Center Comments on Proposed Part B Payment Model

Centers for Medicare & Medicaid Services
Department of Health & Human Services
Attention: CMS–1670–P
Mail Stop C4–26–05
7500 Security Boulevard
Baltimore, MD 21244–1850

Submitted electronically to:    http://regulations.gov

Re:      CMS–1670–P

To Whom It May Concern:

The Center for Medicare Advocacy (Center) is pleased to provide the Centers for Medicare & Medicaid Services (CMS) comments on the Notice of Proposed Rule Making (NPRM) CMS–1670–P published in the Federal Register on March 11, 2016 (81 Fed. Reg. 13230). The Center, founded in 1986, is a national, non-partisan education and advocacy organization that works to ensure fair access to Medicare and to quality health care. At the Center, we educate older people and people with disabilities to help secure fair access to necessary health care services. We draw upon our direct experience with thousands of individuals to educate policy makers about how their decisions affect the lives of real people. Additionally, we provide legal representation to ensure that people receive the health care benefits to which they are legally entitled, and to the quality health care they need.

We write to express support for the proposed Medicare Part B Payment Model (model). We thank CMS for bringing further attention to the needs of Medicare beneficiaries, and the wellbeing of the Medicare program as a whole, through this proposed rule aimed at reducing costs and increasing access to effective prescription drugs. Moreover, we share CMS’ goal of ensuring that the model advances integrity, transparency, and accountability. As a consumer advocacy organization, our comments focus on ensuring patient access, fostering transparency, and stakeholder involvement throughout the demonstration process, while making prescription medications more affordable for beneficiaries, particularly low-income beneficiaries who are currently struggling to afford their prescriptions.

1. Introduction

Medicare Part B covers certain prescription drugs that are administered in the course of a health care provider’s services, through the use of durable medical equipment, or as specified by statute.[1] Some of the prescription drugs that are covered by Medicare Part B include intravenous medications and cancer medications.[2]  Under the current law, the Medicare program is required to pay for such Part B drugs using a methodology that calculates the Average Sales Price (ASP), plus a 6 percent add-on payment for administrative costs.[3] Nevertheless, the current payment model provides little assurance that the value of Medicare Part B prescription drug treatments justifies the paid amount.  In an effort to address this issue, the proposed rule will implement a two-phase payment model over the next five years to determine whether Medicare Part B payments could be lowered while ensuring patient access.[4]

The proposed model seeks to achieve these goals by testing strategies that are consistent with other programs fostered by the Centers for Medicare and Medicaid Innovations (CMMI). For example, select strategies identified in Phase II of the demonstration are similar to those proposed through the Medicare Advantage Value-Based Insurance Design (MA VBID) demonstration beginning in 2017 in seven states.[5] The MA VBID demonstration will allow Medicare Advantage plans to lower or eliminate beneficiary cost-sharing for high-value medications, services, and health care providers. The Part B Drug Payment Model applies these same concepts in traditional Medicare.

In keeping with the demonstration authority of CMMI, the proposed model appropriately targets known “deficits in care.” As consumer advocates, we are aware that many beneficiaries cannot afford the 20 percent coinsurance on high-cost medications, while others struggle to find a pharmacy or supplier who will provide very low-cost prescription drugs. The Part B Drug Payment Model aims to address both of these challenges.

CMS’ proposal to test lowering the 6 percent add-on payment to 2.5 percent plus a flat fee would greatly reduce incentives to prescribe higher-cost drugs, and strengthen incentives for high quality, efficient care. This is particularly critical given the broad support among providers, payers and other stakeholders for moving Medicare and our entire health care system to paying for value instead of volume. It also is urgently needed as CMS is now implementing the Medicare Access & CHIP Reauthorization Act (MACRA) that Congress overwhelmingly supported specifically to pay clinicians based on value.

We support both the size and scope of the proposed model as it would likely be impractical to do separate demonstrations or models by provider type or drug class and still yield the type of data and outcomes CMS is seeking.  As this model is a continuation of many other things CMS is doing already concerning payment reforms, we see no reason that prescription drug pricing should be excluded.  In many ways, prescription drugs are much more amendable to testing and applying value based purchasing (VBP) tools than services or episodes of care, as are being tested in other demonstrations.  In short, we commend CMS for its thoughtful and careful approach to testing better ways to cover Part B drugs.

As CMS works to implement the proposed model, we urge the creation of robust feedback loops to monitor beneficiaries’ experiences throughout the model, and to respond in real time to potential problems. It is essential that CMS establish a mechanism designed to monitor, and receive stakeholder input on, beneficiary access.  The full monitoring and oversight plans should be made publicly available prior to carrying out the model. We also recommend that CMS develop and release a public plan for corrective action, should the agency observe unintended consequences that limit beneficiary access to needed care.

The Center appreciates the opportunity to provide the following comments on the proposal and applauds CMS for engaging a wide range of stakeholders through formal notice-and-comment rulemaking. We urge the agency to formally involve Medicare beneficiaries and their advocates as the agency finalizes the model design and throughout implementation.

2. Phase I: Reducing the Add-On Payment while Increasing Value

Prescription drug spending in the United States reached nearly $457 billion in 2015—roughly 16.7 percent of the $2.729 trillion spent on all health care costs.[6] One study has recently determined that spending on prescription drugs is still projected to grow by 7.3 percent annually between the present date and 2018, while overall health care costs are expected to grow by a substantially lower value of 5.2 percent annually.[7] These cost increases are simply not sustainable for beneficiaries, particularly those who lack coverage that supplements Medicare by paying for certain Medicare cost-sharing.  As noted by the Kaiser Family Foundation, “14 percent of all Medicare beneficiaries had no supplemental coverage in 2010, including a disproportionate share of beneficiaries under age 65 with disabilities, the near poor (those with incomes between $10,000 and $20,000), and black beneficiaries.”[8]

Under the current payment system, when a health care provider gives a patient a prescription drug, he or she is reimbursed at 106 percent—100 percent for the ASP of the drug itself and 6 percent for administrative costs. We agree with CMS that, through the current percentage-based payment, health care providers do not necessarily have an incentive to prescribe less costly medications.  Research underscores that some providers may be more likely to prescribe more expensive medications based upon this payment scheme, which increases cost-sharing for beneficiaries, and increases costs for the Medicare program. In fact, Medicare data from 2012 illustrated that just 3,300 ophthalmologists accounted for $3.3 billion of Medicare’s reimbursement costs under Part B.[9] The data highlighted that the disproportionately large reimbursement figure resulted from those ophthalmologists administering a brand name drug, Lucentis, to patients in order to treat age-related macular degeneration.[10] According to another report, a less expensive cancer drug could have been used for treating patients instead of Lucentis.[11] By reducing the add-on payment to 2.5 percent, plus a flat-fee of $16.80, health care providers will likely have less of an incentive to use expensive drugs in treating patients when less expensive and equally effective drugs may be used.

It is significant to note that the demonstration does not penalize providers for prescribing expensive medications. The demonstration is simply removing a purely monetary incentive for prescribing expensive medications. The demonstration does not limit providers in prescribing the medications they believe are best suited for each individual patient. So, if an expensive medication is the best clinical match for a patient, then the provider will be able to continue prescribing the medication without interruption. We underscore the importance of continued patient access to clinically needed medications. Therefore, we urge CMS to employ appropriate oversight and monitoring of the demonstration to ensure beneficiary access to needed medications is maintained.   

Some stakeholders who greatly profit under the current payment system argue that patients will lose access to needed drugs by reducing percentage-based add-on payments; we find these arguments to be baseless and, without merit. We are unaware of any objective, rational basis for offering percentage-based add-on payments at all.

3. Phase II: Implementing Value-Based Pricing Strategies

Under Phase II of the Proposed Part B Payment Model, CMS will incorporate a range of VBP tools for a limited number of Part B medications. The Center supports the Phase II goals, which are aligned with broader efforts to transition Medicare from volume-based to value-based payment system and to incentivize high-value, evidence-based clinical decision-making. 

We appreciate a careful approach to testing VBP tools, which would serve as a framework for interventions for selected Part B drugs.  CMS proposes to gather additional information on the proposed tools, including suitable candidates among Part B drugs, with further public comment.  We support obtaining public feedback on specific pricing proposals, encourage CMS to conduct educational activities to support education and testing, and encourage CMS to solicit stakeholder feedback on materials and messaging, including from consumer advocacy organizations.

Below, we address Phase II proposals aimed at beneficiary protections and cost-sharing, and discuss individual proposed VBP tools.

            Beneficiary Protections and Cost-Sharing

Discounting or Eliminating Patient Cost-Sharing 

Given that many beneficiaries are faced with out-of-pocket costs of Medicare Part B prescription drugs up to 20 percent, we strongly support CMS’ proposal to discount or eliminate patient cost-sharing in certain instances when drugs are deemed to be higher in value.^[12]   We also strongly support the proposal to not increase cost-sharing beyond 20 percent for drugs that are deemed to be low value.  We urge CMS to proceed with appropriate safeguards that improve transparency for identifying high value services and decrease discrimination based on health status-related factors.

We also strongly encourage CMS to develop targeted notices for beneficiaries who take Part B medications where lowered or eliminated coinsurance is available for specific medications within a grouping of similar prescription drugs. In addition, CMS should ensure that health care providers are adequately informed about which medications qualify for lowered cost-sharing, through clinical decision support tools or otherwise. We find that beneficiaries are not typically knowledgeable about the full range of medications available to treat their condition, nor are they aware of related differentials in cost-sharing. Notices are necessary to build this knowledge and ensure that people with Medicare fully benefit from this particular value-based tool.

Appeals

In the preamble, CMS articulates its intent behind proposing a pre-appeals payment exceptions review process: to allow a provider, supplier or beneficiary to raise issues regarding payment that are included in the VBP tools under Phase II before submitting a claim.  The process would allow the provider, supplier, or beneficiary to contact the contractor before submitting a claim, and explain why an exception to Medicare’s pricing policy is warranted in the beneficiary’s situation, and explain why the price provided under Phase II pricing policy does not provide accurate compensation for the prescribed drug. The payment exceptions decision would be issued, in writing, with 5 business days of receipt.  This process would not confer appeal rights, but CMS notes that the current appeals system is available after submission of a claim, within which payment amount can also be challenged.

Without more information about this proposed process, it is unclear to the Center whether this will help improve or maintain access to prescription drugs for beneficiaries.  While the language in the preamble asserts that this process would occur prior to submitting a claim, whereas the formal administrative appeals process occurs only after a claim has been submitted, it is unclear if the pre-appeals process would occur before the drug in question was actually provided to a beneficiary.  If this process would occur after provision of the drug, but before claims submission, pre-appeals review seems to be redundant.  If this pre-appeals process would occur before provision of a drug, then it has the potential to serve as an additional hurdle for beneficiary access to that drug. The Center seeks clarification on how CMS envisions this pre-appeals process will function, and how CMS will ensure beneficiary access to medications throughout the process.

Further, it is unclear what would prevent providers and suppliers from routinely requesting exceptions to VBP pricing, which would allow circumvention of Phase II tools and could undermine the entire intent behind the proposed model of achieving savings from more effective drug pricing and payment.

In our experience, beneficiaries already face almost insurmountable odds when appealing claims denials, particularly in the Part A arena. For example, from 2010 through 2013, the Center received 14,372 home health redetermination and reconsideration decisions.  Only 346 of these were favorable, a “success rate” of 2.4 percent.  In one year, 2011, the rate was 0.61 percent and the trend continues; in 2014 the denial rate was 98.8 percent.  In meetings between the Center and CMS leadership, CMS has confirmed these statistics are consistent with the national rates.^[13]   These statistics relate to formal administrative appeals in the Part A arena, most of which involve services already rendered and documentation that is more or less complete.  Instituting a pre-appeals payment exceptions review process for Part B drugs subject to VBP pricing that could be used by providers and suppliers as an additional barrier before even the administrative appeals process begins will make obtaining coverage even more difficult.

Value Based Purchasing (VBP) Models

We generally support CMS’ plan to test the following models, and offer the following comments on individual VBP proposals/options.

Reference Pricing

We support the testing of reference pricing in Medicare Part B. Reference pricing has shown to be a useful strategy in closing pricing disparities of prescription drugs in other countries and it could be a valuable tool for Medicare.

The proposed rule would allow Medicare to make equal payments for therapeutically similar prescription drugs through a benchmark, standard payment amount.[14] Under the strategy, a benchmark would be determined by averaging the cost of all prescription drugs in a group type, or any other methodology developed to create a benchmark.[15] Medicare is then able to pay Part B prescription drug costs relative to this set amount.[16]

Reference pricing has been used in other countries as a means of closing disparity gaps in the cost of similarly effective prescription drugs.[17] In a report looking at 16 different studies on the effects of reference pricing, researchers found that four countries that utilized the strategy saw significant signs of price reductions, “with a mean reduction of 11.5%”[18] Additionally, the report analyzed four studies that evaluated patient costs in sample countries and found that reference pricing created reductions of 14 percent to 52 percent.[19]

While reference pricing forms a benchmark price for therapeutically similar prescription drugs, the report did find that pharmaceutical companies “may price their products above . . . this level and patients are responsible for any costs above the reference price.”[20] The proposed rule addresses this problem by noting that “any version of reference pricing implemented would not allow for balance billing of the beneficiary for any difference in pricing.”[21]  We strongly support this proposal to prohibit balance billing of beneficiaries, and assert that reference pricing should not be implemented without this consumer protection.

Indications-Based Pricing

The proposal acknowledges that prescription drugs are often used for treating more than one illness. As a result, CMS proposes that payments be varied depending on the relative effectiveness of a prescription drug in treating a given illness.[22] In other terms, when a prescription drug is more effective in treating illness A than illness B, the payment for illness A may be greater than the payment for illness B.[23] In order to make indications-based pricing decisions, CMS highlights that it will rely on published studies and randomized clinical evidence when possible.[24]  Although we generally agree with CMS that the cost of a prescription drug should be associated with the value that it affords patients and not be simply set at one price point, we urge that CMS conduct further research before implementing this proposal.

Risk-Sharing Agreements Based on Outcomes

The proposed rule would allow CMS to negotiate with pharmaceutical companies to base prescription drug prices on the health outcomes of patients.[25] Under these voluntary agreements, pharmaceutical companies would agree to lower drug prices through rebates, refunds, or adjustments when the price does not match the benefit to the patient’s treatment.[26] CMS proposes that pharmaceutical companies provide it with scientific evidence on the clinical value of the drug and the company’s outcome measures.[27] We support the need for a high level of transparency, including manufacturer disclosure of evidence establishing clinical value for specific drugs.  We support the careful testing of such risk-based agreements, with continuing evaluation regarding beneficiary access to needed medications.

Feedback on Prescribing Patterns and Online Decision Support Tools

We strongly support the implementation of feedback on prescribing patterns through the creation of evidence-based clinical support tools. Through the proposed rule, CMS will design clinical support tools that will be available online and that will be based on “up-to-date scientific and medical evidence, such as well-designed and conducted clinical trials, updated information on drug safety, and practice guidelines.”[28] The support tools will contain feedback on a physician’s prescribing patterns for a given drug or treatment in comparison with Medicare Part B prescribing patterns nationally or geographically.[29] We encourage CMS to increase transparency by opening access to the feedback and online tools to all beyond the health care providers in VBP model, including patients.

While CMS acknowledges that it will use cost-effectiveness research in implementing the above strategies, we also encourage CMS to incorporate precise cost-effectiveness research among the transparency factors included in the clinical support tools. Cost-effectiveness research involves evaluating a given treatment in order to determine whether that treatment provides more value, in terms of both cost and health effects, to a patient’s care. According to a report by The Commonwealth Fund, the lack of cost-effectiveness research “makes it difficult for clinicians, other decision-makers, and patients to make informed choices on which interventions work best and under what circumstances.”[30] By affording health care providers support tools explicitly for allowing them to determine when a prescription drug is not any more effective in treating patients, given its economic value, health care providers will be better suited to align themselves with CMS’ stated objectives of the proposed rule.

4. Conclusion

We thank CMS for proposing thoughtful solutions to the issue of rising prescription drug prices and beneficiary affordability.  We appreciate the opportunity to provide comments to CMS on the proposed rule.  For additional information, please contact Center Senior Policy Attorney David Lipschutz at dlipschutz@medicareadvocacy.org.

Sincerely,

David Lipschutz
Kata Kertesz
Dara Valanejad

Center for Medicare Advocacy