CMS Proposes Reduced Medicare Reimbursements for Some Cancer, Respiratory Drugs

As expected, CMS Administrator Mark McClellan on Tuesday announced a proposal to reduce Medicare reimbursements to medical specialists for some oncology and respiratory drugs administered in doctors' offices, saying that taxpayers have been paying up to twice the actual prices that doctors negotiate with drug manufacturers, the AP/Las Vegas Sun reports (Sherman, AP/Las Vegas Sun, 7/28). The proposed rules would reduce doctors' Medicare reimbursements by as much as 89% for about 30 of the most expensive oncology and respiratory drugs. The proposed reimbursement cuts are expected to save Medicare $16 billion over 10 years. Most of the reimbursement reductions will involve drugs that have generic versions. The new prices will impact Medicare beneficiaries, who pay for 20% of the prices that physicians charge for the drugs.

The changes are based on a new price-reporting system established under the Medicare law. The payment system shifts the reimbursement of physicians for medications administered in hospitals or physicians' offices to the average sales price of the medication, from the average wholesale price currently used. The proposed changes are based on an ongoing Government Accountability Office survey that aims to determine the actual price physicians pay manufacturers for drugs. According to Medicare data, 70% of oncologists' income is derived from the difference between their Medicare reimbursements and the prices they pay manufacturers.

Medicare officials plan to conduct additional price surveys and will release a final price list in November that will take effect in January. Medicare until the end of the year will continue to use the average wholesale price to reimburse physicians for drugs. The changes are expected to decrease Medicare oncologists' average revenue by 8%. Additionally, officials estimate that urologists' drug revenue will decrease by 36% and rheumatologists' revenue will be reduced by 6% (California Healthline, 7/27).

To compensate for doctors' practice expenses, Medicare implemented a temporary 32% increase in payments to specialists that will expire at the end of the year.

Medicare currently does not pay for most prescription drugs, but it covers the cost of intravenous chemotherapy and other treatments that must be administered in doctors' offices. Medicare last year spent $10.5 billion on such drugs. McClellan said the adjustments would cut $530 million from Medicare expenses and save beneficiaries $270 million next year (AP/Las Vegas Sun, 7/28). The proposal may be revised after a 60-day comment period expires. An American Medical Association committee in August will recommend new billing codes that would allow oncologists to be compensated for services associated with chemotherapy, such as nutritional counseling.

Herb Kuhn, director of the CMS' Center for Medicare Management, said, "The growth rate for drug spending (in Medicare) has been phenomenal. We went from $2.9 billion in 1998 to $10.5 billion in 2004" (Snowbeck, Pittsburgh Post-Gazette, 7/28). Sen. Chuck Grassley (R-Iowa) said, "In the current system, beneficiaries sometimes paid more in copayments than the physician or supplier paid to acquire the drug." Ellen Stovall, president and CEO of the National Coalition for Cancer Survivorship, said, "Our concern is that whatever cost savings may be realized will come at the expense of quality care for patients" (AP/Las Vegas Sun, 7/28).

Wendy Selig, vice president of the American Cancer Society, said, "[W]e are very concerned about proposed changes in reimbursement for cancer chemotherapy in a physician's office and how that will affect patients" (Pear, New York Times, 7/28). Therese Mulvey, president of the Massachusetts Society of Clinical Oncologists, said, "We've been distressed for awhile, and there are practices on the edge." She added that the changes could make it too expensive for doctors to provide chemotherapy in their offices, which would send more patients to hospitals for care and result in higher Medicare costs (Heldt Powell, Boston Herald, 7/28).

Several broadcast programs reported on the reduction in Medicare reimbursements for chemotherapy drugs:

• APM's "Marketplace": The segment includes comments from Dr. Deborah Kamin, senior director of the Public Policy and Practice Department at the American Society of Clinical Oncology, and McClellan (Wicai, "Marketplace," APM, 7/27). The complete segment is available online in RealPlayer.
  


• NPR's "All Things Considered": The segment includes comments from ASCO President David Johnson and McClellan (Silberner, "All Things Considered," NPR, 7/27). The complete segment is available online in RealPlayer.