Basic Concepts Driving Drug Payment

PAYMENT RULES for medications are changing with multiple new ideas being proposed and/or enacted. Many of these changes hinge on where drugs are dispensed, prescribed and used. This column will lay the groundwork for understanding drug payment through an explanation of terms and a review of the enacted or proposed rule changes.

Understanding Drug Payment

Medicare remains the single largest payer of medical care and prescription drugs in the United States. Private payer or insurance carriers often emulate Medicare’s payment decisions or at least use them as the basis for programs they institute.

From a medication payment standpoint, drugs fall into three basic Medicare categories based on prescribing location and use: Part A covers drugs for inpatients, Part B covers drugs for outpatients, Part C covers drugs under Medicare Advantage (MA) plans, and Part D covers drugs in the ambulatory setting, which may be the home or some type of residential or long-term care facility. Part A drugs, which are part of the inpatient medical benefit, and Part B drugs, which are considered incident to a physician visit or procedure and are on a well-defined list, fall under the medical benefit. Part D drugs are considered part of the pharmacy benefit, and their use is often under the control of the pharmacy benefit manager.

For Part B drugs covered by the outpatient prospective payment system (OPPS), Medicare assigns a status indicator (SI) to each to provide information about how they will be paid. The relevant SIs are G, K and N. SI G is assigned to new drugs or new uses of drugs that have been given pass-through status based on an application from the manufacturer. By statute, this three-year status protects payment for these drugs at average sales price plus 6 percent, and they will be seen as line items on the patient’s bill. SI K is assigned to separately payable drugs based on a minimum cost ($120 per day for 2018) and also will be seen as line items on the bill. SI N is interesting because it straddles both a cost threshold and a statute requirement for drugs that are bundled into payments for procedures or outpatient visits. Although they are not seen as line items on the bill, billing as if they were is essential to represent the true cost of the bundle and to justify separately payable drug administration fees, if applicable. Don’t strip these out of the bill!

The physician office setting is covered under the physician fee schedule, and rates may differ from OPPS for both drugs and services. There is significant discussion surrounding the site-of-service topic, and 2019 may very well bring some degree of normalization in payment rates.

2019 Changes to Medicare Advantage and Part D Plans

In early April, the Centers for Medicare and Medicaid Services (CMS) finalized policies for Medicare health and Part D drug plans that are designed to save Medicare beneficiaries money on prescription drugs, while at the same time offering additional plan choices. These comprehensive rule changes make programmatic and operational changes to the Medicare Advantage and prescription drug benefit programs for 2019, so they should be reviewed in their entirety. These changes are part of the continuing quest to save money on prescription drugs.

Lowering out-of-pocket drug prices is addressed in a number of ways, including:

• A reduction in the maximum amount low-income beneficiaries pay for certain biosimilars. The provision “Similar Treatment of Biosimilar and Interchangeable Biological Products and Generic Drugs for Purposes of Low Income Subsidy (LIS) Cost Sharing” further encourages the use of lower-cost alternatives by applying generic cost-sharing to biosimilar and interchangeable biological products for LIS Part D enrollees throughout all phases of the benefit.
• Allowing certain low-cost generic drugs to be substituted onto plan formularies at any point during the year so beneficiaries immediately benefit and have lower cost-sharing.
• Increasing competition among plans by removing the requirement that certain Part D plans have to “meaningfully differ” from each other, making more plan options available.
• Increasing competition among pharmacies by clarifying the “any willing provider” requirement to increase the number of pharmacy options beneficiaries have.

Another example of lowering out-of-pocket drug prices can be seen in the 2018 OPPS rules that helped Medicare beneficiaries save on coinsurance on Part B SI K drugs administered in hospital outpatient departments participating in the 340B program. By reducing the amount Medicare pays facilities for those drugs by almost 30 percent, the 20 percent co-pay for which Medicare beneficiaries are responsible also has been reduced by approximately 30 percent.

Clarification of how hospitals implement these changes and how they apply to MA Part C plans that also provide Medicare benefits through private insurance is being made available to participating facilities. Namely, there will be a change in plan design and cost-sharing. MA plans will receive a 3.4 percent pay raise in 2019, well above the initial proposed 1.84 percent increase and higher than the 2018 increase of 2.95 percent.

Less red tape and the “Patients Over Paperwork” initiative (an effort aimed at removing regulatory obstacles and empowering patients to make informed healthcare decisions; developing innovative approaches to improving quality, accessibility and affordability; and improving beneficiaries’ customer experience) are included in the sweeping changes. Included will be a streamlined review and approval process of materials that electronically communicate Medicare health and drug plan information to beneficiaries and improve transparency.

CMS also included several changes to combat opioid overuse. Program regulations were revised to implement certain provisions of the Comprehensive Addiction and Recovery Act and the 21st Century Cures Act that direct Part D plan sponsors to establish a drug management program for beneficiaries at risk for prescription drug abuse or misuse. This includes a policy to prevent Medicare beneficiaries who are deemed at risk for opioid misuse or abuse from obtaining prescription drugs from multiple doctors or pharmacies. Instead, these beneficiaries will be limited to one pharmacy or prescriber for Medicare Part D benefits. This will limit an at-risk beneficiary’s access to coverage for frequently abused drugs to those that are prescribed by a specified pharmacy or provider. Exempted beneficiaries are those who are being treated for active cancer-related pain, are receiving palliative or end-of-life care, or are in hospice or long-term care from drug management programs.

A fact sheet on the 2019 rate announcement and final call letter can be obtained at www.cms.gov/Newsroom/MediaRelease Database/Fact-sheets/2018-Fact-sheets-items/2018-04-02-2.html. A fact sheet on the final rule (CMS-4182-F) can be obtained at www.cms.gov/Newsroom/ MediaReleaseDatabase/Fact-sheets/2018- Fact-sheets-items/2018-04-02.html. The final rule can also be downloaded from the federal register at www.federalregister.gov/ public-inspection/current.

This column will continue discussions of other proposed 2019 changes in the next issue.