By John McManus, president and founder, The McManus Group
After issuing a far-reaching proposal to “test” the impact of payment cuts to all physician- administered Part B drugs on three-quarters of the population in a compulsory five-year demonstration program, CMS has received dramatic and overwhelming rejection from Congress and stakeholders demanding the proposal be withdrawn or substantially modified.
The proposal would effectively rewrite the payment formula Congress enacted in the Medicare Modernization Act, which reimburses physicians for drugs they administer at average sales price (ASP) plus 6 percent. Phase one would reduce that to ASP+2.5 percent and a flat fee of $16.80, which after the 2 percent sequester cut pegs reimbursement to less than ASP+1 percent. Phase two of the demonstration, which could commence as early as January 2017 and before the phase one payment cut could even be evaluated, would test “value-based purchasing” including reference pricing and indication-based pricing schemes.
The first fusillade came from a united House Republican caucus, which amassed 242 signatures (including four Democrats) on a letter led by former physicians Reps. Price (R-GA) and Boustany (R-LA) as well as Rep. Shimkus (R-IL) that demanded a full withdrawal of the proposal.
That letter stated, “CMS’ proposed Medicare drug experiment would lead physicians to refer patients to a hospital outpatient department. Driving more care to an often less convenient, more costly setting makes it more challenging for beneficiaries to access needed care and increases overall Medicare costs. This will lead to further consolidation and less choice for seniors.”
Then every member of the Senate finance committee, which has jurisdiction over Medicare, weighed in against the proposal. Ranking member Wyden (D-OR) and his 12 Democratic colleagues demanded that CMS resolve several important concerns before moving forward:
- BENEFICIARY ACCESS TO PART B DRUGS, including implementation of real-time monitoring to rapidly detect beneficiary quality and access issues.
- IMPACT OF SITE-OF-SERVICE, particularly on rural and smaller physician practices.
- INTERACTION WITH EXISTING DELIVERY AND PAYMENT MODELS, such as the oncology care model and alternative payment models.
- GREATER ENGAGEMENT WITH STAKEHOLDERS.
The Republican finance letter led by Chairman Hatch (R-UT) admonished the administration for using the Center for Medicare and Medicaid Innovation (CMMI) to rewrite other programs: “We caution against invoking a similar unilateral effort to make changes to the successful Part D program through a flawed overreaching read of the CMMI authority … We sincerely hope that you will withdraw this proposed rule and work with the Congress on a bipartisan approach.”
But even more dramatic were the rank and file Democratic letters — eventually totaling two-thirds of the Democrats in both the House and Senate — voicing opposition to their own administration’s proposal to address drug pricing. Rep. Richie Neal (D-MA) collected 57 Democratic signatures on his letter, the Congressional Black Caucus amassed 23 signatures, and Senator Heidi Heitkamp (D-ND) recruited Senate moderates to oppose the demonstration project.
Democratic support for the administration’s demonstration was minimized to fewer than a dozen senators and fewer than 20 members in the House, despite much of the caucus begging the administration for a solution to high drug prices.
Why did Congress overwhelmingly rebuke the administration that had seized on the populist issue of drug pricing? The answer is an overwhelming stakeholder — patient, physician, and industry — grassroots outreach to every member of Congress expressing their deep concern on the clinical ramifications and the policy implications. It started with a letter signed by more than 300 patient, physician, and industry organizations. It culminated with thousands of phone calls, emails, and meetings with senators, representatives, and their staffs urging them to contact the administration and express their concerns and opposition to the experiment.
CMS is now wading through a plethora of officially filed comments that take issue with the very premise of the demonstration project — that the percentage add-on payment incentivizes physicians to choose more expensive and not necessarily clinically superior drugs.
The American Medical Association (AMA) slapped down that suggestion. “Phase 1 is based on a specious premise — i.e., that physicians may choose their patients’ drug therapy based on the drug with the highest reimbursement to the physician. Although the agency primarily relies upon a June 2015 Medicare Payment Advisory Commission (MedPAC) report to Congress to support this assertion, the reality is that MedPAC looked at that question and concluded that there is little evidence to support this claim.”
Indeed, CMS provided no evidence whatsoever that physician prescribing behavior is driven by reimbursement rather than appropriate therapeutic treatment for patients.
The Large Urology Group Practice Association (LUGPA), representing freestanding urology practices, noted the bizarre distortions created by the proposal. “The proposed model will simply cut reimbursement for critical therapies — such as those used to treat patients with advanced prostate cancer — while creating windfalls for drugs either incident to care (such as narcotic opioids used for anesthetic purposes and perioperative intravenous fluids) or for benign conditions, such as testosterone treatments used to treat loss of sexual function. … (Moreover) There are no generic alternatives available for any of the Part B advanced prostate cancer medications that represent the largest component of urology Part B drug spending. Yet, the phase one methodology proposed by CMS would levy its largest cuts on this category of drugs.”
The math on this is simple: expensive drugs, often used as a last resort, are cut the most. Cheap drugs receive massive bonuses because the $16.80 flat payment bears no relation to, and in many cases dwarfs, the underlying cost of the drug.
Congress is now holding hearings to provide greater insight on the implications of the proposal. The Immune Deficiency Foundation, the national group dedicated to advocacy and research of immunodeficiency diseases, testified at the Energy & Commerce Committee on May 17 : “What this proposal lacks — and what other CMMI demonstrations have included very explicitly — is outcome measures.”
Dr. Debra Patt, testifying on behalf of the American Society of Clinical Oncology, the Community Oncology Alliance, and the U.S. Oncology Network, said, “Seven of the top 10 drugs that account for 48 percent of Part B spending are used to treat and cure cancer. Limiting an oncologist’s ability to provide current, cutting-edge treatments, as will occur if the ‘Part B Drug Payment Model’ is implemented, will likely result in inferior outcomes for Medicare beneficiaries with cancer.”
Dr. Patt went on to contrast the surprise release of the sweeping Part B drug experiment with the three-year collaborative and transparent effort between CMMI and the oncology community to develop the Oncology Care Model, an episode payment model aimed at improving coordination, appropriateness of treatment, and access to care for Medicare beneficiaries. “Unfortunately, CMS took the opposite approach in crafting and announcing the Part B Drug Model. It was introduced to the oncology community for the first time when it was released March 11, 2016. Oncologists’ patients and others had absolutely no input on the proposed model.”
ALLIES EXPRESS CONCERN
While the Obama administration is touting support from groups on the left, including the Center for American Progress, the Committee to Preserve Medicare and Social Security, and AARP, key allies appear to be questioning or abandoning the cause. Chris Jennings, an adviser to Democratic presidential front runner Hillary Clinton, recently declined to say whether a Clinton administration would seek to implement the proposal.
Chip Kahn, president of the Federation of American Hospitals, whose hospitals may actually benefit should care migrate to the hospital outpatient setting, expressed concern. “This is not a demonstration,” Kahn said, pointing to the scope CMS’ proposal. “I have concern for the precedent of moving national.”
Perhaps he is wondering if CMMI can unilaterally rewrite deliberately negotiated statutory law regarding drug reimbursement, what is to prevent it from rewriting hospital reimbursement under the guise of a new demonstration?
As anxious stakeholders await CMS’ final rule, Congress is gearing up to legislatively halt the demonstration. Rep. Larry Bucshon (R-IN) has introduced legislation to block the Part B drug rule. A big bipartisan vote for that bill on the House floor may compel the Obama administration to scrap or substantially scale back the proposal. And bipartisan support for fundamentally altering or delaying the proposal by the Senate Finance Committee can grease the skids for action in that chamber if the administration refuses to bow to the mounting pressure.
The pharmaceutical industry understands that this battle is a key test to even bigger changes the left would like to undertake to Medicare’s outpatient drug benefit through Obamacare’s empowerment of CMMI, as well as the pending Independent Payment Advisory Board (IPAB) that is waiting in the wings. (IPAB is an unelected board empowered to rewrite Medicare law to achieve savings if Medicare spending exceeds arbitrary levels written in the Obamacare statute.)
The larger healthcare industry and patient community are now beginning to appreciate just how much power has been transferred from the people’s representatives to unaccountable bureaucrats.