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HHS Inspector General Recommends Updating ESRD Drugs Base Rate

March 27, 2014

The Centers for Medicare & Medicaid Services should revise the base rate and payment bundling for end-stage renal disease drugs to reflect changes in drug acquisition costs, taking into account payment disparities between independent and hospital-based dialysis services, a report by HHS’ Office of the Inspector General concludes.

In 2011, CMS changed the payment method for ESRD treatments to combine services and drugs in one per-treatment rate. The system was based on treatment counts from 2007 claims data that CMS used to estimate 2011 average payments per treatment.

The objective of the new bundling was to reduce incentives and increase profits by overutilizing separately billable ESRD drugs — in particular, erythropoietin-stimulating agents — which Medicare reimbursed at 106 percent of the manufacturer-reported average sales price.

Now OIG says Medicare’s producer price index for prescription drugs was not an accurate means of calculating price changes over time. The government watchdog notes, for instance, that during the first quarter of 2009, Medicare paid $113 million too little to independent dialysis facilities for epoetin alfa.

For hospital-based dialysis facilities, on the other hand, coverage was lower than aggregate acquisition costs in the first quarter of 2012, meaning they couldn’t purchase the entire bundle for less than the reimbursement rate. As a result, they would be hurt by any reductions to the base rate, the report says.

View the report at www.fdanews.com/ext/resources/files/03/03-27-14-ESRDReport.pdf. — Lena Freund

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