Title: The Medicare Prescription Drug, Improvement and Modernization Act of 2003 MPDIMA
1The Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MPDIMA) An Overview
December 2003
2Overview
- The Medicare Prescription Drug Improvement and
Modernization Act (MPDIMA) creates a Medicare
Drug Benefit, fixes several biotechnology
reimbursement issues and resolves a number of
other issues fairly favorably. - The implementation process for the Act is likely
to be arduous and must begin almost
immediately. - This presentation presents an overview of the key
provisions of the legislation from BIOs
perspective and presents the implementation
timetable we are now facing.
3An Overview of H.R. 1 Basic Benefit Package
95 Coverage After 3600 Out of Pocket
5
5100 in Total Spending
2850 Donut Hole in Coverage
25 copay
75 coverage
75 of drug costs between 251 and 2250 are
covered.
250 Deductible
4The Basic Benefits Package
- 250 Deductible.
- 75 cost sharing up to 2250.
- 2850 donut hole.
- After 3600 in out of pocket costs, beneficiary
co-payments are the greater of 5 cost sharing or
2 for generic drugs and 5 for other drugs. - Negotiated prices apply throughout.
5Benefits Delivery
- Prescription Drug Plans (PDPs) Beneficiaries
not enrolled in a Medicare Advantage plan with
integrated coverage will receive their benefits
through PDPs created for this purpose - Full Riskplans. The risk for even these plans
is limited by risk corridors and reinsurance
subsidies over the stop loss limit. - Limited Risk plan. The Secretary is permitted
to reduce the risk exposure for certain plans, if
there are not at least 2 plans offered (only one
has to be a PDP) by 2 different entities in an
area. - Fallback Plan. If the Secretary is unable to
secure full or limited risk participation, a
government contractor can be secured to deliver
benefits. - Medicare Advantage Plan with Integrated Coverage
6Low Income Subsidies
- Dual Eligibles Below 100 FPL
- 1/3 co-payments (generic/brand name or
non-preferred multiple source). - Full subsidy for premiums and deductible.
- No co-payments above the catastrophic threshold.
- Below 135 FPL
- 2/5 co-payments up to catastrophic threshold
only. - Full premium and deductible subsidy.
- 6,000/9,000 asset test.
- 135-150 FPL
- 15 coinsurance up to catastrophic limit. 2/5
thereafter. - 50 deductible, sliding scale premium subsidies.
- 10,000/20,000 asset test.
7Formularies
- Tiered Formularies are permissible as long as
they are actuarially equivalent to the basic
benefit package. - All Formularies must include at least one drug
from each therapeutic class and category. - United States Pharmacopoeia to develop list of
categories and classes. - Appeals Process to treat non-preferred drugs as
preferred if a physician determines that
available preferred products are less effective
or could have adverse effects for the patient
appealing. - Generic products Plan must have in place an
means to suggest generic or lower cost products.
8General Subsidies/Risk
- Premiums Calculated based on a national average
bid premium adjusted to take into account an
overall subsidy of 74.5. - Reinsurance Overall subsidy is net of
reinsurance subsidies of 80 of allowable costs
over the out-of-pocket threshold. - Risk Adjustments Risk adjustments to plan
payments will be made for health status and
geography, though these adjustments will be
budget neutral. - Risk Corridors Even full risk plans will share
some risk with the government through risk
corridors that can reduce or increase their
payments if plan experience is above or below a
targeted amount.
9Miscellaneous Details
- Dual eligibles will be covered under Part D.
- States will have to match payments made for dual
eligibles, but will receive a phased-in reduction
to their matching rate (25 off after a ten year
period). - Retiree Coverage plans offering actuarially
equivalent coverage will receive subsidies of 28
of allowable drug costs between 250 and 5,000.
Retiree plans can subsidize premiums and cost
sharingbut any cost sharing subsidies will not
count toward the beneficiarys out-of-pocket
threshold.
10Part B Payment Reforms
- The Act creates a complicated set of
reimbursement options for Part B physician
payments
- A reduction off of AWP in 2004 (to 85 of AWP)
for most products, subject to a list of
exceptions. - Payment for single source drugs or biologicals
based on lesser of ASP or WAC in 2005, with a 6
markup. - At the physicians option, delivery through a new
Competitive Acquisition system in 2006 or ASP.
112004 AWP Reductions--Exceptions
Products paid 95 of AWP, except where noted
- Blood clotting factors
- Drugs or biologicals not available as of 4/1/03
- Pneumococcal, influenza and hepatitis B vaccines
(these continue to be paid 95 of AWP in the
future). - Separately billable drugs or biologicals (other
than EPO) furnished in conjunction with renal
dialysis services. - Drugs furnished through DME (AWP as of 10/1/03,
continues until 2007 when competitive
acquisition under Part D would be used). - IVIG would be paid 80 of AWP in 2004, but would
be reimbursed only though the ASP method
thereafter.
122004 AWP ReductionsExceptions Cont.
Other Adjustments
- Drugs listed in Table 3 of the CMS NPRM for Part
B payment reform would have their percentages
increased or reduced to as low as 80 of AWP. - Data submitted by manufacturers could be usedat
the discretion of the Secretary - If submitted prior to 10/15/03, effective 1/1/04
- If submitted after 10/15/03 and before 1/1/04,
effective 4/1/04 - 80 of AWP floor
13Reimbursement Based on ASP/WAC
In 2005 and following (for physicians who dont
elect competitive acquisition)
- Generally, payments for single source drugs or
biologicals would be based on 106 of the lesser
of ASP or WAC. - New drugs would be paid at WAC or as specified by
Secretary for initial quarter. - The Secretary would have the authority to adjust
reimbursement if ASP exceeds Widely Available
Market Price (WAMP) or AMP by a specified
percentage. Adjusted payments would be the
lesser of WAMP or 103 of AMP. - ASP is reported by manufacturers by dividing
total sales of a drug or biological by total
units sold in a quarter, net of all discounts and
price concessions, exempting nominal sales and
sales exempt from best price calculations.
14Competitive Acquisition
For 2006 and following, physicians may elect to
have drugs delivered through a new competitive
acquisition program
- Contractors would be paid by Medicare to dispense
drugs administered by physicians. - These contractors also would collect beneficiary
cost sharing. - The Secretary would establish a single
reimbursement amount for each drug in a
competitive acquisition area, based upon the bids
submitted. - Certain drugs would be excludedeither by statute
or the Secretary and would not be considered
competitively biddable. - Payment for new drugs based on ASP.
15Other Physician Payment Changes
Reduced Reimbursement for Drugs Partially Offset
by
- In 2004, Practice expense payments could be
increased by survey data, and work RVU payments
for some specialties also increased. - Additional surveys can be submitted for 2005 and
2006. - Physician fee schedule payments for drug
administration increased by 32 in 2004 and 3 in
2005.
16Implementation Timeline
- Immediate begin procurement process for Drug
Discount Card - Immediate either by rule or instructions,
establish payments for Part B drugs and OPPS. - April 1, 2004Discount Card Program Active
- Spring/Summer 2004begin process of developing
NPRM for PDPs and Medicare Advantage
Solicitation. - NPRM for Solicitation in August 2004.
- Final Rule for Solicitation in November 2004.
- Bids due in February 2005, Awards in June 2005.
- Plans Live in October 2005.
- November 15, 2005 Open Enrollment Begins
17Hospital Outpatient Prospective Payment System
(OPPS)
- Floors and ceilings for radiopharmaceuticals and
drugs and biologicals for which pass-through
payments made on or before 12/31/02, for which a
separate ambulatory payment classification (APC)
has been established
18OPPS Cont.
- Does not include drugs and biologicals
- First eligible for pass-through on or after
1/1/03 (paid under revised section 1842(o)
instead) - For which a temporary HCPCS code has not been
assigned (95 of AWP instead) or - Orphan drugs designated by the Secretary in 2004
and 2005 (in 2004, 9 at 88 of AWP and 2 at 94
of AWP).
19OPPS Cont.
- Requires GAO to study acquisition costs for these
drugs in 2004 and 2005 and to furnish data to
Secretary to use in setting 2006 rates. - Permits Secretary to set 2006 payment rates on
the average price for the drug in the year in
physicians offices as calculated and adjusted by
the Secretary if such data are not available. - Requires GAO to report on appropriateness of
proposed rates within 30 days. - Requires GAO to recommend to Secretary the
frequency and methodology of subsequent surveys. - Requires Secretary to conduct subsequent surveys
taking GAOs recommendations into account.
20OPPS Cont.
- Requires MedPAC to submit report to Secretary by
7/1/05 on adjustment of APCs to take overhead and
related expenses into account, including pharmacy
service and handling costs. - Permits Secretary to adjust rates accordingly.
- Reduces threshold for separate APCs for drugs and
biologicals to 50 per administration. - Makes drug and biological APCs ineligible for
outlier payments.
21Functional Equivalence
- Adopts Senate language.
- Prohibits the Secretary from publishing
regulations that apply a functional equivalence
standard to a drug or biological under the
pass-through. - Applies to application on or after the date of
enactment, unless such application was made prior
to enactment and Secretary applies such standard
only for the purposes of pass-through payments. - Does not affect FDAs authority to deem products
pharmaceutically equivalent and bioequivalent.
22ESRD Drugs Paid Outside the Composite Rate
- Inspector General (IG) to study drugs and
biologicals (including EPO) furnished to end
stage renal disease (ESRD) patients and paid
outside the composite rate. - Studies to focus on difference between payment
rates and facility acquisition costs and estimate
growth of expenditures on such drugs. - For three years beginning 1/1/06, Secretary
required to establish demonstration project for
use of full case-mix adjusted payment system for
ESRD services, including separately billed drugs
and related clinical lab tests. - Secretary required to report to Congress on
design and implementation of such system by
10/1/05.
23ESRD Drugs Paid Outside the Composite Rate
- Requires Secretary to develop basic case-mix
adjusted PPS for dialysis services that would
adjust for a limited number of patient
characteristics. - PPS would include services currently in the
composite rate plus difference in drug
acquisition costs and payment rates as reflected
in IG report. - No administrative or judicial review of the
system. - Drugs and biologicals paid separately prior to
enactment would continue to be separately paid - 95 of AWP in 2004, except for EPO
- Acquisition cost as determined by the IG or, if
unavailable, an amount determined by the
Secretary in 2005, including EPO and - Acquisition cost or ASP methodology as specified
by the Secretary in 2006 and thereafter.
24Self-Administered Drugs and Biologicals
Demonstration
- Requires Secretary to conduct a demonstration
project to pay for certain drugs and biologicals
prescribed as replacements for certain covered
drugs and biologicals, including oral anticancer
chemotherapeutic agents. - To cover up to 50,000 patients and receive up to
500 million in funding. - Conducted in sites selected by Secretary.
- To last for 2 years, starting at least 90 days
after enactment, terminating on or before
12/31/05. - Requires Secretary to submit report evaluating
impact on patient access and cost-effectiveness,
particularly savings on reduced physician and
outpatient department administration services.
25Inpatient New Technology Add-on Payments
- Adopts House provision with two major exceptions
- Deeming certain drugs and biologicals to be
substantial improvements and - Using an 80 marginal rate for additional
payments instead of the 50 current rate.
26Inpatient New Technology Add-on Payments
- Reduces inadequate payment threshold to lesser of
75 of standardized amount or 75 of one standard
deviation of the diagnosis related group (DRG)
involved. - Codifies preference for assigning new
technologies to more appropriate DRGs rather than
establishing add-on payments. - Adds new money.
- Affords more public input into substantial
improvement determination. - Requires Secretary to establish additional
diagnosis and procedure codes in April. - Effective in fiscal year 2005.
- New technology applications filed for fiscal year
2004 and denied would be reconsidered
automatically for 2005 the maximum time for
additional payments would be extended 12 months.
27Hatch-Waxman Reforms
- Bioequivalence language applies only to
non-systemic drugs. - Limits eligibility for 30-month stay to one per
ANDA. - Limits patents eligible for 30-month stays to
those submitted to FDA before submission of the
generic drug application, preventing later-listed
patents from triggering multiple stays. - Permits generic drug applicants who are not sued
within 45-days of paragraph IV certification to
file declaratory judgment actions to the extent
consistent with the Constitution. (Must be a
case or controversy). - Allows all companies that file ANDAs on the first
day of eligibility to share in 180-day
exclusivity. - Establishes several ways in which ANDA applicants
can forfeit 180-day exclusivity rights.
28Importation
- Provides for importation only from Canada, but
only if HHS Secretary certifies to Congress that
importation would pose no additional risk to
public health and safety and would result in
significant cost-savings to American consumers. - Certification requirement is similar to Cochran
amendments that effectively have prevented HHS
from implementing earlier legislation.