Wednesday, March 9, 2016

Medicare to Slash Physician Drug Payment Zip Code

A few weeks ago, there was a briefly posted and then deleted CMS Transmittal (instruction to contractors) to set up systems that could vary drug pricing by zip code (here).   On Wednesday March 9, both the NYT and WSJ carry lead stories that CMS will soon begin a demo program that tests payment cuts to doctors who "buy and bill" drugs for their Medicare patients.

Early Coverage (March/April) 
Open access coverage at Medscape, here. NYT here, with NYT follow-up article here, and NYT op-ed here.  WSJ here.  WSJ also reported that overall drug spending rose 14% in CY2014 (here).  For a further list of sources, see Mediapost (here).  Subscription coverage at Law360, here.  A four page review by Avalere, here.

Closing Coverage (May)
A May 2016 update at Health Affairs from Brookings Institute, here. A May 2016 update from Politico on the kickback, here.  A similar summary of the best links at PHRMA, here.  AHIP response here, and here in full.  An Anti-CMS website is here.  For the May 2011 House hearing on the proposal, here.

CMS Links
For the full 119 page Federal Register announcement, here.  For the CMS press release, here.  A new 16 page HHS/ASPE report on drug spending, timed to the CMMI proposal, here, here; blog on the HHS report, here

Details after the break.

How Much Authority Does CMMI Have?
CMMI has very open-ended authority to waive existing law as it creates its "demonstration programs" which it can later enact as permanent policy.  See the law's text, here [Section 3021 of Affordable Care Act.]

What Are the Controls on CMMI?
Pretty much nil.  The ACA shields all CMMI demos from review "administrative or judicial." It specifically blocks complaints about features like...the selection of projects, their expansion, their scope and duration, and decisions regarding the times of implementation or termination.  See ACA 3021(d)(2); text, here.   Those who are pessimistically inclined may play clips from the Dr. Strangelove film regarding the Doomsday Machine - the nuclear process that Russians designed so that it couldn't be stopped by anyone once it was begun; here.

Drug Pricing Up Until Now
Before about 2005, office drugs (like injected or infused cancer drugs) were reimbursed at "AWP" or average wholesale price, often providing doctors margins of over 10%.  Medicare prices were then converted to ASP + 6%, based on "average sales price" as reported quarterly to CMS by biopharma.  GAO regularly reports that this incents doctors to give higher-cost drugs on which the 6% is proportionately larger (November 2015 example, here).

Basic Experiment: ASP +6, ASP +2.5
Under the new system, in some areas doctors will continue to be paid 106% of ASP, in other only 102.5% of ASP - plus a $16.80 fee.

But there is potentially much more.
CMS also floats "value by indication" pricing (one price in kidney cancer, another price in lung cancer) and "reference pricing" (e.g. least costly alternative) -- but with very little detail about how these game-changing efforts would be implemented.[*[

CMS could go as far as dividing the country in to 4 regions based on first, ASP+6 pricing or ASP+2 pricing, and then each of those groups cut into two arms based on the addition or absence of additional value experiments.  Graphically, something like this:

Trade Journals
For trade journal articles, see Modern Healthcare here,  Cancer Letter here. The Hill here, RevCycle here.  Medpage ("Oncologist blast plan") here,  Becker's Hospital CFO, here.  PoliticoPro, here.

My firm's online review of the Part B proposal is online here.

Pink Sheet ran a pair of articles, one focusing on the program and one focuses on whether it "strains legal norms" - here and here.   (A follow up on the complexities and barriers to the CMMI proposal, APril 18, here.)   RPM Report here.  Inside Health Policy, here and here (re protests to Congress and re AARP's support of the model, respectively).   Arent Fox has a law-firm blog summarizing the policy proposal, here.  A thoughtful and detailed strategic review at Drug Channels, here ("Why CMS's Crazy Plan to Remake Part B Won't Work.")

Inside Health Policy published an article in April that the Demo will probably exclude centers in the Oncology Care Model (here).  The Pew Charitable Trusts held a workshop on the CMMI proposal on April 11 (here, here), and MedPAC revisited Part B drug issues on April 7 (here; transcript will later appear).

For an interesting blog and links on the system-wide decline of physician buy-and-bill and the rise of specialty pharma ship-and-drop, see Drug Channels, here.

Complaint Letters Are Being Launched
ASCO states that the CMS proposal "misses the mark," here.  Two mass letters of complaint have been aimed at CMS (here for summary, for documents to Slavitt Feb 25: here, and to Burwell March 4: here.)  Note that both of these letters were drafted before the full 100-page plan was released on March 9.   The Burwell letter raises concerns that the new initiative seems to bulldoze over the Oncology Care Model (OCM) project, which was a couple years in collaborative development, and which CMS has not even launched yet.

Noting they were studying the CMS proposal carefully, BIO made a public comment on March 9, here.  On March 22, a coalition of 316 stakeholders launched an additional letter to the Hill, here and here.  The core complaints remained brief at only 2 pages, followed by 7 pages of signatories.

A relatively solitary voice, AARP has supported the demo (here), calling the project a "thoughtful, measured approach."  AARP has decried "soaring drug prices" (here, here, here).

Little Focus on Quality

By law, CMMI projects are required to reduce costs without affecting quality.  There is little to nothing in the proposal about monitoring quality of life or quality of health outcomes in affected cancer patients or other types of patients.   In March 2016, a large observational study reported that quality outcomes were materially harmed by the DME competitive bidding demonstration with regard to diabetic supplies and meters, especially in minority populations.  Trade journal here, original publication here.  A sponsor of the study stated:
"We are troubled that CMS failed to detect these 'unintended' consequences and, instead, reported that the program was a success," said study author Gary Puckrein, who's the CEO of the National Minority Quality Forum, in a statement. "Based on our findings and employing the safety monitoring protocols commonly used to protect human subjects, we believe policymakers should immediately suspend the program until CMS can demonstrate its ability to effectively monitor the effects of the program, correct the structural flaws causing this problem and ensure that the lives of America's greatest generation are no longer at risk." 

Pricing by Indication
Outcomes based pricing and especially pricing by indication are getting new attention in the pharma trade journals.  Pink Sheet Daily (subscription describes indication based pricing at Express Scripts (here, here) and CVS (here)  and Pink Sheet discusses outcome based contracts at Express Scripts (here).   From November 2015, see articles on Express Scripts and pricing by indication at FiercePharma (here) and Bloomberg (here) and on Express Scripts own website (here).  In November, Pink Sheet Daily had an article on combined outcome and utilization price negotiated between Amgen and Harvard Pilgrim on the PCSK9 inhibitor Repatha (here).  Latest generation diabetes drugs are a potential target for reference pricing, if you add these payer tactics to a Pink Sheet article finding that "diabetes is the top category targeted for managing spend" (here).

A press release and an ICER white paper (42 pp) on indication based pricing are here and here.  An ISPOR presentation on Indication Based Pricing is here.

Wishing for 1000 Wishes? Limits of Authority by Self-Dealing
While the statute creating CMMI does give it open-ended authority to create demos and waive other Medicare laws through rulemaking, the CMMI proposal may be too nonspecific regarding future value-based projects to pass muster as regulatory law making.  CMS says it can create a range of unspecified value based demo programs, with unspecified financial cuts targeted to unspecified drugs, across unspecified populations, as long as it posts the project for 30 days public comment on its website.  This may exceed its authority under the Administrative Procedures Act.  The APA doesn't contemplate a one-time announcement that an agency can announce once that it has authority to do anything it wants in the future, on any scale, for any duration, merely by posting its action online in advance.  It's like a genie giving CMS one wish, and which it uses to wish for an unlimited number of wishes.  [For some law articles on this topic see here and here; FDA is notorious in legal policy circles for acting by guidance not rulemaking, here, here, here.]  

Reference Pricing Redux: Hays v Leavitt
The CMMI proposal allows it to waive Congress's rules for drug B pricing.  CMS has previously skirted these rules on occasion with a policy maneuver called "least costly alternative" pricing, but lost its ability to do so in 2009 in the federal appeals case Hays v Sebelius (district court here, appellate here, here).  Court ruling that Congress's laws on drug pricing were clear and unambiguous and did not allow CMS to unilaterally interpolate principals like "least costly alternative" or reference pricing.

Making Buy & Bill Hard: Death by 1000 [Quality Metric] Cuts
Another pressure on physicians' ability to buy and bill drugs may be the new physician incentive system, called MIPS/MACRA, to begin in 2017.  Eventually this will roll in up to 9% penalties on doctors for quality and cost metrics.  For a geriatrician who bills Medicare $200,000, that is an $18,000 maximum penalty.  But for a doctor who bills $2M in expensive drugs, the 9% penalty would be $180,000, and the 9% penalty would be larger than the 6% gross cash margin on the drugs or $120,000.