Oral Statement Before the Advisory Panel on Ambulatory Payment Classification Groups

Dr. Hambrick and members of the APC Advisory Panel, thank you for the opportunity to be here today. Unfortunately, Terry Ghio was unable to testify. My name is Beth Roberts, and I am a partner at Hogan & Hartson and serve as outside counsel to Biotechnology Industry Organization. BIO is the largest trade organization to serve and represent the biotechnology industry in the United States and around the globe. BIO represents 1,000 biotechnology companies, academic institutions, state biotech centers, and related organizations in all 50 U.S. states and 33 other nations.

As you might imagine, discovering new cures and ensuring patient access to them is extremely important to us. That is why we particularly appreciate the significant progress CMS made in the 2005 final OPPS rule to address many of our concerns regarding access and quality of care for Medicare beneficiaries. In large part, we believe these improvements have been possible because of the practical guidance of the APC Panel and public meetings such as this one. Thank you.

Some challenges certainly lie ahead though. Specifically, we are concerned about continued patient access to pass-through therapies as well as the new rate-setting methodology based on acquisition cost for specified covered outpatient drugs - and hopefully other separately paid drugs - in 2006 and beyond. We ask for APC Panel's help in resolving these issues in a way that preserves patient access to critical drug and biologicals therapies.

First, BIO continues to be concerned that payments for pass-through drugs and biologicals may not be adequate to allow hospitals to provide these innovative therapies. Pass-through drugs now are reimbursed at 106% of their average sales price or ASP - the same rate as in physician offices. When these rates were introduced in physician offices, however, CMS also adjusted payments for drug administration and established a new demonstration project that pays $130 per patient encounter to collect data on patients' pain, fatigue, and nausea. CMS has not proposed any similar adjustments for hospital outpatient departments, even though reduced reimbursement could have severe consequences for access to drugs and biologicals in this setting. We ask the APC Panel to recommend that CMS take proactive steps to enhance reimbursement for drug administration as was done in the physician office setting.

Second, we urge the APC Panel to recommend that CMS extend the new rate-setting methodology for specified covered outpatient drugs or SCODs to all separately paid, non-pass-through drugs and biologicals in 2006 and beyond. The MMA requires CMS to develop a payment methodology for SCODs that takes into account hospital acquisition costs and pharmacy service and overhead costs. We are concerned that CMS may continue to apply its current, fundamentally flawed methodology that determines costs from hospital charges for other separately paid therapies. This, quite frankly, makes no sense. GAO highlighted the serious flaws with the current rate-setting methodology in a September report. In this year's final rule, CMS itself recognized that it was appropriate to treat three expiring pass-throughs as SCODs even though they did not technically meet the statute's definition. We applaud this decision and ask that it be extended to all separately paid, non-pass-through therapies in 2006 and after. Treating all separately paid drug and biologicals the same would simplify the already extremely complex OPPS and would help ensure that beneficiaries have assess to the therapies they need.

With respect to the new acquisition cost-based reimbursement methodology, we hope CMS will begin an open dialogue with us and other stakeholders as soon as possible rather than waiting until the comment period on next year's proposed rule. The Part D process is a model for the open and transparent dialogue we envision.

The new methodology is to be developed using GAO's studies of hospital acquisition costs and MedPAC's studies of pharmacy service and overhead costs. Any flaws or omissions in these crucial studies will create significant errors in the future payment rates. Therefore, we urge the APC Panel to recommend that CMS work with GAO, MedPAC, and stakeholders now to ensure the agency has the information it needs to set proper payment rates in the future.

We are hopeful that GAO's Fall 2004 survey of over 1000 hospitals' acquisition costs for SCODs and other therapies will give CMS the information it needs. We understand, though, that GAO could not complete the second survey required by the statute before the April 1, 2005 deadline. The APC Panel should recommend that CMS work with GAO to conduct a second survey in 2005 to collect timely data to set the 2006 rates. The Panel also should recommend that CMS continue to accept external cost data submitted by knowledgeable stakeholders, such as manufacturers, providers or patients, to provide verification of hospital acquisition costs for specific drugs and biologicals.

We are very concerned that CMS will not have the pharmacy service data it needs to set appropriate payment rates for 2006. MedPAC has acknowledged that its planned study of just four hospitals will not produce representative cost estimates. It is urgent, therefore, that CMS begin to work now to help MedPAC with its study or find alternate sources of data for use in the 2006 rule.

*     *     *

BIO appreciates this opportunity to share our views about the substantial policy improvements made in the OPPS this year as well as the issues that continue to concern us. We sincerely hope the APC Panel will give thoughtful consideration to our comments and will work to ensure that Medicare beneficiaries continue to have access to critical drug and biological therapies in hospital outpatient departments. Thank you.