CMS Proposes Changes in Payment
Rules for Covered Drugs
August 29, 2003 - The Centers for Medicare and Medicaid
Services (CMS) Aug. 20 published a notice
of proposed rulemaking (NPRM) in the Federal Register
that will change the way in which Medicare pays for drugs
covered under Part B services. Medicare covers three types
of drugs: those provided incident to a physician's service
(injectable prostate cancer drugs like lupron acetate); durable
medical equipment (DME) drugs (inhalation drugs like albuterol
sulfate); and, statutorily covered drugs (influenza and hepatitis
vaccines). These drugs are generally provided by physicians,
pharmacies, DME suppliers, hospital outpatient departments,
and end stage renal disease (ESRD) facilities. CMS notes that
more than 77 percent of spending for drugs is for cancer and
DME drugs. Medicare spending for certain types of cancer drugs
more than tripled between 1998 and 2002, growing from $1.2
billion to $3.8 billion.
Medicare also pays for drugs on a cost or perspective payment
basis. These types of drug payments are outside of the scope
of the proposed rule and include drugs furnished during an
inpatient hospital stay (except clotting factor); drugs packaged
under the outpatient prospective payment system (OPPS); drugs
furnished by ESRD facilities whose payments are included in
Medicare's composite rate; and, drugs furnished by critical
access hospitals, skilled nursing facilities (unless outside
a covered stay), comprehensive outpatient rehabilitation facilities,
rural health facilities, and federally qualified health centers.
Currently, Medicare pays 95 percent of average wholesale
price (AWP). AWP is set in an industry guide by the manufacturers
of the various drugs and may or may not reflect actual wholesale
prices. CMS is soliciting public comments on four
proposed approaches to change the way in which Medicare
pays for covered drugs.
CMS estimates that enacting one of the four proposals will
save as much as $27.6 billion in drug costs over the next
ten years. In conjunction with this rule, CMS will use some
of the savings to make "significant increases" in
payments for administering cancer drugs under the fee schedule.
CMS anticipates incorporating a final version of this NPRM
into the final Medicare Physician Fee Schedule for Calendar
Year 2004 that will be published in November.
CMS will be accepting comments on the rule until Oct. 14.
Information:
Denise Dodero, Associate Vice President
AAMC Health Care Affairs
ddodero@aamc.org
(202) 828-0493
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