By MARK McCARTY,
Medical Device Daily Washington Editor
And AARON LORENZO, MDD Contributing Writer

The Center for Medicare & Medicaid Services (CMS; Baltimore) recently posted the details of its proposed changes to payments for Medicare Part B physician services with few surprises in those payments. However, if a couple of “Dear Colleague” letters now making the rounds on Capitol Hill are any indication, Congress may again scuttle these cuts and frustrate the agency's efforts to rein in Part B spending.

Since at least 2002 CMS has attempted to put the brakes on increased spending on services under the physician fee schedule but, according to the CMS announcement, “Congress intervened and temporarily suspended the requirements of the formula in favor of specific, statutorily dictated updates for 2003 through 2006.”

The current move to do away with the cuts would probably not be welcomed in the House Energy and Commerce Committee's health subcommittee, which earlier this year heard testimony arguing against cuts to the technical component of physician imaging services. By some accounts, efforts to restore those cuts would not fly unless proponents can come up with offsets (Medical Device Daily, July 20, 2006).

The bill to restore the physician imaging payments, H.R. 5704, has stalled in the House and seems unlikely to resurface this legislative session.

Under the proposed cuts to the physician fee schedule, the agency will pay for a greater number of preventive services, but CMS aims to impose a 5.1% cut in overall physician reimbursement. CMS would pay for screening for abdominal aortic aneurysms (AAA) in 2007 as a one-time service for beneficiaries who make use of the Initial Preventive Physical Examination benefit and are at risk for AAAs. CMS would drop the copay for colorectal cancer screening, and would cover bone mass measurements for those taking at least five milligrams a day of prednisone (or an equivalent dose of another corticosteroid) for at least three months.

“Medicare's coverage of preventive care is better than ever, and we are taking another step in 2007,” said outgoing CMS administrator Mark McClellan, emphasizing that the agency seeks to “provide better support for physicians to spend time with their patients and greater accuracy in payments for some services.”

The drop of 5.1% in physician reimbursement is because spending on Part B services has outstripped the so-called sustainable growth rate (SGR) index by fairly hefty margins in the past couple of years. According to the CMS document, Part B expenses increased by 10% between 2004 and 2005, with the following year exhibiting a similar jump.

The rule contains the aforementioned cuts in reimbursement to physicians for imaging services by 25% for the technical component. Physicians would bill for the same dollar figure for interpretation, but doctor's offices would be able to charge only what hospitals charge for multiple outpatient scans. CMS will take comments on the proposed rules until Oct. 10.

According to the web site of the Healthcare Information & Management Systems Society (HIMSS; Chicago), Sen. John Kyl (R-Arizona) and Rep. Nancy Johnson (R-Connecticut) are both circulating Dear Colleague letters in their respective houses to prevent the cuts. The Senate version, addressed to majority leader Bill Frist (R-Tennessee) and minority leader Harry Reid (D-Nevada), urges the party leaders to ensure “that these impending cuts are addressed before Congress adjourns in October” and argues that “[a]t a minimum, we must provide physicians with a positive Medicare payment update for 2007.”

The signers insist that if the proposed cuts are carried through, “the aggregate payment rates since 2001 will have fallen 20% below the government's conservative measure of inflation for medical practice costs.”

The letter bears the signature of 80 members of the Senate, including unlikely-seeming bedfellows such as Rick Santorum (R-Pennsylvania) and Hillary Rodham Clinton (D-New York).

Pharma user fees expected to increase

Rumor has it that user fees on the pharmaceutical side are set to increase. Ongoing discussions between drug industry representatives and FDA officials are moving forward to finalize the fourth version of the Prescription Drug User Fee Act, and according to a recent report in the The Wall Street Journal, fees that drug companies pay the agency to help fund its reviews are going to climb.

That's not surprising – user fees increased the previous two times the law was reauthorized – but the growing percentage of the FDA budget constituted by such fees is notable. Already, user fees account for more than half of human drug reviews, about 53%, and that's likely to go up.

But what the drug industry will get in return is a bit murky.

With no corresponding up-tick in congression-appropriated dollars for the FDA, user fees would become more of a crutch to offset a lack of funding for programs beyond the scope of drug reviews. That thought doesn't sit well with the drug industry, and officials from the Biotechnology Industry Organization (BIO; Washington) have made their feelings known on the matter. Jim Greenwood, president/CEO of BIO, told members of the Massachusetts Biotechnology Council earlier this summer that the FDA “is drowning” under the weight of added responsibilities and budget woes, “and sees PDUFA as its life-line.”

The current iteration of the law expires in a year, with details on the new version likely to emerge later in 2006 in order for legislators to take up its reauthorization in earnest.

ACT Claim Riles Senators

The recent stem cell work unveiled by Advanced Cell Technology (ACT; Alameda, California) has drawn the ire of some on Capitol Hill, namely Sens. Arlen Specter (R-Pa.) and Tom Harkin (D-Iowa), who said hype around the company's technique to generate human embryonic stem cells while preserving the donor embryo could prove detrimental to efforts to secure more federal funding for the research.

Their criticism came at a hearing of the Labor, Health & Human Services, and Education Appropriations Subcommittee, which followed up on ACT's success in deriving stem cells from human blastomeres with a single-cell biopsy technique that is used in in vitro fertilization clinics to assess the genetic health of pre-implantation embryos. That finding was published last month in Nature, but negativity soon surfaced after it became clear that none of the embryos discussed in the paper survived. The senators expressed concern that publicity around this latest research could impair efforts to revive H.R. 810, the bill to expand federal support for embryonic stem cells that President Bush vetoed earlier this summer.

In more positive news, the company closed two financings last week that generated about $13 million in cash to fund more work on its latest embryonic stem cell technique, as well as three therapeutic programs for degenerative eye disease, heart and vascular disease and the regeneration of skin damaged by wounds, burns and in surgical procedures. The company closed $8.75 million earlier this month when existing investors exercised additional rights under a debenture financing, and raised $4.3 million by re-pricing existing warrants.