WASHINGTON - Medicare's reimbursement plan allowing it to essentially set prices on certain drugs and biologics by classifying them as functionally equivalent remains on the books despite efforts by the industry to lobby against it.
The Centers for Medicare & Medicaid Services (CMS) incorporated that element into its annual Outpatient Prospective Payment System, or OPPS, last fall, much to the surprise and displeasure of a few interested parties like the Washington-based Biotechnology Industry Organization and Amgen Inc. (See BioWorld Today, Nov. 4, 2002, and Dec. 27, 2002.)
That is the rule that enabled CMS to reimburse Amgen's Aranesp and Ortho Biotech Products LP's Procrit at the same rate. The government believes the two anemia drugs produce the same outcome when dosed appropriately. Amgen, of Thousand Oaks, Calif., does not agree.
CMS updates its reimbursement rates annually, and as of Friday, its final rule was published in the Federal Register. The rule is effective Jan. 1, and does not revise the functionally equivalent element.
Of that, Mark Wolfe, a spokesman for Ortho Biotech, a division of New Brunswick, N.J.-based Johnson & Johnson, told BioWorld Today, "From our perspective, CMS has reaffirmed the essence of a well-considered decision with regard to the two products. The linkage of the two products has been maintained, based on similar outcomes from patients."
Reimbursement for Procrit in the outpatient hospital setting in 2004 will increase from 68 percent of the average wholesale price to 74 percent, Wolfe said.
On the other side of the country, Amgen is looking on the bright side of things, too. Michael Beckerich, an Amgen spokesman, told BioWorld Today that CMS's final rule "is a big step in the right direction," specifically as to how it relates to Aranesp reimbursement.
CMS said it will increase the Aranesp reimbursement by 37 percent, or from $2.37 per microgram to $3.19 per microgram. That is a result of CMS changing the payment ratio between the two anemia products.
Last year the ratio was 260 units of Procrit to 1 microgram of Aranesp. Next year, it will be 330 units to 1 microgram. (The average dose of Aranesp is 200 micrograms every two weeks, compared to 40,000 units or Procrit weekly. Procrit is expected to be reimbursed at $9.67 per 1,000 units.)
"We still believe the reimbursement ratio from Aranesp to Procrit should be higher, and we believe the reimbursement price of Aranesp should be higher," Beckerich said.
CMS not revising the functional equivalence policy in the final rule doesn't mean it will remain in effect as written in 2003.
BIO released a prepared statement saying Congress has agreed to end the functional equivalence policy as part of its Medicare bill. Both the House and Senate bills contain language dealing with the issue. However, BIO finds the Senate version more appealing because it prohibits use of the policy as a method of determining prices. The House bill would allow it within certain parameters. (See BioWorld Today, July 7, 2003.)
Meanwhile, BIO views the CMS final reimbursement rule as a mixed bag.
Overall, reimbursement rates will drop about 6.6 percent below the 2003 levels. On a more positive note, CMS will reimburse 11 orphan drugs at 88 percent of the average wholesale produce (last year CMS only reimbursed four orphan drugs).
The list of 11 includes Proleukin (aldesleukin), a treatment for metastatic renal cell carcinoma and metastatic melanoma, made by Chiron, of Emeryville, Calf.; Ontak (denileukin diftitox), a fusion therapy for the treatment of persistent or recurrent cutaneous T-cell lymphoma, made by San Diego-based Ligand Pharmaceuticals Inc.; Cerezyme (imiglucerase), an enzyme replacement therapy for Type I Gaucher's disease, made by Genzyme Corp., of Cambridge, Mass.; and Thyrogen (thyrotropin alfa), a thyroid cancer-screening drug also made by Genzyme.
In another area, BIO said the new rule prevents biotechnology drugs from being packaged into "payment bundles" along with other hospital service payments, which in the past meant certain biotech drugs were reimbursed at a lower rate.
The rule does not include a pass-through pro-rata payment reduction. Products in the pass-through system are new drugs and biologics that are temporarily (for about two years) reimbursed at a higher rate. Last year payments for pass-through products were cut by 18 percent, BIO said.
The entire rule can be viewed by visiting www.cms.gov.