Testimony on 2005 OPPS Proposal and Other Medicare Issues

The Biotechnology Industry Organization (BIO) appreciates this opportunity to testify about the hospital outpatient department prospective payment system (OPPS) proposed rule for 2005. BIO is the largest trade organization to serve and represent the biotechnology industry in the United States and around the globe. BIO represents from that 1,000 biotechnology companies, academic institutions, state biotechnology centers, and related organizations in all 50 U.S. states and 33 other nations. BIO members are involved in the research and development of health care, agricultural, industrial and environmental biotechnology products.

Representing an industry that is devoted to discovering new cures and ensuring patient access to them, BIO consistently has expressed concerns that OPPS could create substantial access and quality of care issues for Medicare beneficiaries. After years of testifying before the APC Panel and submitting comments and meeting with the Centers on Medicare and Medicaid Services (CMS), we are pleased to see that CMS has made significant progress in addressing many of our concerns in its proposed OPPS rule for 2005. 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.

In addition to asking that these reforms be finalized, we ask that the APC Panel urge CMS to issue more detailed ASP reporting guidance immediately and to work with the Government Accountability Office (GAO) and the Medicare Payment Advisory Commission (MedPAC) today to do what is necessary to ensure appropriate payment rates for drug and biological products in the future. We also ask the APC Panel to recommend that CMS extend the future rate-setting methodology mandated in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) for "specified covered outpatient drugs" to apply to all separately paid drugs and biologicals. Finally, we request that the APC Panel recommend that CMS maintain the $50 packaging threshold for drugs and biologicals in 2007 and subsequent years unless the agency can show with a thorough study that patient care will not be affected by increasing it. These issues are described in depth below.

1. The APC Panel should recommend that CMS finalize the numerous policies contained in the proposed rule that will improve beneficiary access to critical drug and biological therapies.

Specifically, BIO sincerely appreciates the following policy changes proposed by CMS and urges the APC Panel to adopt them in the final rule:

• recognition that radiopharmaceuticals are "drugs and biologicals" to be treated similarly to other drug and biological products;
• implementation of the provision to provide immediate reimbursement for drugs and biologicals for which HCPCS codes have not yet been assigned;
• treatment of all new drugs and biologicals with HCPCS codes as pass-through products, regardless of whether CMS received a pass-through application for them;
• acknowledgement that all biologicals are sole source products;
• no application of an equitable adjustment or functional equivalence;
• continued exclusion of certain orphan drugs to ensure beneficiary access to them; and
• zeroing out the pass-through payment amount for drugs and biologicals and increasing the conversion factor accordingly.

BIO applauds the APC Panel and CMS for implementing these changes that will help to ensure that Medicare beneficiaries have access to vital drug and biological therapies.

2. The APC Panel should recommend that CMS provide immediate and clear guidance on the ASP reporting requirements.

In the proposed rule, CMS announces its intent to use average sales price (ASP) data to determine payment rates for pass-through therapies and proposes to expand the ASP reporting requirements to radiopharmaceuticals for which pass-through applications are submitted after January 1, 2005. Unfortunately, CMS' guidance regarding ASP reporting has been far from clear. As we explained in our comments on the ASP interim final rule, the current rule on ASP reporting is fraught with ambiguities and omissions that make it difficult to assure accuracy and consistency. It is crucial that CMS provide manufacturers with clear guidance immediately that will enable them to file appropriate and accurate data and avoid the serious penalties associated with misrepresentations of these data. Accordingly, BIO asks the APC Panel to recommend that CMS provide additional guidance regarding ASP reporting in a final rule issued well before the third quarter filing deadline - when reports actually will be used to set payment rates. Without accurate reporting, we are concerned that payment rates will not be appropriate.

3. The APC Panel should recommend that CMS extend the future rate-setting methodology mandated in the MMA for "specified covered outpatient drugs" to all separately paid drugs and biologicals.

For years 2006 and beyond, the MMA requires CMS to develop a payment methodology for "specified covered outpatient drugs" that takes into account a GAO study of hospital acquisition cost data and a MedPAC study of pharmacy service and overhead costs. BIO firmly believes that a rate-setting methodology based on actual hospital acquisition costs for drugs and biologicals is far more appropriate than a rate-setting methodology based on determining costs from hospital charges. Although the MMA only technically requires that rates be set in this manner for "specified covered outpatient drugs," we believe that payment rates for all separately paid drugs and biological therapies should be determined using acquisition cost data. Rather than applying different rate-setting methodologies to drugs based on the date their pass-through status expired, as CMS could opt to do, CMS should apply the same methodology to all separately paid drugs and biologicals. CMS already has proposed to do this for three expiring pass-through drugs for which payment was first made on January 1, 2003, by treating them as specified covered outpatient drugs. We strongly support this proposal, and we urge the APC Panel to recommend that CMS expand this treatment to all separately paid drugs and biologicals in the future.

4. The APC Panel should recommend that CMS work with the GAO and MedPAC now on their respective hospital acquisition and pharmacy service cost studies to ensure proper payment rates for drugs and biologicals in the future.

To develop the payment methodology for 2006 and beyond, the MMA requires the GAO, and later CMS, to study the hospital acquisition costs of "specified covered outpatient drugs." In addition, MedPAC is charged with studying pharmacy service and overhead costs of these therapies. These studies are crucial to the development of the new payment methodology. Any flaws or omissions in these studies will create significant errors in the future payment rates. Therefore, we urge the APC Panel to recommend that CMS work with GAO and MedPAC now to ensure the agency has the information it needs to set proper payment rates in the future. We believe it is especially important for GAO to extend its acquisition cost study to all separately paid drugs and biologicals to provide the data necessary to produce a consistent payment methodology for these therapies in the future. Although we understand that GAO plans to include the designated orphan drugs in its survey, the studies also should include drugs and biologicals for which payment first was made on or after January 1, 2003, including the three expiring pass-through drugs that CMS proposes to treat as specified covered outpatient drugs in the proposed rule. This treatment makes sense and would facilitate consistent reimbursement among drug and biological therapies.

5. The APC Panel should recommend that CMS maintain the $50 packaging threshold for drugs and biologicals in 2007 and subsequent years unless the agency can show with a thorough study that patient care will not be affected by increasing it.

BIO remains extremely concerned about packaging the costs of drugs and biologicals. CMS reduced the threshold for packaging from $150 to $50 for 2004, and the MMA requires it to remain at $50 per administration in 2005 and 2006. CMS has asserted that its preference is for additional packaging, however, and that it would continue to study this issue. BIO believes CMS should carefully examine the patient care ramifications of bundling important therapies with other APCs before contemplating any additional packaging. We are certain that careful studies will reveal that increasing the threshold in 2007 and subsequent years is inappropriate. Accordingly, we ask the APC Panel to recommend that CMS maintain the $50 packaging threshold for drugs and biologicals in 2007 and subsequent years unless the agency can show with a thorough study that patient care will not be affected by increasing it.

BIO appreciates this opportunity to share our views about the substantial policy improvements made in the proposed rule and the critical issues that continue to concern us in the OPPS. We sincerely hope the APC Advisory 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.