The National Cancer Institute will conduct a head-to-head study of Amgen's Aranesp (darbepoetin) and Ortho's Procrit (epoetin) in order to define equivalent doses of the anemia agents, CMS reports in the final Hospital Outpatient Prospective Payment System rule for 2003.

NCI "has been directed to work with CMS to quickly develop and sponsor a trial or trials to evaluate the appropriate conversion ratio between these products for the purpose of Medicare pricing," the Centers for Medicare & Medicaid Services states in an Oct. 31 final rule.

"We expect this project to be completed during the cycle for development of the 2004 OPPS update regulation."

CMS has concluded that the two anemia therapies are "functionally equivalent" for use in the pre-dialysis renal failure population and therefore should be reimbursed at the same rate, the agency states in the final rule.

In an August proposed rule, CMS categorized Aranesp as a new biological agent eligible for "pass-through" payments, which would have allowed reimbursement at AWP-5% (¹ [A#00640320017], p. 24).

However, CMS has reconsidered and determined that Aranesp should not be paid at a higher rate than the older Procrit. The agency calculated a conversion factor to define equivalent doses of the two agents, and is setting a reimbursement rate of $2.37 per microgram for the Amgen product.

Under the proposed rule, the reimbursement would have been $4.74 per microgram, or exactly double the new rate.

Johnson & Johnson submitted comments to the agency urging the change (² Also see "J&J Wants Changes To Medicare OPPS Rule; Procrit Could Benefit" - Pink Sheet, 23 September, 2002., p. 26). With the publication of the final rule, Amgen will now be exploring options to reverse the decision.

Amgen declared that it objects both to the finding that Aranesp is "functionally equivalent" to Procrit, and to CMS' calculation of a conversion factor. "Amgen will work vigorously to correct the inaccuracies in the rule in all appropriate forums."

The OPPS rule covers a small but significant slice of the total Procrit/Aranesp market. Ortho estimated the portion at about 10%-15%.

The final rule includes a lengthy justification of the policy change and the use of the conversion factor.

"Because darbepoetin alpha has two additional carbohydrate side chains, it is not structurally identical to epoetin alpha," CMS acknowledges. "However...both products use the same biological mechanism to produce the same clinical result, stimulation of the bone marrow to produce red blood cells."

"In this situation, we believe it is appropriate for us to rely on our authority in Sec. 1833(t)(2)(E) of the Social Security Act to make an adjustment we determine 'necessary to ensure equitable payments,'" CMS said. "We do not believe it would be equitable or an efficient use of Medicare funds to pay for these two functionally equivalent products at greatly different rates."

"An alternative line of reasoning would produce the same result," CMS maintained. Under Sec. 1833(t)(6)(A), only "new" biologics are eligible for pass-through payments, not "current" therapies like Procrit.

"Because darbepoetin is functionally equivalent to epoetin alpha, we believe we could conclude that it would be most appropriate to consider darbepoetin alpha a 'current' biological," CMS said.

The agency acknowledges that it was difficult to define an appropriate conversion ratio because Procrit is marketed in international units while Aranesp is sold in micrograms.

"In clinical practice, CMS recognizes that no strict method of converting an epoetin alpha dose to a darbepoetin alpha dose exists," the agency noted. "For developing a payment policy, however, it is feasible to establish a method of converting the dose of each of these drugs to the other."

To develop a formula, CMS notes that it "held a series of meetings with both Amgen and Ortho" and reviewed "substantial" information provided by the companies.

CMS also hired an independent contractor to review the available clinical data, and conducted its own internal review, the agency said. "The body of literature reviewed included 40 scientific articles culled from references submitted by the companies as well as a Medline literature search."

CMS concluded that an appropriate conversion rate is 260 IU of Procrit equals one microgram of Aranesp.

The NCI study "could help us insure our policy is correct and if necessary update this policy in the future," CMS added.

The agency stressed that the Aranesp/Procrit review should be considered unusual.

"We do not expect to make nationally-applicable determinations of similarity of drugs or biologicals, such as that discussed above, on a routine basis. We regard this situation as unusual, distinguished by the very strong similarity of the two products and by the size of the potential effects on the Medicare program. We thus believe that making this determination and insuring comparable payment is justified in this particular instance."

CMS is also removing Idec's Zevalin (ibritumomab) from the list of drugs and biologics eligible for "pass-through" payments.

The agency determined that the non-Hodgkin's lymphoma agent should be considered a radiopharmaceutical and thus covered under the Ambulatory Payment Classification system.

CMS noted that Zevalin could have cost the program more than $28,000 per treatment; "had we found it necessary to treat these products as drugs, however, we could have invoked the authority of Sec. 1833(t)(2)(E) to establish a more equitable payment rate."

Zevalin is sold in separate diagnostic and therapeutic kits intended to be used in tandem. Under CMS' final rule, the diagnostic application will be reimbursed under APC 718 at a rate of $2,750. The therapeutic application will be reimbursed under APC 725 at a rate of $20,000.

While those payments mark a significant reduction from the level contemplated under the proposed rule, they are actually a slight increase from the current reimbursement rate ($2,269/$19,643) (³ Also see "Zevalin Medicare Reimbursement: Idec Predicts Smooth Transition Into 2003" - Pink Sheet, 28 October, 2002., p. 27).

After removing Zevalin and Aranesp from the "pass-through" payment list, CMS believes that the remaining products will not exceed the cap of 2.5% of total program costs. Therefore, each of the remaining products on the list will be paid at the full AWP-5% formula in 2003.

Pharmaceuticals on the list include Merck's Invanz (ertapenem) and Cancidas (caspofungin), Amgen's Neulasta (pegfilgrastim), AstraZeneca's Faslodex (fulvestrant), Texas Bio/GSK's argatroban, Novartis' Zoladex (zolendronate) and Wyeth's Protonix IV (pantoprazole).

In 2002, CMS had to reduce average payments under the pass-through program significantly in order to stay under the cap.

The final rule also changes the payment formula for the large number of products no longer eligible for "pass-through" payments in 2003.

In response to comments about the potential for precipitous declines in reimbursement for individual agents, CMS has adopted a "dampening" formula for products whose reimbursement levels would decline by more than 15%.

However, in order to preserve budget neutrality, CMS had to reduce the average reimbursement rates for all products covered under the OPPS system.

For example, TAP's Lupron , which is being reimbursed at approximately $46 per unit in 2002, would have been reimbursed at $44 under the proposed rule. After the changes in the formula, however, it will be reimbursed at $40.

In contrast, Factor VIIa, which is currently reimbursed at $1,308 per unit, would have been reimbursed at $704 in 2003. Thanks to the dampening formula, the 2003 reimbursement is now set at $1,084.

In response to comments, CMS is also dropping three orphan drugs from the OPPS system altogether: Genzyme's Cerezyme , Bayer's Prolastin and Wyeth's Mylotarg . Those products will be paid on a "reasonable cost basis."

CMS is similarly dropping pneumococcal pneumonia and influenza vaccines from the OPPS system as well, and will reimburse for the "reasonable cost." Hospitals noted that the annual OPPS updates in January are out of sync with the ordering cycle for flu vaccine.

Aranesp, Procrit Are “Functionally Equivalent,” CMS Says In Final OPPS Rule

More from Archive

More from Pink Sheet