It’s About More Than Hospitals: CY 2019 Proposed Hospital Outpatient Prospective Payment System Rule Contains Proposals of Interest to the Pharmaceutical Industry

Comments on the Proposed Rule are due back to the agency no later than September 24, 2018. Included with a host of proposals related to hospital reimbursement, reporting, and quality measures are provisions (focused on in this Alert) that relate to drug reimbursement, the 340B Drug Pricing Program (the 340B Program), and solicitations for comment related to a demonstration similar to the now defunct Competitive Acquisition Program. CMS has published a fact sheet summarizing the contents of the Proposed Rule, which can be found here.

Reimbursement For Drugs and Biologicals Without Pass-Through Status

The Proposed Rule would update the “packaging threshold” necessary to establish separate payment for Medicare Part B reimbursable drugs and biologicals to $125 for CY 2019. Drugs or biologicals whose per day cost exceeds the packaging threshold will be reimbursed separately as opposed to reimbursement being “bundled” into a prospective payment with the underlying treatment or procedure.

In addition, the Proposed Rule would continue CMS’s policy to pay for separately reimbursable drugs without pass-through status at the drug’s average sales price plus an add-on of six percent. Reimbursement for Medicare Part B reimbursable drugs without pass-through status acquired by disproportionate share hospitals or rural referral centers that are qualifying 340B Covered Entities and who purchase such drugs at the 340B Program price would be reimbursed based on that drug’s ASP minus 22.5 percent. Neither of these proposals represent a departure from the current reimbursement methodology.

Also, similar to the proposed reimbursement method under Medicare Part B for new drugs or biologicals introduced to the market lacking an ASP as articulated in the recently released proposed physician fee schedule for CY 2019 (covered by Arent Fox’s Health Care Counsel blog here) but with a slight twist, CMS proposes that whenever wholesale acquisition cost based pricing is used as the reimbursement methodology for drugs or biologicals, such drugs or biologicals will be paid at a rate of WAC plus three percent, as opposed to the six percent add-on currently in effect, and regardless of whether the drug is new to the market.

Reimbursement For Drugs Purchased via the 340B Program Remains Largely Unchanged

As noted above, the Proposed Rule would retain reimbursement for Medicare Part B reimbursable drugs without pass-through status acquired by disproportionate share hospitals or rural referral centers that are qualifying 340B Covered Entities and who purchased the drugs at the 340B Program price at the drug’s ASP minus 22.5 percent.

However, CMS has proposed a change in reimbursement for biosimilars acquired by disproportionate share hospitals or rural referral centers that are qualifying 340B Covered Entities. Starting January 1, 2019, biosimilars without pass-through status purchased by disproportionate share hospitals or rural referral centers that are qualifying 340B Covered Entities and purchased at the 340B Program price will be reimbursed at ASP minus 22.5 percent of the actual biosimilar’s ASP, as opposed to the ASP of the reference product (which is the current practice).

In addition, the claims modifier requirements for 340B drugs as finalized in the CY 2018 HOPPS Final Rule (summarized here), will remain in effect for CY 2019 without further modification, but CMS does take the time to clarify that “the 340B payment adjustment [ASP-22.5 percent] does apply to drugs that are priced using either WAC or AWP, and it has been our policy to subject 340B acquired drugs that use these pricing methodologies to the 340B payment adjustment since the policy was first adopted.”

340B Covered Entity “Child Sites” to See Change in Reimbursement

Currently, non-excepted off-campus provider-based departments such as physician’s offices that are owned by a hospital are not considered to be “covered outpatient departments” subject to HOPPS reimbursement methodology. (In 340B Program parlance, these types of treatment locations are often referred to as “child sites.”) Therefore, the 340B Program reimbursement methodologies adopted in the CY 2018 HOPPS Final Rule as summarized above have not applied to PBDs, and Medicare Part B reimburseable drugs or biologicals used in the PBD setting are currently reimbursed at ASP plus 6 percent, regardless of whether the drug was purchased at the 340B Program price or not. However, citing shifts in care leading to higher costs for both the Medicare program and Medicare beneficiaries, CMS proposes that for CY 2019 and subsequent years, CMS will “pay under the PFS [physician fee schedule] the adjusted payment amount of ASP minus 22.5 percent for separately payable drugs and biologicals (other than drugs on pass-through payment status and vaccines) acquired under the 340B Program when they are furnished by nonexcepted off-campus PBDs of a hospital.” As with the existing Medicare Part B reimbursement adjustment for Medicare Part B drugs and biologics acquired at the 340B Program price, this applies only to disproportionate share hospitals and rural referral centers that are qualifying 340B Covered Entities. 

CAP 2.0?

The Proposed Rule also contains several requests for information that industry stakeholders may wish to comment upon: (i) a RFI on promoting interoperability and electronic health care information exchange through possible revisions to the CMS patient health and safety requirements for hospitals and other Medicare-participating and Medicaid-participating providers and suppliers; (ii) a RFI on price transparency to improve beneficiary access to provider and supplier charge information; and (iii) a RFI on leveraging the authority for the Competitive Acquisition Program for Part B drugs and biologicals as the basis for an innovation demonstration. 

With respect to the third RFI, the CMS Center for Medicare and Medicaid Innovation is seeking public comment “on key design considerations for developing a potential model that would test private market strategies and introduce competition to improve quality of care for beneficiaries, while reducing both Medicare expenditures and beneficiaries’ out of pocket spending.” It should be noted that CMS is not suggesting to restart the old CAP as established by Section 1847B of the Social Security Act and later suspended in January 2009, but rather is interested in adopting some lessons learned from the failed CAP experiment and/or incorporating additional features of a CAP-like model as proposed by the Medicare Payment Advisory Commission in June 2017 (known as the Part B Drug Value Program, or DVP). Potential CAP-like models could feature competitively selected private sector vendors to establish payment arrangements with the manufacturers of separately payable Part B drugs, and could include value based pricing strategies “such as outcomes-based agreements, indication-based pricing, payment over time, shared savings or performance-based payments based on the impact on total cost of care, and reduced beneficiary cost-sharing.” Interestingly, CMS is also considering “ways to allow Medicare Advantage, State Medicaid agencies, and Medicaid Managed Care Organizations to have access to the same or similar value-based vendor-administered payment arrangements available under a potential CAP-like model, such as by paying for included drugs and biologicals for their enrollees through model vendors.” The RFI related to this topic contains a host of questions and issues that CMS invites stakeholders to comment upon.