Medicare Reform Advisor, November 16, 2004

Nov. 16, '04 Vol. 1, No. 37 Weekly news and analysis

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© 2004 HCPro, Inc.

Rate bump could create disincentive to prescribe dialysis drugs

Medicare Reform Advisor is hitting the road to bring you the best coverage and analysis from workshops and conferences on diseases and therapeutic categories, and the reimbursement implications for you. This is part of a new ongoing series. This week: Dialysis. On December 13: Neurological disorders.

Lower payments for dialysis drugs next year-coupled with the 8.7% increase in payments for dialysis services under the composite rate (see "Drug Payment Reform" below for details)-could create a disincentive to prescribe drugs, McGuire Woods attorney Kimberly Kannensohn, JD, told 65 dialysis executives November 11 at the Dialysis Issues Conference in Chicago. A senior CMS official said the agency is concerned about this. Starting January 1, Medicare will pay a fee of $0.50 per syringe for each Epogen administration. This, Kannensohn said, raises a question as to whether dialysis facilities are legally obligated to administer prescription drugs ordered by a patient's nephrologist. Epogen is one of 10 drugs routinely administered by dialysis facilities. There is no regulation or law that requires dialysis facilities to administer medications prescribed by a patient's dialysis physician. When a nephrologist prescribes Epogen and the patient is not capable of self-administration, the dialysis center should provide it, following CMS' view that facilities provide "appropriate care." Kannensohn suspects CMS may announce criteria about this issue.

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Dialysis drug payments better
But still below pre-MMA level

Hospital-based dialysis centers will do well under the new reimbursement rates starting January 1, except for payments related to Epogen. The following are the 2005 average acquisition payment amounts for the top 10 dialysis drugs-rates below are slightly better than Medicare's proposal this summer, but still well below pre-reform law reimbursement levels:

1. Epogen: $9.76 for 1000 units
2. Calcitriol: $0.96 for .1 microgram
3. Doxercalciferol: $2.60 for 1 microgram
4. Iron dextran: $10.94 for 50 micrograms
5. Iron sucrose: $0.37 for 1 milligram
6. Levocarnitine: $13.63 for 1 gram
7. Paricalcitol: $4.00 for 1 microgram
8. Sodium ferric glut: $4.95 for 12.5 micrograms
9. Alteplase, Recombinant: $31.74 for 1 microgram
10. Vancomycin: $2.98 for 500 milligrams

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Composite rate increase for dialysis
To help dialysis facilities cover costs for certain treatments, CMS will increase the dialysis composite rate to 8.7% in 2005, up nearly 2%. This one-time increase will compensate for reimbursement reductions, leaving most hospital-based facilities slightly ahead or breaking even in the end. CMS will issue a proposal next spring with a new methodology for calculating the 2006 composite rate. The rate takes effect January 1, although you may send comments about it to CMS January 14. Go to www.cms.gov for details.

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Critical access update
Indian health service/tribal hospitals, including critical access hospitals that manage and operate hospital-based ambulances, can now receive payment for ambulance services based on 100% of reasonable costs associated with outpatient services, according to section 630 of the reform law. Fiscal intermediaries should pay for ambulance services at 100% reasonable costs for all critical access facilities. The payment update takes effect April 1, 2005. See CMS transmittal 367 for further details.

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Medicare looking to close "prevention gap"
While much of the attention with the Medicare Modernization Act has focused on how Medicare is going to provide prescription drug coverage, another important aspect addresses how more emphasis needs to be placed on preventive care, Centers for Medicare and Medicaid Services (CMS) Administrator Mark McClellan said at a Washington briefing last week that unveiled several new and enhanced steps the agency is taking in this direction. For example, CMS will be working more closely with the Centers for Disease Control and Prevention and other Health and Human Services agencies to emphasize the prevention messages and promote early detection of diseases. CMS will also be working with private groups, such as the American Diabetes Association, the American Cancer Society, and the American Heart Association to raise awareness of this prevention campaign. "We have the best opportunity ever to close the prevention gap for seniors," McClellan said. He defines this gap as the "difference between the expert recommendations for seniors to use preventive services and the actual use of prevention-oriented medicine by seniors."

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Four antiviral drugs to be covered
Medicare announced November 12 that it will cover four new flu drugs starting December 13 as part of a demonstration project that wraps up May 31, 2005. The project is intended to help CMS evaluate the effects of paying for certain antiviral drugs to treat or prevent influenza. Medicare will cover the following drugs (note each has a maximum allowable payment:

1. Amantadine Hydrocloride, Oral, per 100 mg, HCPCS code G9017, $0.77
2. Zanamivir, Inhalation Powder Administered Through Inhaler, per 10 mg, HCPCS code G9018, $5.43
3. Oseltamivir Phosphate, Oral, per 75 mg, HCPCS code G9019, $6.98
4. Rimantadine Hydrochloide, Oral, per 100 mg, HCPCS code G9020, $1.65

CMS says it will cover the generic equivalent of these drugs when appropriate. Drugs must be furnished to a beneficiary with symptoms of influenza, as a prophylaxis for a beneficiary exposed to a person with a diagnosis of influenza, or to a beneficiary in an institution where there has been an influenza outbreak, according to CMS Transmital 365. The demonstration does not cover these antiviral drugs for general prophylactic use. All of the drugs must be furnished incident to a physician service or must be prescribed by a physician.

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Poll: Seniors cynical of pharmco role
Seniors interviewed after the election said they were concerned about the drug manufacturers' role in determining which drugs Medicare should or should not cover under the new drug benefit provisions of the Medicare Modernization Act, according to a poll commissioned by the Washington, DC-based Pharmaceutical Care Management Association (PCMA), a trade association representing the country's pharmaceutical benefit managers (PBMs).

"What [the seniors] are saying is that they want competition in the system," said PCMA's President Mark Merritt in a telephone briefing November 10 on the poll. "They do not want drug companies essentially pricing their own products or getting the federal government to mandate market share for their drugs at the taxpayers' expense."

"There is a good deal of skepticism or cynicism about the drug manufacturers among these seniors who voted in the election. They want to make sure that drug manufacturers compete with one another to provide discounts--rather than accept the recommendations of the manufacturers about which drug should be covered," said Whit Ayres, who heads Ayres, McHenry & Associates, which conducted the poll on behalf of PCMA. "Most of them think it's a bad idea to have the drug manufacturers even involved with making decisions about what drugs ought to be covered within the Medicare program."

The post election survey was conducted among 800 voters 60 years of age or older by Ayres, McHenry & Associates Nov. 3 7, 2004. According to Merritt, this data regarding senior voters' views about the structure of the new Medicare drug benefit could have implications as the Bush Administration and the United States Pharmacopeia work over the next several weeks to finalize draft model Medicare formulary guidelines.

Survey highlights
Among the survey findings were the following:

• Health care ranked fifth overall among issues with the greatest impact on seniors' votes. For all seniors, 11% said health care had the greatest effect on their votes, after Iraq at 22%. Among Bush voters, health care ranked fourth at 6%; among Kerry voters, health care ranked third at 18%.

• When considering just health care, controlling costs ranked first (selected by 4% of those interviewed), followed by funding Medicare (3%) and dealing with the cost of prescription drugs (3%). For Kerry voters, 7% cited costs, and 5% cited Medicare funding; for Bush supporters, only 1% cited costs and Medicare funding.

• 82% of seniors surveyed said Medicare should make drug manufacturers compete with each another to provide discounts on their drugs.

• 69% of seniors said it is a "bad idea" to have drug manufacturers helping to determine which of their drugs Medicare should and should not cover. Broken down further, 64% of Bush voters thought it is a bad idea, as did 75% of Kerry voters.

• 25% of seniors said the drug companies are motivated by providing seniors choices; 54% said "profits" are the driving force. Bush voters attributed drug company behavior to profits or providing choices by 43% and 33% respectively, and Kerry voters agreed 66% and 16% respectively.

• 72% of seniors surveyed said they preferred a drug plan similar to that enjoyed by members of Congress, which offered a choice of drug plans "with at least 120 categories of drugs," rather than a plan similar used by the Department of Veterans Affairs, which offered "one national preferred drug list with 34 categories of drugs." (The 120 categories is 26 fewer than what is currently recommended by U.S. Pharmacopeia in its draft formulary guidelines.)

• 77% of seniors said that drug manufacturers should disclose their pricing agreements with retail pharmacies, wholesalers, and pharmacy benefit managers--rather than just some of these types of companies; 71% said it was unfair to apply disclosure requirements to just one type of company, while only 13% think it is fair.

See www.pcmanet.org for further survey findings.

Report from Correspondent Jan Simmons.

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Bryan Cote
Executive Editor
860-232-6367
E-mail address: bcote@hcpro.com