Nearly 50 of the most frequently-prescribed oncology or treatment-related drugs would be ‘underwater’ – or reimbursed at less than acquisition cost – under the payment rate in the Medicare demonstration project recently proposed by the Centers for Medicare and Medicaid Services, according to the Community Oncology Alliance.

In May 9 comments to CMS, the oncology provider organization takes issue with the agency’s claim that the proposed payment approach would help ensure that prescribing decisions are based on the value of treatments and not the profits that could be generated through the use of expensive drugs.

CMS proposes testing an alternative to the current average sales price (ASP) plus 6% reimbursement formula for Medicare Part B drugs, instead paying at ASP plus 2.5% and a flat $16.80 fee, thus reducing the amount of reimbursement that is based on a drug’s price ([A#14160308007]).

The proposal is designed to be “budget neutral,” meaning CMS expects its overall Part B payments would remain the same, but payments for some very expensive drugs would be reduced and reimbursement for low-cost drugs would increase. The demonstration is expected to particularly impact oncology, ophthalmology and rheumatology practices. Medicare spending on Part B drugs totaled $22bn in 2015.

However, the Community Oncology Alliance (COA) argues, “there are very few situations in cancer treatment when alternative drugs exist that are differentiated in price/cost. So the Part B proposal, while ostensibly focused on controlling costs, is valuing less-important drugs … and not the most important, highest-value cancer treatment drugs that are standard-of-care therapy.”

COA says it modeled the impact of the demonstration in collaboration with practicing medical oncologists and practice administrators and found that 47 drugs would be reimbursed at below acquisition cost under the alternative payment approach (see chart). Reimbursement for nearly half of those drugs will be reduced by well over $100 per dose under the demo, according to COA’s figures.

Two treatments, Valeant Pharmaceuticals International Inc.Provenge (sipuleucel-T) and Bristol-Myers Squibb Co.’s Yervoy (ipilimumab), will see reductions of more than $1,000 per dose.

The analysis assumes that under the federal budget sequester, the actual payment amount paid in the test would be only ASP plus .86% and the flat fee would be reduced to $16.53. In its model, COA compares that payment rate to the current effective rate under the sequester, which is ASP plus 4.3%.

Community oncology practices have been among the most vocal critics of the Part B demonstration, driven by concerns over financial repercussions of reduced reimbursement. Provider and patient-oriented arguments against the demonstration will be aired at a House subcommittee hearing May 17 ([A#14160511004]).

Almost 70% of cancer patients are treated in an office-based or community oncology setting, according to COA, and the remaining patients are treated in hospital outpatient facilities.

Hospitals Seek Exemption, Propose Alternatives

In separate May 9 comments to CMS, the American Hospital Association also challenged the demonstration project. “There is no convincing evidence that physicians who practice in hospital outpatient department (HOPD) settings consider profitability over clinical effectiveness when deciding which drugs to prescribe or order,” AHA argues.

Furthermore, “hospitals have little control over which drugs physicians order in HOPD settings. Yet this model would hold them accountable for these decisions – to the extent that they would bear 60% of the aggregate payment reduction.”

Therefore, “it is clear that hospitals are inappropriate for inclusion in this model,” the group maintains.

However, AHA says if CMS continues to include hospitals in the experiment, “we strongly recommend that the model be implemented on a much smaller scale by excluding cancer drugs and narrowing the number of geographic areas that are affected.”

Under the current plan, participation in the model would be mandatory for all providers and suppliers of Part B drugs located in selected geographic areas. Physicians and hospitals in half the nation would receive Part B payments at the alternative rate plus the flat fee and the other half would continue to be paid under the ASP plus 6% formula.

AHA also recommends that CMS “tailor” the experiment to select physician specialties or conditions treated by multiple drugs that are substitutable and vary considerably in price, or to clinically complex conditions with “several” therapeutically equivalent treatment options.

AHA suggests a number of alternative approaches to the proposed ASP plus 2.5% and $16.80 flat fee. For example, drugs with an ASP of less than $100 could get ASP plus 2.5% and a $5 flat fee, while drugs costing more than $100 would receive ASP plus 2.5% and a $31.97 flat fee, the group says.

Under another option, drugs costing more than $100 but less than $480 would get ASP plus 2.5% and a $16.80 fee and drugs with an ASP of greater than $480 would be paid at ASP plus 2.5% and a flat fee of $47.98.

Oncology Drugs Underwater In Part B Payment Model
The Community Oncology Alliance gave CMS a list of 47 oncology treatment or supportive care drugs that it says would be "underwater" – reimbursed at less than acquisition cost – under the Medicare demo based on "actual practice cost." COA says the list of underwater drugs would be "far longer" if the costs of procurement, storage, preparation and waste disposal were considered as well.
Drug	Sponsor	Approved Indications	Current payment per dose: ASP + 4.3%	Demo payment per dose: ASP +.86%, $16.53	Difference
Actemra (tocilizumab)	Roche	rheumatoid arthritis	$2,167.60	$2,112.56	$55.04
Adcetris (brentuximab vedotin)	Seattle Genetics	lymphomas	$16,369.56	$15,845.59	$523.97
Alimta (pemetrexed)	Eli Lilly	non-small cell lung cancer	$5,492.37	$5,237.55	$164.82
Aranesp (darbepoetin alfa)	Amgen	anemia	$871.18	$858.95	$12.23
Avastin (bevacizumab)	Roche	colorectal cancer,	$1,298.74	$1,272.39	$26.35
Cyramza (ramicirumab)	Eli Lilly	gastric, non-small cell lung and colorectal cancers	$8,192.04	$7,938.08	$253.96
Dacogen (decitabine)	Eisai/Otsuka	myelodysplastic syndromes	$1,099.12	$1,079.35	$19.76
Elitek (rasburicase)	Sanofi	plasma uric acid management	$5.047.25	$4,897.13	$150.12
Erbitux (cetuximab)	Eli Lilly	colorectal, head and neck cancers	$2,888.84	$2,809.99	$76.86
Faslodex (fulvestrant)	AstraZeneca	breast cancer	$1,776.38	$1,734.25	$42.12
Feraheme (ferumoxytol)	AMAG Pharmaceuticals	anemia	$420.11	$422.77	$2.66
Folotyn (pralatrexate)	Spectrum Pharmaceuticals	T-cell lymphoma	$9,506.06	$9,208.71	$297.35
Fusilev (levoleucovorin)	Spectrum Pharmaceuticals	rescue after chemo in bone cancer	$916.27	$902.55	$13.72
Gammagard (immune globulin)	Baxalta	replacement therapy	$2,811.51	$2,735.21	$76.30
Gammaked (immune globulin)	Kedrion Biopharma	primary immune deficiency	$3,329.27	$3,253.87	$93.40
Gazyva (obinutuzumab)	Roche	lymphoma, chronic lymphocytic leukemia	$3,296.62	$3,204.30	$92.32
Halaven (eribulin)	Eisai	breast cancer, liposarcoma	$2,505.37	$2,439.17	$66.19
Herceptin (trastuzumab)	Roche	breast, gastric cancers	$3,211.91	$3,122.30	$89.52
Injectafer (ferric carboxymaltose)	American Regent	anemia	$812.49	$802.20	$10.30
Istodax (romidepsin)	Celgene	T-cell lymphoma	$7,893.37	$7,649.27	$244.10
Ixempra (ixabepilone)	Bristol-Myers Squibb	breast cancer	$4,018.29	$3,902.14	$116.15
Jevtana (cabazitaxel)	Sanofi	prostate cancer	$8,516.10	$8,251.44	$264.66
Kadcyla (ado trastuzumab emtansine)	Roche	breast cancer	$7,563.74	$7,330.53	$233.21
Keytruda (pembrolizumab)	Merck	melanoma, non-small cell lung cancer	$8,276.80	$8,020.04	$256.76
Kyprolis (carfilzomib)	Amgen	multiple myeloma	$1,853.78	$1,809.10	$44.68
Lupron (leuprolide)	AbbVie	prostate cancer	$1,930.84	$1,883.62	$47.22
Neulasta (pegfilgrastim)	Amgen	neutropenia	$3,836.03	$3,725.90	$110.13
Nplate (romiplostim)	Amgen	platelet producer	$221.74	$2,164.92	$56.83
Octagam (immune globulin)	Octapharma	primary humoral immunodeficiency	$3,077.34	$2,992.26	$85.08
Opdivo (nivolumab)	Bristol-Myers Squibb	melanoma, non-small cell lung and renal cell carcinoma	$5,952.00	$5,772.00	$180.00
Perjeta (pertuzumab)	Roche	breast cancer	$6,471.96	$6,274.80	$191.17
Privigen (immune globulin)	CSL Behring	primary humoral deficiency, immune thrombocytopenic purpura	$2,924.85	$2,844.81	$80.04
Provenge (sipuleucel-T)	Valeant Pharmaceuticals	prostate cancer	$37,733.75	$36,504.35	$1,229.39
Remicade (infliximab)	Janssen	Inflammatory disease	$3,837.88	$3,727.69	$110.19
Rituxan (rituximab)	Roche	non-Hodgkin lymphoma, chronic lymphocytic leukemia, rheumatoid arthritis	$5,833.30	$5,657.22	$176.08
Sandostatin (octreotide)	Novartis	acromegaly, carcinoid syndrome	$152.40	$163.90	$11.50
Somatuline depot (lanreotide)	Ipsen	acromegaly, carcinoid syndrome	$5,005.23	$856.50	$148.74
Torisel (tesirolimus)	Pfizer	renal cell carcinoma	$1,555.39	$1,520.56	$34.83
Treanda (bendamustine)	Teva	chronic lymphocytic leukemia, non-Hodgkin lymphoma	$4,051.42	$3,934.18	$117.24
Trisenox (arsenic trioxide)	Teva	promyelocytic leukemia	$932.66	$918.39	$14.26
Tysabri (natalizumab)	Biogen	multiple sclerosis	$5,029.40	$4,879.86	$149.53
Vectibix (panitumumab)	Amgen	colorectal cancer	$4,729.01	$4,589.40	$139.63
Velcade (bortezomib)	Takeda	multiple myeloma, mantle cell lymphoma	$1,515.60	$1,482.09	$33.51
Vidaza (azacitidine)	Celgene	myelodysplastic syndrome, myeloid leukemia	$510.61	$510.28	$0.33
Xgeva (denosumab)	Amgen	bone metastases	$1,310.23	$1,283.50	$26.73
Yervoy (ipilimumab)	Bristol-Myers Squibb	melanoma	$35,470.35	$34,315.60	$1,154.66
Zaltrap (ziv-aflibercept)	Sanofi	colorectal cancer	$2,587.26	$2,518.36	$68.90

Source: COA May 9 comments to CMS

Medicare Payment Demo Would Put Often-Prescribed Cancer Drugs ‘Underwater’

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