Life Science Compliance Update

April 11, 2016

MedPAC Votes for Sweeping Revisions to Medicare Part D

The Medicare Payment Advisory Commission (MedPAC) an important advisory panel to congress, voted to back a package of changes to the Part D prescription drug program that according to MedPAC could save as much as $10 billion over five years. The post-acute proposal will be included in the commission's June report to Congress and would change the way Medicare reimburses skilled-nursing facilities, home health agencies, inpatient rehabilitation facilities and long-term-care hospitals. The proposal aims to establish rates according to specific patient conditions rather than care setting. 

HHS would have until 2022 to develop an actual payment prototype, and MedPAC would need to weigh in on it by 2023. Congress has previously called upon MedPAC to develop a plan to pay the represented providers described above under one prospective payment system.

During discussion, commissioners raised tepid concerns with a few of the recommendations, despite ultimately supporting the recommendations in a unanimous fashion. Commissioners also emphasized the importance of having the Part D recommendations made as a "package," noting that several of the recommendations are essential to the success of others. For example, Commissioners noted that an improved exceptions and appeals process would be necessary to ameliorate concerns raised about the removal of antidepressants and immunosuppressants from the classes of clinical concern. Additionally, Commissioners cited several recommendations which will require active monitoring to measure the impact on plan sponsors and beneficiary access.

Despite the support of commissioners, providers expressed concerns, especially on the impact the model may have on patients' out-of-pocket costs. Co-pays currently depend on the post-acute-care setting.

The most controversial of MedPAC's suggestions was to limit which drugs would be a part of the protected class of Medicare Part D. Under the policy, a part D plan is required to cover all or substantially all drugs in six therapeutic classes: antiretrovirals, immunosuppressants when used to prevent organ rejection, antidepressants, antipsychotics, anticonvulsant agents and antineoplastics. MedPAC's recommendation is to remove antidepressants and immunosuppressants used to prevent transplant rejection from the list. MedPAC believes this will save money without affecting medication access by switching patients to generic options. But the exact amount saved and the potential number of people who would be impacted is unknown.
On one hand, beneficiaries might not be harmed by the proposal due to the variety of generics for both types of drugs. Providers and advocates argue that protected class status is necessary to guarantee under Medicare that patients have access to all immunosuppressive drugs. This is sometimes necessary if a physician needs to try a wide array of options. CMS tried this in 2012 and 2014, but Congress and stakeholders panned the idea.

Another controversial recommendation would reduce the reinsurance subsidy for Part D plans from 80% to 20%, while increasing what plans are paid upfront. By law, Medicare Part D subsidizes 74.5% of the expected cost of basic drug benefits, with enrollees paying the remainder through premiums. The subsidy is composed of two components: direct monthly subsidy payments and expected individual reinsurance payments to plans. MedPAC said the change would force plans to more diligently track their spending but one commissioner conceded it has not studied the impact of the proposal on smaller plan sponsors.

The Pharmaceutical Research and Manufacturers of America (PhRMA) issued a strong statement opposing the MedPAC recommendations after the meeting:

"PhRMA strongly opposes the sweeping new Medicare Part D recommendations approved by MedPAC earlier today. Taken together, these recommendations will significantly harm beneficiaries by eroding coverage and protections for some of the most vulnerable enrollees in the program. MedPAC's vote also ignores broad stakeholder concerns raised in response to these proposals.

"In particular, the recommendation to exclude manufacturer discounts in the coverage gap from enrollees' true out-of-pocket spending would in effect widen the coverage gap, increasing beneficiary out-of-pocket spending and hurting patients.

"MedPAC's decision to revisit its 2012 low-income subsidy copay recommendation is similarly misguided and would penalize low-income beneficiaries with a clinical need for brand medicines and could increase other health care costs by reducing adherence to prescribed treatment regimens.

"Finally, MedPAC's recommendation to remove antidepressants and immunosuppressants for transplant rejection from the classes of clinical concern in Part D was soundly rejected by a broad stakeholder coalition and bipartisan members of Congress two years ago. This recommendation would jeopardize access for beneficiaries with significant medical and prescription needs who live with mental illness or recently underwent an organ transplant."

April 05, 2016

MedPAC Meeting on Part B Drug Payment Policy

The Medicare Payment Advisory Commission held a meeting on Part B drug payment policy issues. The meeting focused on the way Medicare pays for most Part B covered drugs that are administered in physician offices and hospital outpatient departments based on the average sales price (ASP) plus six percent. Medicare also pays dispensing and supplying fees to inhalation drug suppliers and pharmacies for certain Part B drugs.

The Commission discussed whether or not there is a better way to structure the add-on payment to ASP; whether there are payment policies that could be considered to promote more price competition among Part B drugs; and whether changes should be made to the dispensing and supplying fees.

MedPAC Chairman Glenn Hackbarth, JD, MA, made a draft recommendation that the Secretary should reduce the Medicare Part B dispensing and supplying fees to match rates of similar payers. At the end of the discussion, Chairman Hackbarth asked if any commissioners took issue with the recommendation, and no commissioners spoke up.

The meeting was essentially split into two parts: the staff recommendations and the commissioner discussion.

Staff Recommendations

The staff didn't make any formal recommendations, but instead discussed general policy options to encourage reduced Medicare Part B drug spending. Staff also presented new data to the Commission indicating that for roughly 23 out of 34 drugs, 75% of providers were not bale to obtain the drugs for less than ASP plus two percent. A policy option to restructure the add-on payment should include reducing the add-on to three and a half percent while paying a fixed payment of $5 per drug, per day.

As far as policy ideas to reduce the payment amount for the underlying medication, staff brought up three policies: an ASP inflation cap, consolidated billing codes, and a restructuring of the competitive acquisition program (CAP). The CAP was an older model that originally ran between 2006 and 2008. There is currently no limit on how much the payment rate for an individual drug can increase over time, and several drugs had an ASP increase of five percent or more over just the last year. Staff noted that a cap on the rate of price increase may be effective in rebate form, similar to the Medicaid program, where manufacturers pay a rebate when ASP growth exceeds an inflation benchmark. Such an idea could protect the program against dramatic and quick price increases.

Consolidated billing codes would help to promote competition, since currently, single-source drugs and biologics get their own billing codes, which does not promote competition. This proposal is inline with the Commission's prior holdings that the Medicare program should pay similar rates for similar care.

Under the CAP program, vendors can purchase drugs directly from the manufacturer and supply them to the physicians. The vendor would then be reimbursed by Medicare for the drugs, and Medicare would also pay the physicians a fee to administer the drug. The idea behind a program like this is to take physicians out of the business of purchasing drugs. Previously, this program did not work because of low doctor enrollment and limited vendor leverage, but with a few updates and revisions, this program may be more successful the second time around. Some potential revisions include ideas like offering shared savings and using a stock replacement model for drugs, instead of a preorder model.

Commissioner Discussion

Commissioner Kathy Buto was concerned about how an ASP inflation cap would actually work in practice. She was concerned that the beneficiary's cost-sharing would be higher because a potential rebate would go to Medicare, or concerned that Medicare would not collect a rebate but instead set a payment rate limit. In the second scenario, the beneficiary's cost-sharing would actually be lower because it would be based on the capped price. Staff agreed and mentioned that under the first scenario, overall Part B premiums would go down due program savings, and under the second scenario, individual cost sharing would go down, dependent upon the drugs the beneficiary was using.

Commission Jack Hoadley spoke up and believed that cost savings should be going directly to the beneficiaries instead of spreading overall savings around through lower premiums. Commission Bill Hall also made the point that a limit on price increases doesn't do much to prevent a high launch price, and that mandatory rebates actually encourage that kind of behavior, because they know the drug will be discounted for many beneficiaries.

When the Commissioners discussed consolidated billings codes, Hoadley did like the recommendations but was unsure as to whether or not he could trust it would result in biosimilars savings. Commissioner Buto was even more skeptical, noting a potential lack of opportunity to appeal a denial for a higher cost drug, which would potentially leave the beneficiary on the hook for the remainder of the cost. Commissioner Katherine Baicker, on the other hand, did like the idea, because it focuses on the highest value care that the patient truly needs; and Commissioner Warner Thomas also expressed his support for the idea, saying that the policy "makes a lot of sense."

As expected, the CAP program drew many qualms. Commissioner Hoadley wasn't sure if the program was "worth it," and Commissioner Thomas referred to implementation as a "challenge." Commissioner Hall mentioned several specific concerns, especially relating to practice management issues with billing, inventory, and moving from a fixed reimbursement for drugs to something contingent on savings. He also expressed concern that such a voluntary program may not give an accurate snapshot of its efficacy because more than likely it would only be well-situated providers who participate.


April 04, 2016

Courts to Finally Take Up CMS Recovery Audit Contractors Appeals Backlog

According to HHS, a backlog exists of more than 800,000 appeals from health care providers challenging denied Medicare claims, most of them generated by the program's Recovery Audit Contractors (RACs). That is about 10 times as many as the program can adjudicate in a year at its current funding levels. However, a federal appeals court has given new life to a lawsuit that seeks to force the government to complete the appeals more quickly. The court's ruling sends the case back to the district court for reconsideration. This moved was quickly celebrated by the American Hospital Association.

We have previously reported on problems related to RACs, including an OIG report suggesting CMS may not be catching sufficient numbers of overpaid claims. The report found problems with CMS' action--or inaction--regarding improper payment vulnerabilities and referrals for potential fraud, as well as with RAC performance evaluations. While CMS identified 46 vulnerabilities that resulted in improper payments, it only took corrective action to address 28 of them and failed to evaluate the effectiveness of these actions. The OIG pointed out that by not evaluating corrective actions CMS could not determine if they effectively reduce improper payments.

What are RACs?

Congress authorized the program in the Medicare Modernization Act of 2003 and made permanent in the Tax Relief and Health Care Act of 2006. Its intended goal is to detect and correct improper Medicare payments. Over a billion claims are submitted to Medicare each year and it is estimated 3.9% of the dollars paid do not comply with coverage rules. This has been confirmed by GAO reports and as a result, there has been a renewed interest by the DOJ and the OIG to combat health care fraud and protect Medicare in the process. The RAC program is designed to detect improper payments, both under and overpayments, and corrects errors by collecting money or repaying money depending on the original payment.

Appeals Process

The RAC appeals process mirrors the five-level Medicare claims appeal process through which fee-for-service providers appeal reimbursement decisions. The five levels of appeal include:

1. Redetermination by the Fiscal Intermediary

2. Reconsideration by a Qualified Independent Contractor

3. Administrative Law Judge Hearing

4. Medicare Appeals Council Review

5. Judicial Review in U.S. District Court

If RAC determination appeal requests are not filed within the specified timeframe for the applicable level of appeal, the opportunity to appeal is lost.

AHA Lawsuit

According to FiereceHealthFinance, the American Hospital Association (AHA) filed the suit in 2014 to try and clear a backlog of RAC appeals at the administrative law court level. There were at least 800,000 appeals at that level as of 2014. A lower federal court had dismissed the lawsuit due to lack of jurisdiction, concluding because Congress was working on trying to procure more funding to review claims, it did not yet have the authority to act further. However, the case was recently reinstated by an appeals court.

The AHA notes that in December 2013, with the large backlog of appeals mounting, HHS imposed a two-year moratorium on assigning new appeals of claim denials. The court's opinion observed that the department "has the capacity to process only about 72,000 appeals per year, a far cry from the almost 400,000 appeals it received in fiscal year 2013, or from the more than 800,000 appeals that composed its backlog in July 2014. These figures suggest that at current rates, some already filed claims could take a decade or more to resolve." That administrative logjam delays billions of dollars in Medicare reimbursements to hospitals, the AHA noted.

This was illustrated in 2014 when, as an example, it was reported administrators at Baxter Regional Hospital in Mountain Home, Ark., said it had so much money tied up in endless Medicare appeals that it could not afford to replace the roof over their surgery department or buy new beds for their intensive-care unit. Baxter joined other providers with the AHA in the 2014 lawsuit.

Next steps?

Modern Healthcare reported a number of potential next steps after this ruling. The outlet cited Jessica Gustafson from Health Law Partners, who called the decision a "positive development for hospitals," but did say she would be surprised if the district court mandated HHS to more quickly address the appeals. There is legislation in Congress introduced last year that would make changes to the appeals process and reduce the backlog.

Other suggested possibilities include an added push on Congress to pass the bill, but that court action may be necessary if the political will is not there. Should the lower court force HHS to comply with the statutory timelines, HHS may need to find ways to reduce audits or hire more administrative law judges. The court could also not make an order, or ask HHS to issue status reports on efforts to deal with the backlog.



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