CMS’ Medicare Part B drug proposal: 5 things to know

The goal of CMS’ proposal to change reimbursement for drugs provided in outpatient settings under Medicare Part B is to reduce costs while rewarding better outcomes for patients, according to the government agency.

In the first phase of CMS’ demonstration project, which would kick off in late 2016, payment to providers would vary based on geographic area. And the differential payment would mean that one half of the control group would receive 106% of the average sales price (ASP), which is what it is today. The other half would receive 102.5% of the ASP, plus $16.80, which is a flat fee per drug.

The second part of the demonstration project, which would start in early 2017, would further divide the control groups into a couple of different buckets to test a variety of value-based purchasing options based on strategies used by pharmacy benefit managers, private health plans, and hospitals.

Asked about an expected date for the final rule, a CMS spokesperson said the agency will continue to review comments received on the proposed rule and will provide a timeline for the final rule at a future date.

Here are five things healthcare executives need to know about the proposal:

1. The proposal is attracting both support and criticism.

Some advocacy groups such as PhRMA, which represents many pharmaceutical and biotechnology companies, and the Community Oncology Alliance, which represents community oncology practices, are up in arms.

CMS’ demonstration project “is the most contrived, absurd experiment on cancer I have seen,” said Ted Okon, executive director of the Community Oncology Alliance, in a Tweet sent shortly after CMS’ announcement about the program.

CMS’ proposal has garnered support from AARP and the Medicare Rights Center, which describes itself as a nonprofit consumer service organization advocating for access to affordable healthcare for older adults and people with disabilities.

Joe Baker, president of the Medicare Rights Center, testified before a Congressional hearing in May that his organization applauds CMS for “proposing to test solutions that have the potential to alleviate calamitous cost burdens, which cause too any older adults and people with disabilities to forgo necessary care.”

Next: Providers need to streamline their procurement processes

2. Providers need to streamline their procurement processes-regardless of whether the proposed rule becomes final as it currently stands.

RoettgerTim Roettger, vice president of pharmacy services at St. Louis-based healthcare system SSM Health, thinks that CMS’ proposal is focused on making cuts in the wrong area. Still, he’s been working with his colleagues throughout the health system-which includes 20 hospitals and 62 outpatient care facilities-to be prepared.

One of those initiatives includes the “blocking and tackling” that is the health system’s procurement process, work that pre-dates CMS’ announcement.

This involves making sure that SSM Health secures competitive bids for the best prices from pharmaceutical manufacturers, and runs all the way through ensuring that SSM Health’s inventory systems are as efficient as possible to eliminate any waste.

You have to run your hospital as efficiently as possible-and that’s important for SSM Health, regardless of any changes to CMS’ payment structure, says Roettger.

3. Evidence-based medication pathways can also be part of the solution.

Thought leaders throughout SSM Health have come together in what Roettger calls the organization’s therapeutics committee to develop pathways that help guide how providers use medications to treat patients.

In the case of pneumonia, for example, SSM Health has convened a group of pulmonologists and clinical pharmacists to review the literature and determine the best care plans for patients. Then those care plans are uploaded into the health system’s electronic health record, which means, for example, that the emergency room doctor only needs to select that the patient has community-acquired pneumonia and the patient will receive a certain set of antibiotics.

SSM Health has developed similar treatment pathways for other conditions, such as diabetic ketoacidosis, heart attack, stroke, and other disease types, he says.

Embracing evidence-based care pathways for patients is the right thing to do for patient care, says Roettger, who says SSM Health would undertake this approach to care, regardless of CMS’ payment changes.

Next: The program would impact cancer and rehumatology drugs the most

4. The program would impact cancer and rheumatology drugs the most.

While focusing on drugs provided in an outpatient setting sounds “innocuous,” it’s unclear to Roettger why CMS is focusing on cancer and rheumatology patients to achieve savings.

He estimates that more than 80% of the dollars spent by his health system on drugs in the outpatient space are for oncology and rheumatology patients. And there’s a good reason for that, he says: The cure rate for breast cancer and pediatric leukemia, just to cite two examples, are the best we’ve seen in our country because of pharmaceutical breakthroughs.

Cancer and rheumatology drugs help cure life-altering conditions, says Roettger. These drugs have introduced real breakthroughs in the past few years that have dramatically changed the lives of patients in terms of extending and saving lives.

Far more women used to die from breast cancer, but that number has gone down largely because of innovations in cancer drug treatments, he says. By way of contrast, Roettger says he would take a much more critical look at ulcer and ear infection medications that had the same treatment rate for a dramatic increase in cost.

SSM Heath’s governmental affairs team is in active communication with members of Congress to “try to make sure [SSM Health’s] voice is heard on this matter,” says Roettger. CMS has received more than 130 comments on its proposed rule, and the agency has a lot of work to do to sort through all of them, says Lawrence Kocot, principal and national leader of KPMG’s Center for Healthcare Regulatory Insight.

“It’s going to be interesting to see what the final rule looks like,” says Kocot, who anticipates a number of changes in the final version. Further, he anticipates that cancer drugs could be one area where CMS decides to scale back its efforts.

5. In the proposed rule, the most expensive drugs would be hit hard by reimbursement cuts.

Drugs that cost more than $480 per day in 2016 would see a reduction in reimbursement, according to a recent study by consulting firm Avalere. This should have a significant impact on oncologists, rheumatologists, and ophthalmologists, who tend to use more expensive drugs for which there generally aren’t lower cost alternatives. Further, Avalere found that seven of the 10 drugs to be hit hardest by lower reimbursement are used to treat cancer.