The History of Average Sales Price WSMOS SPRING MEETING 2016 Jeffery C. Ward, M.D.
Oncolytics: The Oncologists Bread and Butter • The majority of anti-cancer pharmaceuticals are still delivered in hospitals and clinics. • Providers buy and bill the drugs that they then prescribe and administer. • Drugs are the largest single item expenditure and largest source of gross revenue in the oncology clinic. • Until recently, the margin on drugs was the financial driver of oncology infusion suites and oncologist incomes.
Runaway Cost: Whose Fault?
Before MMA of 2003 brought us ASP: • There was AWP (not really Average Wholesale Price). • By 2003 steady decreases in Medicare drug payments had resulted in AWP-15%. • The mechanics of AWP allowed for compensatory margin increases that were commonly 30-50% of the purchase price. • Margins of up to 200-300% were seen in isolated, but well publicized circumstances.
The Implementation of ASP+6 • ASP really is the drug companies average sales price. • ASP never was the providers average purchase price due to prompt pay discounts and the inexorable rise inflation of drug prices. • Initial impact of MMA was buffered by Medicare demo projects, temporary increases in infusion fees and relatively lucrative commercial contracts. • As Demo projects stopped, infusion fee increases sunset, and commerical payers followed suit, the risks inherent in buy and bill increased.
After Twelve Years of ASP • Underwater drugs are commonplace. • Oral Drugs with no margin replace IV therapies further eroding the margins that have helped pay for un-reimbursed services. • Risk shifting by sending underinsured and uninsured patients to hospitals is routine. • Brown bagging and white bagging of expensive drugs is business as usual for small practices. • Larger practices with significant community presence and hospitals with facility fees and 340B discounts garner contract leverage, diversity of income stream, and pharmaceutical buying power survive and may thrive. • Small practices are a dying breed through closures, mergers, and acquisition.
Sequestration One part of broader disruption in medicine …
2011 FOOTER 8
Invoice and a Management Fee • Pay physicians invoice pricing for drugs. • Convert current 6% of ASP to a management fee that is independent of the drug used. • CPC and Payment Reform Workgroup spent over a year trying to convince ourselves that this on the surface simple solution would work.
Invoice and a Management Fee: Why Invoice? • AWP: Manufacturers Suggested Retail • WAMP: Defines drug price through market Price, no longer published, no relationship surveillance. Collection has been sporadic, to market pricing. last done by OIG focusing only on Part B. Currently not robust enough to be practical, • ASP: Created by MMA, Reported actual but could be credible to CMS. price manufacturer is paid to include rebates/discounts, 6 month lag, only for • RSP/NADAC: Developed in 2013 to provide Part B drugs, not the price paid by CMS and states an alternative to AWP for providers. pharmacy reimbursement, based on survey of invoice prices to pharmacies. Has been • WAC: Actual price distributors pay to difficult to collect rebate information and manufacturers exclusive of rebates/ still a work in progress with significant discounts, subject to manipulation through logistical hurdles. Would not be applicable large rebates, close to provider cost for to providers or many Part B drugs. brand name drugs, substantially overestimates provider cost for generics. • AAC: NADAC like survey proposed in ASCO Payment Reform Workgroup discussions. • AMP: Price reported to by manufacturers Would require broad survey of providers, based on sales to retail pharmacies for exclude 340B and government contracts, purpose of calculating statutory Medicaid could be tiered to practice size and type of rebates. Many Part B drugs cannot be institution. Would face same logistical calculated this way and defaults to ASP. hurdles as NADAC and lag effect of ASP
Invoice and a Management Fee: The Problems • Invoice reimbursement offers no shopping incentive currently provided by the provider seeking the best price to keep the buy low. • With no six month lag = no disincentive to price increases by manufacturers who currently are, in theory, inhibited by the specter of an underwater drug. • It keeps the management fee tied to Part B drugs unless the management fee is uncoupled from the invoice. • High cost to billing and drug distribution infrastructure.
Remember the Competitive Acquisition Program? • In addition to ASP, MMA created CAP. • Designed to produce significant savings for Medicare and beneficiaries by reducing Part B drug costs. • Multiple vendors competitively bid for drug provision contracts, similar to Medicare Part D. • Physicians would order oncolytics from the vendor • The vendor would bill Medicare and collect copays.
CAP: Why didn’t it work • Congress built it on a shoestring budget. • Practices gave up drug margins and got nothing in return: At its peak only 1400 physicians and very few oncologists participated. • Predicated on competing vendors: Only BioScrip signed a contract, and withdrew after three years citing “unacceptable short and long term profit risk.” • Cost more than ASP+6: In part because CAP vendor’s reimbursement was inflation adjusted, avoiding 6 month lag impact. • CMS shut it down after 42 months.
CAP: Could It Work? • The ethos and ecology of oncology practice is changing, such that CAP may be perceived quite differently than a decade ago. • It would have to be accompanied by a management fee to providers to offset dollars lost from drug margins. • It will require upfront investment to provide vendors with adequate reimbursement for administrative burdens and mitigation of some of the risk. • This upfront investment cannot come out of current oncology reimbursement and keep practices solvent. • Predicated on having faith that the investment will result in lower prices and ultimate savings. 42
RCAP: Could it work? • It could have formidable foes: Pharma, Distributors, Buy and Bill enthusiasts … • It would have political history and baggage to overcome, and would require new legislation. • It would require considerable upfront investment in the belief that 1) Physician prescribing behavior is sufficiently driven by drug margins, and 2) Vendors would be able to extract sufficient savings from the pharmaceutical industry.
Lessons Learned from the UHC Demo UnitedHealth Episode Payment Pilot (19 cancer/stage/biology specific episodes)* – Converted drug margin to Episode Payment to be used as practice saw fit to improve quality and value of care – All drugs paid at average sales price rate (proxy for acquisition costs) – Hospital E&M Bundled based on historical use – All other services paid FFS – Annual review of detailed cost and quality data (continuous improvement) Results: – Good News: Total spending reduced by $33.3 million – ?Bad News: Chemotherapy drug costs increased by $13.5 million Half Full or Half Empty – Half Full: Questions the argument that we are incentivized to prescribe expensive drugs because of the margin we obtain on them – Half Full: With additional resources and focus on continuous quality improvement we can decrease other drivers of costs – Half Empty: Spiraling drug spending not restrained by this approach FOOTER 16
Consolidated Payments for Oncology Care Payment Reform to Support Patient-Centered Care for Cancer ASCO’s ¡Clinical ¡Prac/ce ¡Commi3ee ¡Payment ¡ Reform ¡Work ¡Group ¡ ¡ ¡ ( JOP Jul 1, 2014:254-258; published online on April 15, 2014 ) ¡
What About Drugs? • Reforming cancer care reimbursement is not complete as long as “Buy n Bill” remains • Reform will need to account for impact on infrastructure that brings drugs to practices • Delay in addressing ASP+6% is an acknowledgement of reality, not hypocrisy
What About Drugs?
To the Editor: We take a decidedly contrary position to that expressed by Polite et al in “Payment for Oncolytics in the United States: A History of Buy and Bill and Proposals for Reform.” Medicare drug reimbursement based on average sales price (ASP) is not under attack in the Congress; actually, the facts prove the exact opposite … . In actuality, sequestration was a failsafe device that Congress created to motivate a “super committee” of select members to reduce federal spending … . Many members of Congress believe that the Centers for Medicare & Medicaid Services (CMS) should exempt Medicare Part B drug reimbursement from the sequester cut … . The contention held by some that ASP-based reimbursement incentivizes use of higher priced drugs is unproven … The real incentive to use more expensive drugs exists in hospitals where 340B drug discounts provide up to a significant 100% margin on cancer drugs … Payment reform in oncology should first be directed at increased Medicare and private pay spending for drugs and services in the hospital setting.
Recommend
More recommend
