Thursday, February 11, 2016

CMS CR 9501 (Feb 5 2016; Withdrawn)

This is the text of the temporarily posted and withdrawn CMS TRANSMITTAL about drug pricing demonstration projects.

Pub. 100-19 Transmittal: 137 Date: February 5, 2016 Change Request: 9501 

SUBJECT: Implementation of the Part B Drug Payment Model (Phase 1) 

EFFECTIVE DATE: July 1, 2016

*Unless otherwise specified, the effective date is the date of service.



A. Background:

 The purpose of the Change Request (CR) is to instruct CMS shared system maintainers to implement a mechanism that will allow the use and testing of different Average Sales Price (ASP) payment limit values in certain defined geographic areas based on ZIP code. The replacement values would be used in Part B settings such as hospital outpatient departments, physician offices, and pharmacies that currently submit claims for Part B drugs. The information in the background document of this implementation CR is to be construed as final, but this information may be modified as details regarding the implementation of this payment model are finalized.

Medicare pays for most drugs that are administered in a physician’s office or the hospital outpatient department at ASP plus 6 percent by statute regardless of the price a provider pays to acquire the drug. Medicare makes an additional separate payment for administration of the drug under the physician fee schedule or the hospital outpatient prospective payment system (OPPS). The ASP is calculated quarterly using manufacturer-submitted data on sales to all purchasers; rebates, discounts and price concessions are reflected in the ASP. The statute does not identify a reason for setting the payment limit at an additional 6 percent above ASP, although physicians and others have asserted that it is needed for handling and overhead costs.

The ASP methodology does not take into account the effectiveness of a particular drug, or the cost of comparable drugs, when determining the Medicare payment amount. The ASP methodology has been criticized for encouraging the use of more expensive products because the add-on to the drug’s cost is a percentage of the sales price while handling and overhead costs may not vary with the drug’s price.

Medicare is developing methods to test the impact of changes to Part B drug payments. One approach that is being considered would focus on the 6 percent add-on to the ASP. This approach would be implemented via a grouping of five digit ZIP codes, grouped into MSAs or similar units. In this approach, ZIP codes not assigned to an alternative payment would continue to receive payment as ASP+6 percent; these ZIP codes may be grouped together to capture an MSA or similar units. The ZIP code groupings would be done by CMS and the pricing flag field that would be added in existing filler on the ZIP code file sent to the contractors would indicate which ASP pricing methodology applies to any specific ZIP code. Medicare could test the impacts on changes to the ASP add-on percentage for their effects on spending and prescribing patterns to determine, for example, if the changes affect the financial incentive for physicians or hospitals to choose higher cost drugs that do not offer additional clinical value.

Medicare is also developing methods to test the impact of targeted pricing changes to payments for individual Part B drugs beyond changes to the ASP-based payment. These targeted drug payments could vary across a different set of ZIP codes than those assigned to the different ASP methodologies. CMS is targeting a July 5, 2016 implementation for the system changes to support these new pricing methods discussed above, but additional approaches that test other methods of targeted pricing would likely be phased in later. Also, since this model is going through notice and comment rulemaking, there is a possibility that the new ASP and Zip 5 and Zip 9 files that contain the new pricing values developed under rule making will be available and effective sometime between August 1 and September 15, 2016 rather than on August 1, 2016 exactly.

B. Policy: 

Section 1115A of the Social Security Act (the Act) (added by Section 3021 of the Affordable Care Act) (42 U.S.C. 1315a) authorizes CMS’s Center for Medicare & Medicaid Innovation to test innovative health care payment and service delivery models that have the potential to lower Medicare, Medicaid, and Children's Health Insurance Program spending while maintaining or improving the quality of beneficiaries’ care.

Contractors shall implement necessary changes to their respective systems in order to accommodate a new Part B Drug Payment Model to test different approaches for the payment of Part B drugs.

Contractors shall refer to the attachment(s) to this CR for a more detailed outline of the programmatic requirements of the Model. Contractors shall also refer to the attached proposed revised layouts for the ZIP code files and ASP file that CMS will create for this model.

Please note that the new payment indicator will appear on both the Zip 5 and the Zip 9 files; the indicator is the same on both files based on the first five digits of the Zip. CMS is providing the indicator on both files in case that will help to simplify implementation logic changes. *

*NOTE** - The CMS supplied payment indicator that will be included on the revised ZIP 5 and ZIP 9 files is only based on the first 5 digits of the particular ZIP code. However, CMS is replicating the ZIP 5 payment indicator on the ZIP 9 file per FISS request. **NOTE** - Once the new drug pricing payment model is in effect (that is, once the one-time off-cycle ASP and ZIP Code files are installed per instructions below), there is no need for MACs to adjust (either when brought to their attention or by searching their own files) any previously adjudicated claims in order to ensure they are priced using the new model. Any claim adjustments necessitated by the normal course of claims processing  shall be adjudicated and priced based on the “FROM” date of service on the claim.


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