August 2015 Vol 8, Special Issue: Payers' Perspectives in Oncology - Payment Reform
Wayne Kuznar

An alternative to the “buy-and-bill” system for outpatient chemotherapy is inevitable as average sales price (ASP)-based chemotherapy payment is being challenged by payers and by policymakers, said a panel of speakers at ASCO 2015 who critically assessed this method of reimbursement for chemotherapy drugs.
Chemotherapy drug reimbursement is the largest source of revenue for oncology practices, but as the prices of cancer drugs have soared, these purchases jeopardize the ability of many practices to operate and provide patient care.

Alternative payment schedules include management fees, invoice-based pricing, revision of competitive acquisition programs, government-negotiated pricing, shifting Medicare Part B drugs to Part D, and drug bundling.

ASP-based chemotherapy drug reimbursement permeates Medicare and private payers, but “political budgetary pressures represent a strong underlying force that can threaten ASP plus ‘x’ at any time,” said Blase N. Polite, MD, MPP, Associate Professor of Medicine, and Chief of Quality Hematology/Oncology, University of Chicago School of Medicine.

“If we can come to a consensus on how to spend the money and what to replace ASP with, we would be in a strong bargaining position as a group,” Dr Polite said. “The problem may be that ASP plus ‘x’ is the worst possible payment system, except for all the alternatives.”

Challenges to ASP plus 6%

Threats to the ASP plus 6% model come from lawmakers looking to cut costs, as well as from small and medium-sized oncology practices, which face an increasing number of “underwater” drugs, and see “buy and bill” as a liability rather than a secure revenue stream. In fact, ASP plus 6% has already been reduced to ASP plus 4.3% with the budget sequester of 2012, which was intended to be a stopgap measure, but was extended to 2024.

The challenge is in maintaining the current efficient drug distribution system if ASP plus 6% goes away. “This is where the difficulty comes,” said Dr Polite.

In March 2015, the Medicare Payment Advisory Commission (Med­PAC) expressed concern about the 6% add-on to ASP as a potential incentive for the use of higher-priced drugs. As a result, MedPAC has discussed 2 policy options to replace ASP plus 6% with ASP plus 0% and adding a $24 per-drug-administered daily fee, or ASP plus 2.5% and adding a $14 per-drug-administered daily fee.

Rena M. Conti, PhD, Assistant Professor, Department of Public Health Sciences (Health Services Research), University of Chicago, noted that buy and bill creates incentives for practices to obtain drugs at prices below the average, and then generate revenue off reimbursement set on the average, so they search for the lowest acquisition price. The lowest prices are available through group purchasing discounts that are offered to hospitals eligible for the 340B Drug Pricing Program, thus insulating them from many of the financial pressures that independent practices face.

“We believe that there’s a dynamic component that…practices are actually going to seek to consolidate over time to get access to these discounts, and we believe this is destabilizing the market,” Dr Conti said. “There may be some perversion of the [340B] program, notably that this is a discount program geared toward serving the most indigent population that is not Medicaid-eligible but that is likely uninsured.”

Other variations have cropped up as a result of the current reimbursement method. One is the shift away from drugs after patent expiration toward better reimbursed branded drugs. Another suggestion is a reduction in the number of generic drug manufacturers, producing a more fragile supply of chemotherapy drugs, as drug manufacturers look to take advantage of scope and scale economies.

In addition, pricing incentives are perverse with ASP, Dr Conti said. The launch prices of drugs have increased over time, even when they are adjusted for the benefits that the drugs provide.

Changes to the drug reimbursement system must not adversely impact oncologists’ timely access to drugs for their patients, said Jeffery C. Ward, MD, an oncologist at the Swedish Cancer Institute, Edmonds, WA.

Alternative Methods

Dr Ward offered alternative payment methods, but many suffer the same failings as ASP, he said. He discussed the following 2 possibilities.

The first option Dr Ward offered is invoicing and a management fee, independent of drug selection. However, “invoice reimbursement offers no incentive to the provider to seek the best price available,” said Dr Ward.

The second option is a resurrection, with revision, of the competitive acquisition program, through which practices ordered oncolytics from a vendor that billed Medicare for the drugs and collected copays. “It would require upfront investment to provide vendors with adequate reimbursement for administrative burdens and/or mitigation of some of the risk,” Dr Ward said.

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Last modified: August 19, 2015
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