Medicare Prescription Drug Improvement and Modernization Act of 2003: Reimbursement for Part B Drugs and Drug Administration

On December 8, 2003 , President Bush signed into law new Medicare legislation that creates a prescription drug benefit for Medicare beneficiaries. The legislation also contained revisions to the reimbursement formula for Part B drugs and drug administration. For 2004, the payment will be based on 85 percent of the average wholesale price (AWP) for most drugs. In 2005 and beyond, payment will generally be based on 106 percent of the actual manufacturer's sales price (ASP). A more detailed analysis of the new reimbursement formula follows.

ASH is deeply concerned about the financial impact the reimbursement changes will have on hematology/oncology practices. Although the legislation provides increases in practice expense, starting in 2005 it appears that Medicare payment for chemotherapy agents and other drugs will be dramatically reduced.

There are still many unknowns regarding how the new ASP level will be determined and what this change might mean for hematologists. ASH will launch a major advocacy campaign to fight harmful effects of the new reimbursement formula before it is implemented in 2005. This effort will include collecting data from members who are hematologists/oncologists practicing in a community setting to understand what they are paying for some commonly used drugs and how they are purchasing drugs. This will help the Society assess the impact of the legislation. In addition, this data will help the Society analyze the validity of the ASP rates promulgated by the Centers for Medicare and Medicaid Services (CMS). Importantly, this data will also help the Society fight for improvements in the reimbursement formula.

The following is an initial analysis of the major provisions in the recently passed Medicare Prescription Drug Improvement and Modernization Act of 2003 related to drugs currently covered by Medicare. The legislation is very complex. Further details will be provided in the coming weeks.

Payment for Drugs Provided in Physicians Offices

Payment for drugs in 2004 will be based on 85 percent of AWP with the following exceptions:

• Blood clotting factors, new drugs not covered as of April 1, 2003 , and vaccines and drugs billed through ESRD facilities will be paid at 95 percent of AWP.

• Blood and blood products (other than clotting factors) will be paid at 2003 rates.

• For drugs whose actual market prices had been studied by the GAO and OIG, The Secretary of HHS will set the payment based on the percentage of AWP reflecting the price data in the studies, but no lower than 80 percent of AWP. This suggests the following payment rates: Rituxan (81%), Taxotere (80%), Paraplatin (81%), Camptosar (80%), Gemcitabine (80%), Anzemet (80%), Neupogen (81%), Kytril (80%), Navelbine (81%), and Hycamtin (84%).

• For drugs where a manufacturer provides data demonstrating that a percentage of AWP higher than 85 percent is warranted (e.g. demonstrating that the actual price at which drugs are sold is higher than 85 percent), the Secretary can reimburse at a higher rate.

Payment in 2005 will be based on the average sales price (ASP) as reported by manufacturers. This generally will be 106 percent of ASP; however, a lower payment rate will be substituted if ASP exceeds the widely available market price by more than 5 percent. Studies are required to determine (1) whether sales to large volume purchasers such as HMOs and Pharmacy Benefit Managers should be excluded from the calculation of ASP and (2) whether oncologists and hematologists can obtain drugs for 106 percent of ASP.

For 2006 and beyond, physicians will have a choice between the ASP method of reimbursement or obtaining their drugs from a contractor selected by a competitive bidding process. In the latter case, the contractor would file claims and collect deductibles and coinsurance from the patients.

Payment for Drug Administration Services

For 2004, the practice expense RVUs for drug administration would be adjusted using the results of the ASCO survey data. This is expected to substantially increase payment for the injection and infusion codes. Opportunities to submit new survey data for 2005 and 2006 are also provided for all specialties using these codes.

The drug administration codes, including the non chemotherapy infusion codes (90780-90781), the therapeutic injection codes, and the chemotherapy injection and infusion codes will be assigned a physician work value equal to that assigned for a level 1 established patient (0.17 RVUs).