Washington Editor

WASHINGTON - As promised in January, the biotechnology lobby in Washington hasn't stopped arguing against the government's new Medicare reimbursement rules for the outpatient hospital setting.

At issue is a set of somewhat controversial rules that went into effect Jan. 1 on reimbursement under the outpatient prospective payment system, also referred to as OPPS. Since the rules were unveiled in November, the Biotechnology Industry Organization (BIO) has been particularly critical of the "functionally equivalent" element that was added without a proper public comment period.

BIO released a statement Wednesday saying members of Congress are beginning to ask whether the Centers for Medicare and Medicaid Services (CMS, formerly HCFA) overstepped its statutory bounds when it implemented the rule without public input. The functionally equivalent standard is bothersome because it gives the government the authority to classify certain new biologics as equal to older, less-expensive products.

BIO and several lawmakers argue that reimbursing an innovative and older product at the same rate could end up cheating sick people out of the best drugs.

In fact, Sen. Tom Daschle (D-S.D.) sent a letter to Thomas Scully, CMS administrator, noting that some of his constituents had contacted him with concerns that the "new standard will adversely affect the quality of care given to rural beneficiaries, who often travel many miles to reach medical facilities."

While lawmakers are gaining a better understanding of the reimbursement system from the drug maker's point of view, CMS continues to argue its case for changing the rules.

The OPPS story captured headlines when Thousand Oaks, Calif.-based Amgen Inc. said it would lose 10 percent of U.S. sales on its anemia drug Aranesp (darbepoetin alpha) because the government "mischaracterized" it as the functional equivalent to Johnson & Johnson's Procrit. (See BioWorld Today, Nov. 11, 2002.)

In a Senate hearing in late January, Scully said the government pays $1,422 per patient every two weeks for Aranesp, and $1,200 per patient every two weeks for Procrit. However, CMS has decided to reduce the Procrit payment to $720.

"This has been a very unpleasant situation, but we determined that these drugs [Aranesp and Procrit] are functionally equivalent," Scully said. "We couldn't pay $720 for Procrit and then pay $1,422 for Aranesp - that would be double. If we paid that, then we would have to cut mammograms or colonoscopies." (See BioWorld Today, Jan. 31, 2003.)

Under the old rules, new products like Aranesp would be reimbursed under the "pass-through" system at a rate of 95 percent of the average wholesale price for a period of two years. (Budget constraints last year forced the reimbursement from 95 percent to 78 percent.)

Amgen filed a complaint against CMS over the matter, but in late December, a District of Columbia judge dismissed the case, citing the company's lack of standing. Amgen later appealed the decision. Amgen could not be reached for comment. (See BioWorld Today, Dec. 27, 2002.)

The functionally equivalent section is only one area that raises questions.

BIO also is displeased with CMS' decision to eliminate radiopharmaceuticals (for example, IDEC Pharmaceutical Corp.'s non-Hodgkin's lymphoma product, Zevalin) from pass-through reimbursement eligibility. Finally, BIO wants all orphan drugs to be excluded from the OPPS system so that they can be more appropriately reimbursed, a prepared statement said.