Wither the Chemotherapy Margin

Kenneth Zuckerman, M.D., Chair, ASH Committee on Government Affairs

After ten years of starts and stops, reduced reimbursement for sale of chemotherapy and related drugs is upon us. The Medicare Modernization Act of 2003 has left hematologists/oncologists and our patients in limbo. The new Medicare law creates a voluntary prescription drug benefit for all people with Medicare; it also would make significant changes to the way hematologists are reimbursed for providing chemotherapy. The current system of using the AWP (average wholesale price) minus 5 percent will be replaced by a new system based on the ASP (average manufacturer's sales price) plus 6 percent. Further, while the new law provides for increases in practice expense payments in 2004, it appears that Medicare payment for chemotherapy agents and other drugs will be dramatically reduced beginning in 2005. There is a transitional adjustment payment for administration of chemotherapy of 32 percent above current payments for 2004, which is decreased to only 3 percent for 2005, and is eliminated thereafter. Given the uncertainty of how the new ASP formula will compare to the current AWP amount and how the payments for practice expense related to administration of chemotherapy will be determined, the actual financial impact of the changes on hematology practices is unclear. However, nearly all practitioners and analysts believe that the positive margins generated by sale of parenteral medications to cancer patients will be substantially lower than in recent years. ASH has recommended to Congress that the transitional payment be continued for two additional years until data can be collected and analyzed to determine the new law's impact on hematology practices and patient access to care.

On February 24, members of the ASH Committee on Government Affairs met with a top health policy staff member of Congressman Michael Bilirakis (R-FL). Rep. Bilirakis is the Chair of the Health Subcommittee, which is responsible for all Medicare and Medicaid legislation. His staff member made it clear that, given a short legislative session due to the elections, as well as the anger of many key members of Congress with what was described as the combative and "self-serving" manner of the "oncology industry" in 2003, she believes there is no chance for any change in the cancer drug reimbursement portion of the Medicare legislation this year.

The ASH Committee on Government Affairs also investigated a potentially serious threat to hematologists' ability to prescribe what we believe is best treatment for our patients. Articles in The New York Times and The Boston Globe had reported that the Center for Medicare and Medicaid Services (CMS) would begin to scrutinize off-label use of medications, with an initial focus on Zevalin (90Y-ibritumomab), Bexxar (131I-tositumomab), Camptosar (irinotecan), and Eloxatin (oxaloplatin). The implication was that CMS might not pay for medications for other than FDA-approved indications, regardless of the physician's judgment. Dr. Sean Tunis, Chief Medical Officer of CMS, was quoted in The New York Times as saying, "I think this could potentially be a seismic shift, and I would say it would be a significant departure from how we've approached this in the past."

On February 23, ASH arranged an opportunity for the Committee on Government Affairs to speak directly with Dr. Tunis to discuss the CMS perspective on payment for off-label use of drugs for cancer therapy. Dr. Tunis explained that extensive discussions with counsel have resulted in the following determinations: (1) legislation gives CMS no discretion at all to refuse payment for FDA-approved indications; (2) there is a "fairly high level" of requirement for CMS to pay for use of drugs for indications that are not FDA-approved but are compendia-listed indications, and only "minimal discretionary authority" to reject payment for these indications; and (3) the major area of flexibility for CMS to restrict reimbursement is for use of drugs for non-compendia-listed indications. Dr. Tunis' current thinking is that before CMS would pay for drugs used for off-label, non-compendia-listed indications, CMS might require additional information, such as: (1) at least one published peer-reviewed article supporting the use of the drug; (2) certification by the treating physician that the patient failed treatment with compendia-listed drugs for that indication or have contraindications for compendia-listed drugs for that indication; and/or (3) documentation that the patient has been informed of the unproven status of efficacy and safety in his/her disease and circumstances. Dr. Tunis also committed to an ongoing dialog with the ASH leadership on CMS issues. The Committee feels that we must remain vigilant, but Dr. Tunis' statements seem to indicate a very reasonable approach to payment for cancer drugs. For frequently updated information on the progress of decision-making at CMS, please visit www.cms.gov/coverage.

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