Health Law Daily Self-administered drugs reimbursement loophole costs Medicare hundreds of millions
Thursday, July 9, 2020

Self-administered drugs reimbursement loophole costs Medicare hundreds of millions

By Wendy Biddle, J.D.

Inability of CMS to identify if a drug was administered in a physician’s office or at home causes inflation of reimbursement price.

Closing a loophole for payments for two self-administered drugs would have saved Medicare half a billion dollars, a new report by the HHS OIG finds. That loophole, which the OIG identified in 2017, concerns the drugs Orencia and Cimzia, which code descriptions specifically excluded self-administration but from the analysis, their payments amounts had been set using only the physician-administered versions. Part B spending for those two drugs could have been reduced by $497 million from 2017 through 2018 (OIG Report, OEI-BL-20-00100).

Self-administered drugs are typically not covered under Medicare Part B. However, in a November 2017 report, the OIG found that CMS and a federal court interpreted a relevant statute to require the inclusion of versions of drugs not generally covered under Part B in limited circumstances when setting Medicare payment amounts. As a result, CMS included noncovered, self-administered versions of Orencia and Cimzia when determining payments for those two drugs. The inclusion of these noncovered versions caused Medicare and its beneficiaries to pay an extra $366 million from 2014 through 2016. The OIG recommended that CMS seek a legislative change that would provide the agency with flexibility to determine when noncovered versions of a drug should be included in the calculation of the Part B payment amount. CMS did not agree with the recommendation and, to date, no action has been taken to close the payment loophole, costing Medicare another $497 million from 2017 through 2018.

Orencia is a prescription drug used to treat arthritis. Prior to 2011, Orencia was only prescribed as a single, infused (physician-administered) drug. But in 2011, a new higher-priced version primarily for self-administration at home was approved by the FDA. When Orencia’s manufacturer began reporting pricing data for the new version in 2014, CMS blended the prices for both the physician and self-administered versions when determining the payment amounts. If CMS had excluded the self-administered version of Orencia, Medicare and beneficiary spending would have been reduced by $394 million or 26 percent on the drug between 2017 and 2018.

Due to this payment loophole, physicians who administered Orencia to Medicare beneficiaries in their offices received an average of 40 percent more than they should have. Similarly, physicians who administered Cimzia, a drug used to treat many inflammation diseases, received an average of 23 percent above their cost for the drug. Previously, the OIG has shown that financial incentives may affect prescribing behavior, and therefore the OIG expressed concern.

OIG’s recommendation. OIG again recommends that CMS seek a legislative change requiring that noncovered, self-administered versions of drugs be excluded in the calculation of Part B payment amounts. Given the complexities inherent in identifying such versions, the OIG states it is critical that any legislation address decisions points in the process, particularly the sources and evidence that CMS may use.

CMS Response. Similar to the previous report, CMS again did not agree with the OIG’s recommendation, stating that it is concerned with the complexity of identifying non-covered versions included in Part B calculations. CMS also stated that because the FDA does not identify National Drug Codes (NDC) on the basis of where it is likely to be administered, the manufacturer’s label would not likely provide the requisite level of detail to make a determination regarding self-administration.

MainStory: TopStory OIGReports AgencyNews GeneralNews CMSNews PartBNews PrescriptionDrugNews ProviderNews

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