We summarize the main provisions in the 761-page CMS proposed rule for 2019 OPPS. Learn more.

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July 27, 2018

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FEATURED STORY
 

One OPPS to (Propose) Rule Them All

 
 

On Wednesday afternoon, the Centers for Medicare & Medicaid Services (CMS) released the calendar year (CY) 2019 Outpatient Prospective Payment System (OPPS) proposed rule. CMS emphasized its site-neutrality provisions as reducing costs to the Medicare program and increasing patient choice of sites of care. It also focused on several efforts to fulfill President Trump’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. We discuss the main provisions of the 761-page proposed rule.

Hospital Payment and Site Neutrality

For CY 2019, CMS proposes to increase the OPPS payment rates 1.25% and plans to continue implementing the statutory 2.0% reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements.

CMS is proposing to promote site neutrality between hospital outpatient departments and ambulatory surgical centers (ASCs) by adjusting provider payment rates. By 2019, CMS also expects to reduce hospital outpatient spending by $760 million through the use of site-neutral payments within the OPPS and ASC Payment System.

CMS is also proposing to base payments for clinic visits performed at off-campus hospital outpatient departments on the Physician Fee Schedule (PFS). CMS explained that such clinic visits contribute significantly to preventable spending, due to providers charging varying rates. The new payments would lower the cost of clinic visits, for example, from $116 with a $23 beneficiary copay to $46 and a copay of $9.

CMS is soliciting public comments on additional items and services paid under the OPPS that may represent unnecessary increases in hospital outpatient department utilization.

Drug Payment and 340B Program

CMS proposes a packaging threshold for CY 2019 of $125, up from $120 in CY 2018.

For separately payable drugs and biologicals, CMS is proposing to continue to pay at average sales price (ASP) plus 6%. This is the same add-on amount since 2013.

For drugs, biologicals, and radiopharmaceuticals that do not have ASP data available (eg, new drugs on the market) and are not acquired under the 340B program, CMS is proposing to align with the PFS proposed rule and reimburse at wholesale acquisition cost (WAC) plus 3%, instead of WAC plus 6%. If WAC data are not available for a drug or biological, CMS plans to continue its policy to pay separately payable drugs and biological products at 95% of average wholesale price (AWP).

CMS will continue to pay for drugs and biologicals acquired under the 340B program at ASP minus 22.5%, WAC minus 22.5%, or 69.46% of AWP, as applicable. A new proposal would be to pay ASP minus 22.5% for 340B-acquired drugs furnished by non-excepted, off-campus provider-based departments (PBDs). This proposal is consistent with the payment methodology adopted in CY 2018 for 340B-acquired drugs furnished in hospital outpatient departments.

CMS proposes that the pass-through payment status of 23 drugs and biologicals will expire on December 31, 2018 (Table 19) and that pass-through payment status will continue for 45 drugs and biologicals (Table 20).

Biosimilars

CMS proposes to pay for non-pass-through biosimilars acquired under the 340B program at ASP minus 22.5% of the biosimilar’s own ASP, rather than ASP minus 22.5% of the reference product’s ASP, reversing its decision from last year’s OPPS final rule.

Competitive Acquisition Program

CMS includes a Request for Information (RFI) on how to leverage its Competitive Acquisition Program (CAP) authority for a Center for Medicare and Medicaid Innovation (CMMI) program demonstration to allow vendors to negotiate Part B drug prices.

CMS is particularly interested in how to structure a vendor role and whether a CMMI model should include an approach similar to the CAP, where vendors would purchase and take title to the included drugs and biologicals, or an approach similar to the Drug Value Program (DVP) envisioned by the Medicare Payment and Advisory Commission (MedPAC), where providers and suppliers purchase and receive drugs and biologicals through pricing arrangements and vendors would not take title to the included drugs and biologicals.

CMS is also interested in comments on whether testing either or both of these approaches may be appropriate for certain drugs and biologicals, such as testing one approach for high-cost drugs and biologicals, single-source drugs and biologicals, or certain drug classes, and testing another approach for other types of drugs and biologicals.

Hospital Quality Reporting Program

For 2019, CMS proposed removing 1 measure from the Hospital Quality Reporting Program beginning with the 2020 payment determination and removing 9 other measures beginning with the 2021 payment determination.

Wednesday’s proposed rule was accompanied by a press release and fact sheet. It is scheduled to be published in the July 31 issue of the Federal Register. The comment period for the proposed rule ends September 24, 2018. The final rule is expected around the beginning of November and will become effective January 1, 2019.

 

Emerging Trends in PBM Restrictions on Commercial Copay Assistance

 
 

CBI 6th Annual Reimbursement & Access 2018

Join experts Corey Ford, MHA, Director, Reimbursement Strategy & Tactics, Xcenda, and Jim Dickey, Director, Product Experience, Lash Group, at the 6th Annual Reimbursement and Access conference August 15–16 in Philadelphia to learn more about copay accumulator programs and their impact on manufacturers and patients.


Learn more >

 

 

HPW Rebuild

 
LEGISLATIVE UPDATE
 

House Voted to (Again) Toss Device Tax Into Mount Doom

 
 

The House of Representatives voted Tuesday to repeal a 2.3% excise tax on medical devices, created by the Affordable Care Act (ACA) to help pay for expanding health insurance. Tuesday’s vote on the Protect Medical Innovation Act (H.R.184) was 283-132, with all but 1 Republican supporting the bill. Among Democrats, 57 voted for the measure and 131 opposed it. The bill would reduce federal revenue by about $22 billion over a decade.

The medical device tax took effect in 2013, but Congress suspended it starting in 2016 and in January extended that moratorium until January 2020.

The tax was viewed as a particular threat by new and small device companies because it taxed companies’ revenue and not their profits. Emerging device manufacturers not yet profitable, therefore, would still be required to pay taxes on any revenue, thus potentially constraining their growth and product development.

HPW Rebuild

 
REGULATORY UPDATES
 

Like Gollum, CMS Taketh Away; Unlike Gollum, CMS Giveth Back

 
 

On Tuesday, CMS posted a final rule resuming risk-adjustment payments to insurers. Established in 2014 under the ACA, the risk-adjustment payment program was created to protect insurers participating in the individual and small-group insurance markets. Insurers with a lower-risk enrollee pool are required to pay into the system, and insurers with a relatively higher-risk enrollee pool receive payments. This requirement is intended to prevent adverse selection.

Since its inception, the risk-adjustment program has been subject to multiple challenges in federal court. Most recently, a federal district court in New Mexico challenged the payment-calculation methodology of the program. On February 28, 2018, the court decided the payment rules were flawed in the requirement to be budget neutral and found the “use of statewide average premium in the risk adjustment transfer formula governing the 2014–2018 benefit years to be arbitrary and capricious.” The court remanded the case back to the lower court.

As reported in our July 13 issue, CMS subsequently stated it would halt all upcoming payments to insurers. Coming at the same time insurers were setting premium rates and evaluating participation in federal exchanges for the following year, the announcement caused alarm at the financial damage incurred by a payment freeze.

To maintain insurer confidence in the stability and predictability of the market, CMS has reissued the risk-adjustment payments and provided additional clarification on the methodology established under the program.

The current Administration has come under fire for actions many believe would increase premiums in the exchange plans, and halting the risk-adjustment payments stoked those fires. With many voters now viewing Republicans as “owning” healthcare costs, the politics of mid-term elections shouldn’t be discounted as a potential driver in the decision.

 

Court Channels Its Inner Grond and Smashes Maryland’s Price-Gouging Law

 
 

On Tuesday, the Fourth Circuit Court of Appeals denied the Maryland Attorney General’s request for an en banc (ie, full-court) rehearing of the challenge to the state’s drug price-gouging law brought by the Association for Accessible Medicines (AAM).

The law, which went into effect October 1, 2017, prohibited manufacturers and wholesale distributors from engaging in “price gouging,” or the “unconscionable increase in the price of a prescription drug,” in the sale of essential off-patent or generic drugs. Manufacturers and wholesalers who engaged in “price gouging” faced a civil penalty of $10,000 per violation or an injunction against the sale of the drug at the increased price.

Before the Act took effect, AAM filed suit, alleging that the Act violated the dormant commerce clause and was unconstitutionally vague. A district court ruled against AAM and granted Maryland’s motion to dismiss.

AAM appealed the decision and, in April, a 3-judge panel of the Fourth Circuit Court of Appeals ruled that Maryland’s law violated the US Constitution’s dormant commerce clause. Maryland Attorney General Brian Frosh (D) subsequently filed for the case to be reheard by the entire panel of the Fourth Circuit, which was denied by a 9-3 decision.

Importantly, the Fourth Circuit’s April decision made clear that states can still enact legislation to regulate prescription drug prices. However, the Fourth Circuit’s decision not to grant en banc review will solidify the 3-judge panel’s ruling against Maryland, and should support challenges to other similar state statutes.

 

Denethor Preferable to Aragorn? HHS Wants More Generics, Fewer Brands

 
 

A study by the US Department of Health and Human Services (HHS) indicates fully substituting branded drugs with therapeutically equivalent, but not necessarily A/B generics, when available, could save Medicare Part D and its patient beneficiaries approximately $3 billion. The department states its calculations do not include manufacturer rebates or statutory discounts, possibly inflating expected savings.

In 2017, 90% of retail prescriptions were for generics, but the department indicates substantially greater savings could have been realized, even while acknowledging that prescribing a branded product without substitution is sometimes medically warranted.

The department, through the Food and Drug Administration (FDA), has already proposed removing impediments to generic entry and increasing generic substitution through cost-sharing incentives. In this report, it recommends allowing generic substitution if a direct therapeutic equivalent at the ingredient name level (rather than at the molecule level) exists. Critics note that those are not direct substitutions and that, for most beneficiaries, the increased cost-sharing with branded products would be a motivation for them to seek the generic if it were appropriate.

 

Gandalf Came Back Stronger. So Can Part D

 
 

As we quickly approach the 15th anniversary of the passage of the Medicare Modernization Act (where did the time go?), there has been increased discussion in policy circles about how utilization within the Medicare prescription drug benefit (Part D) has evolved and where it might be time to revisit and, potentially, rework the benefit design. A newly released study in Health Affairs highlights the rapid rise in beneficiary out-of-pocket (OOP) spending in the catastrophic coverage phase of the benefit and calls for an OOP cap to be implemented. The cost for this change would be between $0.41 and $1.31 in premiums per member per month.

“Catastrophic coverage” is the last phase of Part D coverage, occurring at $5,000 in true OOP costs, with beneficiary coinsurance at 5% of prescription cost beyond that threshold. When the program began, most beneficiaries with this level of spending were low-income subsidy (LIS) recipients and protected from the OOP expense. However, as use of specialty medicines increases, more “non-LIS” beneficiaries are reaching catastrophic coverage and facing significant cost-sharing. This scenario is unlike what many of them experience in Medicare Part B, where there is the ability to secure Medicare supplemental coverage (Medigap); supplemental insurance is not available under the Part D benefit.

This change to cap catastrophic OOP costs has been suggested by several policy makers, including MedPAC and the current Administration. Most recently, Democrats have proposed to eliminate cost-sharing above the catastrophic threshold. While the change would be welcome for many beneficiaries, the study does highlight that change does not address the larger issue of catastrophic spending. The study found that, from 2007 to 2015, the proportion of total spending (federal and beneficiary contributions) in catastrophic coverage grew from 18% to 37%.

With so much focus on prescription drugs, perhaps it’s time to revisit the Part D benefit and ask what has worked well and what may need to change. Just this week, CMS issued a memo (see the first item in the Information Buffet below) on tiering exceptions in Part D that felt like it came 10 years too late. Are these exceptions utilized? Do beneficiaries even know about them?

The Part D benefit has been an enormous success, but it is not perfect. Studies like this begin to shine a light in ways with big changes for some beneficiaries while maintaining its basic marketplace structure.

 

Information Buffet (AKA, Other Stuff That Caught Our Attention)

 
 

We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

 

Connected Health: The Next Healthcare Frontier

 
 

Digital health, also known as connected health, has a spotlight shining on it thanks to technological advances, as well as increased venture funding, over the past several years.

In this white paper, we examine the factors health technology manufacturers and healthcare firms must review for reimbursement, evidence requirements, data collection, and timing for payer stakeholder consideration.


Download now >

 

 

 
HEARD ON THE STREET
 

“‘Medicare for All’ [would] only serve to hurt and divert focus from seniors. You are giving the government complete control over decisions pertaining to your care, or whether you receive care at all…. In essence, Medicare for All would become Medicare for None.”

 – CMS Administrator Seema Verma, criticizing Sen. Bernie Sanders’ (D-VT) call for a national health plan during a speech at the Commonwealth Club in San Francisco

Source: “Medicare and Medicaid Administrator Seema Verma,” July 25

 

 
POLICY BY NUMBERS
 

27%

 

Only about 1 in 4 adults say they have heard or read about President Trump’s prescription drug plan, according to a POLITICO-Harvard T.H. Chan School of Public Health poll.

Source: “Americans skeptical of Trump’s drug plan—if they’ve even heard of it,” POLITICO, July 23

 
UPCOMING MEETINGS & CONFERENCES
 

CBI Reimbursement and Access 2018

August 15–16  | Philadelphia, PA
Xcenda’s Corey Ford, MPH, Director of Reimbursement Strategy and Tactics, will team up with Lash Group’s Jim Dickey, Director of Product Experience, to present a session titled, “Emerging Trends in PBM Restrictions on Commercial Copay Assistance.” They will examine and discuss the emerging copay accumulator trends. Learn more

 
 
 

Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.

 
 
 
 
 
FEATURED CONTRIBUTORS
 

EDITOR-IN-CHIEF:
Jennifer Snow
Senior Director,
Health Policy
Xcenda

MANAGING EDITOR:
Scott Shields
Associate Director,
Health Policy
Xcenda

 

ADVISORY BOARD:

Amy Grogg, PharmD
Senior Vice President | Commercialization Solutions | AmerisourceBergen Corporation

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Reimbursement & Policy Insights | Xcenda

CONTRIBUTING AUTHORS:

Stew Kaufman | Reeya Patel | Scott Shields | Stephen Wilson

PRODUCTION:

Laurie Kozbelt | Ellen Olson

 

July 27, 2018

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