumes, and that "careful cost effectiveness analysis" would be more appropriate than "trying to import other countries' price controls."
Washington correspondent Jan Simmons reporting
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McClellan Unplugged
The following are highlights from comments CMS Administrator Mark McClellan made July 21 at the beginning of the three-day Secretarial Summit on Health Information Technology (sponsored by HHS) at the Washington, DC, Convention Center:
Internet-based Indiana pilot portal
"Medicare will pilot test this Internet portal this year to provide beneficiaries direct web access to much of their Medicare claims information. We intend to do this in a way that is secure, and protects the privacy of their information. Later this year, we'll be adding information on preventive services."
E-Prescribing
"We're driving forward to electronic prescribing in conjunction with implementing the new Medicare drug benefit. E-prescribing can improve the nation's safety and reduce avoidable health care costs by reducing prescription errors due to that hard-to-read physician handwriting. I'm guilty of it. [Physicians and providers will be] checking drug interactions and allergies, and making sure the patients and health professionals have adapted the latest and most relevant information at hand when they make important decisions about medicine."
"We are implementing a new provision of the Medicare Modernization Act that allows [the Centers for Medicare and Medicaid Services] to develop national standards-standards that are mandatory for all the drug plans participating in the Medicare Part D prescription drug benefit...by 2009. But I think we can do this much faster and under [Secretary Thompson's] leadership we will be establishing a set of standards-standards that are already in use and in agreement by January 2006 when the Medicare benefit begins. We're also reviewing existing programs for e-prescribing nationwide. We are going to identify the most promising features-the most effective features that can be adopted more widely as pilots in conjunction with new benefits in 2006.
Physician involvement
"Participation by physicians in e-prescribing will be optional, but by having established standards and by taking additional steps to encourage the use and support for effective e-prescribing programs, we're going to make e-prescribing much more attractive. That will encourage and support faster adoption. Promoting the adoption of e-prescribing is an essential step for us improving the quality of health care, and we'll be implementing the new Medicare drug benefit in a way that does all we can to help patients get the added benefit of e-prescribing as soon as possible."
Electronic health records
"Medicare is joining a national alliance of purchasers and payers who will be working with them and supporting their efforts to create a common approach to encouraging health information technology adoption--coordinating with the private sector to reduce the costs of adopting an effective electronic health record system. [This] will help overcome the barriers that exist today to electronic health records."
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Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com |
