Message to Congress: Keep the Care in Medicare!

  • Contact: Kathy Stover
    (202) 962-9200
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WASHINGTON, D.C. (May 12, 2003) – If Congress doesn’t fix a Centers for Medicare and Medicaid Services’ (CMS) reimbursement rule, Medicare beneficiaries with various cancers, heart disease, osteoporosis, and multiple sclerosis may soon find their access to hospital outpatient drug therapies restricted, a group of doctors, patient advocacy groups and biotechnology researchers said today at a Capitol Hill press conference.

“It is cruel irony that while Congress is working to expand drug coverage for Medicare beneficiaries, CMS has placed what little drug coverage Medicare already has in place in jeopardy,” said Sharon L. Cohen, vice president for federal government relations at the Biotechnology Industry Organization (BIO). “Congress needs to keep the care in Medicare by quickly correcting this rule so that seniors with rare and deadly diseases receive the outpatient drug therapies they need. Hospitals should not be penalized financially when they provide Medicare beneficiaries with the latest and most appropriate drug therapies. Congress needs to correct this mistake before access to life-saving drugs is denied.”

Effective January 2003, CMS cut reimbursement rates for many outpatient hospital drug therapies so dramatically that hospitals may no longer continue to provide them. These dramatic reductions, by an average of 35 percent, are caused primarily by a fundamentally flawed methodology CMS is using to calculate rates in the hospital outpatient prospective payment system (OPPS).

The result of this CMS rule is that it’s becoming cost prohibitive for hospitals to provide these life-saving treatments for Medicare beneficiaries. CMS’ measures are effectively forcing hospitals to either discontinue treatment that Medicare patients with rare and deadly disorders need or absorb the cost. Since January, many hospitals have assumed the cost of treatment that is not reimbursed, but, according to hospital officials, this approach cannot last much longer.

“CMS reimbursement cuts make it almost impossible to treat Medicare patients in the hospital outpatient setting,” Wendy Andrews, director of oncology services, at the University Medical Center, in Tucson, Arizona said at today’s Capitol Hill press conference. “Our physicians have a vested interest in providing the best therapy for their patients. Forcing them to make decisions solely because hospitals cannot afford drug treatments Medicare won’t fully reimburse seems to be exactly the opposite of what Congress is trying to do by reforming Medicare.”

Beyond the inadequate reimbursement policy, CMS introduced additional new policies in its final OPPS payment rule that will deny Medicare beneficiaries access to important drug therapies in outpatient settings.

First, CMS’ OPPS rule places far too stringent criteria around the “orphan drugs” Medicare will exempt from this payment regime. Orphan drugs are named for their use in diseases that affect no more than 200,000, and often only several hundred, in the United States.

Since demand is extremely low and variable, orphan drugs are costly to manufacture and costly for hospitals to keep in inventory. For this very reason, orphan medicines should be excluded from the OPPS, a measure necessary to ensure that Medicare beneficiaries with rare disorders have access to these potentially life-saving medicines.

“Because of this payment rule, many seniors and the disabled who suffer from rare disorders will have limited access to the very cutting edge treatments that can save them,” said Abbey S. Meyers, president of the National Organization of Rare Disorders (NORD). “Congress has the ability to re-institute this incorrectly reformed rule as they prepare to bring a package of Medicare enhancements and reforms to the House and Senate floors. We know they will agree that this reform has significantly impaired the ability of Americans to receive the highest quality health care.”

Second, CMS coined the term “functionally equivalent” to justify comparing two outpatient drug therapies, in order to reimburse them at the same rate – that of the lowest-cost product. Not only is the “functionally equivalent” standard contrary to statute, but it also was announced in the final regulation without any notice or opportunity for public comment prior its implementation in clear violation of federal statute and due process rules.

“This unprecedented CMS policy focuses on cost, and ignores both patient needs and physician judgment about which therapy is best. Physicians, not a government payment policy, should determine when to substitute one therapy for another based on a patient’s individual needs,” said Sharon L. Cohen, vice president for federal government relations.

Third, CMS arbitrarily and without justification, redefined diagnostic and therapeutic radiopharmaceuticals, declaring them no longer “drugs” or “biologicals” even though they are approved as such by the Food and Drug Administration (FDA). This substantial change in reimbursement policy also was made without notice or an opportunity for public comment. It also-- more – violates the statute (Social Security Act) as well as longstanding CMS policy. This reclassification of radiopharmaceuticals as “non-drugs” must be reversed to guarantee continued Medicare patient access to these important diagnostic and therapeutic drugs, as Congress clearly intended.

Congress is scheduled to begin work on Medicare drug coverage legislation soon. At today’s press conference, a cross-section of healthcare organizations and leading healthcare individuals urged Congress to include in their Medicare drug coverage legislation provisions to correct the flawed Medicare hospital OPPS regulation implemented on January 1 of this year. Without such corrective action, Medicare beneficiaries will be denied access to the drug therapies they need.

BIO, which recently launched an ad campaign inside the Beltway and in several key states urging Congress to fix the CMS rule, said the organization is working with Congress to develop legislative remedies to each of these problems within the OPPS system, including the following:

  • Separate reimbursement for drugs and biologicals based on hospital acquisition costs plus adequate amounts to cover administration, pharmacy service costs and overhead.
  • Permanent separate reimbursement for all innovative drugs and biologics as soon as the products have received FDA approval.
  • Exclusion of orphan drugs from OPPS, so they will be reimbursed more appropriately.

  • Elimination of the “functionally equivalent” standard for setting payment rates and requiring CMS to adhere to FDA-established definitions of drugs, biologics, orphan drugs and medical devices.


To learn more about how the CMS rule affects Medicare beneficiaries, log on to www.within-reach.org.


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BIO is the world's largest trade association representing biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations. BIO members are involved in the research and development of innovative healthcare, agricultural, industrial and environmental biotechnology products. BIO also produces the BIO International Convention, the world’s largest gathering of the biotechnology industry, along with industry-leading investor and partnering meetings held around the world. BIOtechNOW is BIO's blog chronicling “innovations transforming our world” and the BIO Newsletter is the organization’s bi-weekly email newsletter. Subscribe to the BIO Newsletter.