12:00 AM
Aug 18, 2003
 |  BioCentury  |  Regulation

CMS giveth, taketh away

While the government's new Medicare reimbursement plan makes some concessions to industry's unhappiness with last year's maiden rule, the 2004 Outpatient Prospective Payment System draft rule still provides no absolute remedy to objections over coverage of orphan drugs, the concept of "functional equivalence" and concerns about patient access.
In a win-loss situation for orphan drugs, the Centers for Medicare & Medicaid Services is set to cover additional orphan treatments. But it now proposes to pay for them under an OPPS payment structure that industry and patient groups say makes it impossible for hospitals to recoup their costs.
At the same time, CMS has acknowledged the difficulty of comparing the effectiveness of drugs and biologics. But it has offered no immediate remedy to industry's frustrations with the use of functional equivalence. Until it is convinced otherwise, the agency proposes to continue reimbursing Amgen Inc.'s Aranesp darbepoetin alfa at the same rate as Johnson & Johnson's Procrit eopoetin alpha, despite legal and legislative efforts to reverse the policy.
The OPPS rule, which sets reimbursement prices and policies for drugs used by Medicare beneficiaries in the outpatient hospital setting, has been attacked by industry and patient groups for limiting patient access to therapies by creating disincentives for hospitals to administer expensive breakthrough treatments.
With the 2004 draft rule still perceived as flawed, industry players are looking to legislative solutions in the fall. Medicare bills in both the House and Senate have language aimed to fix OPPS pricing. And a stand-alone bill introduced in the House exclusively aims to broaden CMS coverage of orphan drugs.
Orphan drugs

After implementation of the original OPPS rule in January, the Biotechnology Industry Organization and patient advocacy groups like the National Organization for Rare Diseases (NORD) protested CMS's decision to ignore FDA's definition of an orphan drug.

Instead, CMS instituted its own stricter version that identified only four orphan drugs out of about 90 that have received FDA approval. Those four drugs were reimbursed outside of the OPPS pricing scheme at "reasonable cost," a former version of CMS's cost-charge ratio methodology that was used to set reimbursement prices.

While reasonable cost reimbursement did not uniformly cover all acquisition costs, it has been viewed by industry to be more inclusive than the methodology adopted in the 2003 rule. Indeed, under the current rule, the remaining 85 or so FDA-defined orphan drugs were subject to reimbursement...

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