October 2007 | Vol. 25, No. 10

MedPAC Supports Exceptions Process for Marketing Drug Bundle

The Medicare Payment Advisory Commission (MedPAC) in early September said a CMS proposal included in the proposed 2008 physician fee schedule to deal with marketing drug bundles is off base. The agency’s proposal requires manufacturers to allocate the value of all price concessions proportionately according to the dollar value of the units of each drug sold under a marketing bundle arrangement. SVU believes this CMS proposal will be detrimental to a lot of smaller IDTFs.

Although MedPAC praises CMS for tackling the complex issue, MedPAC Chair Glenn Hackbarth says, “CMS’ solution does not take into account the different types of drug bundles, which can contain both Part B drugs and other products. MedPAC urges CMS to create an exceptions process to ferret out contractual agreements that involve marketing bundles that involve drugs with no clinical alternatives, according to comments sent to the agency.

“If the agency determined that allocation of discounts in the bundled arrangement resulted in the distortion of ASP [average sales price],” Hackbarth wrote, “it could require the manufacturer to reallocate bundled discounts according to the contingencies in the contract terms. We believe this proposal is worth considering in terms of feasibility, including determining which products would fall into the exceptions process.”

It is worth noting that the American Society of Clinical Oncology (ASCO), in its comments on the fee schedule, was silent on the issue of a marketing drug bundle. Behind the scenes, however, ASCO urged physician umbrella organizations like the American Medical Association to include language in comment letters about the fee schedule opposing the marketing drug bundle proposal, according to a specialty society source.

Since the Medicare Modernization Act cut prices for all Part B drug reimbursements significantly, eliminating the average wholesale price and replacing it with the ASP plus 6 percent, many practices have looked for ways to win price concessions from manufacturers. Oncologists see a high percentage of Medicare patients and had used profits from Medicare drug reimbursements to subsidize patient counseling and other

MedPAC also indicated in its comment letter that it doesn’t trust the data from AMA’s five-year review of work values for 58 CPT codes CMS has decided not to take action on.

“As we have seen with previous work on the 5-year review for 2007 and indeed with work on both of the earlier reviews -- for 1997 and 2002 -- the proposed action on the additional 58 codes is tipped in favor of higher RVUs: RVUs would go up for 33 codes, down for 10 codes and not change for 15 codes. In addition, CMS is proposing to adopt a RUC [AMA Specialty Society Relative Value Update Committee] recommendation that would increase the valuation of physician work for anesthesia services by 32 percent.”

“The Commission remains concerned about what appears to be a bias in the five-year review in favor of undervalued codes as compared to overvalued codes. Services that are overvalued may be overprovided because they are more profitable than other services,” Hackbarth wrote. “In addition, because so many more codes would have their values increased than decreased, CMS would passively devalue all work RVUs with a budget neutrality adjustment of almost 12 percent.”

MedPAC recommended in its March 2006 report that CMS take a “more central role in identifying potentially misvalued services, especially overvalued ones.” The commission also recommended that CMS “reduce its reliance on physician specialty societies by establishing a standing panel that would provide expertise in addition to that provided by the RUC. This new panel would help CMS identify misvalued services and collect data to establish supporting evidence for the RUC to consider.”

The commission supported the agency’s stance on IDTFs, which would prevent most leasing arrangements and prohibit IDTFs “from leasing their space, equipment or staff to physicians who are able to refer patients to the facility and bill Medicare for the services.”

MedPAC is solidly in the camp of physician specialties that support using the Physician Assistance and Quality Initiative Fund -- totaling $1.35 billion -- to pay down the negative update in 2008. The commission “urges CMS to re-examine ways that the fund could be directed toward the 2008 update for physician services.”

Many physician groups and specialty societies railed against the 9.9 percent average cut in payments for Medicare providers next year in their comments about the rule.

The Medical Group Management Association suggested that if Congress or CMS doesn’t act to ameliorate the cuts, payment rates will be lower than those in 1999, while at the same time physician practice costs have increased by 42.5 percent over the past eight years.