Washington Editor

WASHINGTON - Doctors who administer chemotherapy in their offices might soon notice a decline in Medicare reimbursement for drugs, but an increase in payment levels for the services required to administer the drugs.

But whether new reimbursement structures proposed by the Centers for Medicare and Medicaid (CMS) will balance for physicians' offices, health care providers and pharmaceutical and biotechnology companies remains unclear, industry experts here said.

Recently, CMS issued a rule containing proposed payment adjustments for the 32 drugs most commonly used by Medicare beneficiaries. The prices are based on average sales price (as submitted by manufacturers), plus 6 percent. The Medicare law, signed by President Bush in December 2003, requires that CMS reimburse based on average sales prices (ASP), as opposed to the average wholesale price (AWP).

Indeed, that change might be quite an adjustment for some companies, patients and health care providers.

While reimbursements for cancer products and services have grabbed most headlines, Jayson Slotnik, director of Medicare reimbursement and economic policy at the Biotechnology Industry Organization, warned that prices for all drugs used by Medicare patients will change.

It appears that urologists will take a pretty big hit, Slotnik said, referring to CMS's plan to cut payments for Zoladex (London-based AstraZeneca plc) by 38 percent, from $375.99 per implant to $234.28 per implant; for Lupron Depot (Lake Forest, Ill.-based Tap Pharmaceuticals Inc.) by 53 percent, from $500.58 to $234.28; and Viadur (Alza Corp., of Mountain View, Calif.) by 55 percent, from $4,831.40 per implant to $2,190.71.

Slotnik said BIO supports reimbursement based on ASP, "but we are concerned with patient access and how this is really going to work. We just want to make sure that patients can get their drugs and that ASCO doctors and urologists don't start sending their patients over to the outpatient departments at hospitals where there might not be any room for them."

Indeed, Deborah Kamin, senior director of cancer policy at the American Society of Clinical Oncology (ASCO) in Alexandria, Va., is concerned about the same thing.

If reimbursement for drugs falls and compensation for administering services doesn't increase, many doctors likely will end up sending patients to other health care facilities, Kamin said.

ASCO believes Medicare's reimbursement rate for an oncologist's time and service is about 25 percent of the cost. "So our position for quite a few years has been that, yes, the system is broken and should be fixed," Kamin said. "We do not believe that resources should be coming out of the system."

ASCO wants Congress to delay implementing the new fee structure, scheduled to take effect Jan. 1, until all pricing information, analysis and relevant studies are completed, Kamin said, adding that it is difficult to calculate the full impact of the new system with such limited information.

She wants to wait for the American Medical Association (AMA) to complete its CMS commissioned review of Current Procedural Terminology (CPT) codes for physician time and service. The AMA is expected to make recommendations for updates to payment codes, which have remained constant for years despite advances in drug therapy and clinical practices.

Among the recommendations already released, the AMA suggests that the definition of chemotherapy be extended to include drugs that are provided for treatment of non-cancer diagnoses (e.g., cyclophosphamide for autoimmune conditions), or to substances such as monoclonal antibody agents, whether provided by hematologists-oncologists or by other specialists.

Also, the AMA suggests that coding include severe reaction management services provided by physicians and staff when severe adverse reactions might cause life-endangering reactions that require constant or frequent physician presence during the administration of high complex biologic medications or other chemotherapy services.

"AMA's view is that potentially some of these new codes could offset [drug price] cuts, but it isn't at all clear what will be sent to Medicare, and further, whether Medicare will even agree to include all of them once they get them," Kamin said. "So in a nutshell, there's really not enough information to understand the full impact of this, but what we see concerns us greatly because there are significant reductions in the amount Medicare will pay for certain drugs and in our early analysis, it appears that quite a few of them are going to be paid at a rate that goes below what doctors will pay to purchase the drugs."

Products on the list of 32 drugs most commonly used by Medicare recipients include Aranesp, Neupogen and Neulasta, made by Thousand Oaks, Calif.-based Amgen Inc.; Remicade, made by Malvern, Pa.-based Centocor Inc.; Rituxan and Herceptin, made by South San Francisco-based Genentech Inc.; and Visudyne, made by Vancouver, British Columbia-based QLT Inc.

As an example of cuts, CMS proposes to drop reimbursement for Aranesp by 15 percent, from $21.20 per injection to $18.10 per injection. The government will increase payment for Rituxan by 3 percent, from $427.28 in 2004 to $438.38 in 2005.

Meanwhile, reimbursement for Taxol, Bristol Myers-Squibb's cancer product going off patent, will drop 81 percent, from $138.28 to $25.84 per injection.

To view the list of 32 drugs or review the proposal, visit CMS's website at www.cms.hhs.gov/medicarereform

CMS will accept comments on the rule until Oct. 4.

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