Average Sales Price WSMOS SPRING MEETING 2016 Jeffery C. Ward, - - PowerPoint PPT Presentation

The History of

Average Sales Price

Jeffery C. Ward, M.D.

WSMOS SPRING MEETING 2016

Oncolytics: The Oncologists Bread and Butter

• The majority of anti-cancer pharmaceuticals are still

delivered in hospitals and clinics.

• Providers buy and bill the drugs that they then

prescribe and administer.

• Drugs are the largest single item expenditure and

largest source of gross revenue in the oncology clinic.

• Until recently, the margin on drugs was the financial

driver of oncology infusion suites and oncologist incomes.

Runaway Cost: Whose Fault?

Before MMA of 2003 brought us ASP:

• There was AWP (not really Average Wholesale Price).
• By 2003 steady decreases in Medicare drug payments

had resulted in AWP-15%.

• The mechanics of AWP allowed for compensatory

margin increases that were commonly 30-50% of the purchase price.

• Margins of up to 200-300% were seen in isolated, but

well publicized circumstances.

The Implementation of ASP+6

• ASP really is the drug companies average sales price.
• ASP never was the providers average purchase price due

to prompt pay discounts and the inexorable rise inflation

• f drug prices.
• Initial impact of MMA was buffered by Medicare demo

projects, temporary increases in infusion fees and relatively lucrative commercial contracts.

• As Demo projects stopped, infusion fee increases sunset,

and commerical payers followed suit, the risks inherent in buy and bill increased.

After Twelve Years of ASP

• Underwater drugs are commonplace.
• Oral Drugs with no margin replace IV therapies further eroding

the margins that have helped pay for un-reimbursed services.

• Risk shifting by sending underinsured and uninsured patients

to hospitals is routine.

• Brown bagging and white bagging of expensive drugs is

business as usual for small practices.

• Larger practices with significant community presence and

hospitals with facility fees and 340B discounts garner contract leverage, diversity of income stream, and pharmaceutical buying power survive and may thrive.

• Small practices are a dying breed through closures, mergers,

and acquisition.

One part of broader disruption in medicine…

Sequestration

2011

Invoice and a Management Fee

• Pay physicians invoice pricing for drugs.
• Convert current 6% of ASP to a management

fee that is independent of the drug used.

• CPC and Payment Reform Workgroup spent
• ver a year trying to convince ourselves that this
• n the surface simple solution would work.

Invoice and a Management Fee: Why Invoice?

• AWP: Manufacturers Suggested Retail

Price, no longer published, no relationship to market pricing.

• ASP: Created by MMA, Reported actual

price manufacturer is paid to include rebates/discounts, 6 month lag, only for Part B drugs, not the price paid by providers.

• WAC: Actual price distributors pay to

manufacturers exclusive of rebates/ discounts, subject to manipulation through large rebates, close to provider cost for brand name drugs, substantially

• verestimates provider cost for generics.
• AMP: Price reported to by manufacturers

based on sales to retail pharmacies for purpose of calculating statutory Medicaid

• rebates. Many Part B drugs cannot be

calculated this way and defaults to ASP.

• WAMP: Defines drug price through market
• surveillance. Collection has been sporadic,

last done by OIG focusing only on Part B. Currently not robust enough to be practical, but could be credible to CMS.

• RSP/NADAC: Developed in 2013 to provide

CMS and states an alternative to AWP for pharmacy reimbursement, based on survey

• f invoice prices to pharmacies. Has been

difficult to collect rebate information and still a work in progress with significant logistical hurdles. Would not be applicable to providers or many Part B drugs.

• AAC: NADAC like survey proposed in ASCO

Payment Reform Workgroup discussions. Would require broad survey of providers, exclude 340B and government contracts, could be tiered to practice size and type of

• institution. Would face same logistical

hurdles as NADAC and lag effect of ASP

Invoice and a Management Fee: The Problems

• Invoice reimbursement offers no shopping incentive

currently provided by the provider seeking the best price to keep the buy low.

• With no six month lag = no disincentive to price increases

by manufacturers who currently are, in theory, inhibited by the specter of an underwater drug.

• It keeps the management fee tied to Part B drugs unless the

management fee is uncoupled from the invoice.

• High cost to billing and drug distribution infrastructure.

Remember the Competitive Acquisition Program?

• In addition to ASP, MMA created CAP.
• Designed to produce significant savings for

Medicare and beneficiaries by reducing Part B drug costs.

• Multiple vendors competitively bid for drug

provision contracts, similar to Medicare Part D.

• Physicians would order oncolytics from the

vendor

• The vendor would bill Medicare and collect

copays.

CAP: Why didn’t it work

• Congress built it on a shoestring budget.
• Practices gave up drug margins and got nothing in return: At

its peak only 1400 physicians and very few oncologists participated.

• Predicated on competing vendors: Only BioScrip signed a

contract, and withdrew after three years citing “unacceptable short and long term profit risk.”

• Cost more than ASP+6: In part because CAP vendor’s

reimbursement was inflation adjusted, avoiding 6 month lag impact.

• CMS shut it down after 42 months.

CAP: Could It Work?

• The ethos and ecology of oncology practice is changing, such

that CAP may be perceived quite differently than a decade ago.

• It would have to be accompanied by a management fee to

providers to offset dollars lost from drug margins.

• It will require upfront investment to provide vendors with

adequate reimbursement for administrative burdens and mitigation of some of the risk.

• This upfront investment cannot come out of current oncology

reimbursement and keep practices solvent.

• Predicated on having faith that the investment will result in

lower prices and ultimate savings.

42

RCAP: Could it work?

• It could have formidable foes: Pharma, Distributors,

Buy and Bill enthusiasts…

• It would have political history and baggage to
• vercome, and would require new legislation.
• It would require considerable upfront investment in the

belief that 1) Physician prescribing behavior is sufficiently driven by drug margins, and 2) Vendors would be able to extract sufficient savings from the pharmaceutical industry.

Lessons Learned from the UHC Demo

UnitedHealth Episode Payment Pilot (19 cancer/stage/biology specific episodes)* – Converted drug margin to Episode Payment to be used as practice saw fit to improve quality and value

• f care

– All drugs paid at average sales price rate (proxy for acquisition costs) – Hospital E&M Bundled based on historical use – All other services paid FFS – Annual review of detailed cost and quality data (continuous improvement) Results: – Good News: Total spending reduced by $33.3 million – ?Bad News: Chemotherapy drug costs increased by $13.5 million Half Full or Half Empty – Half Full: Questions the argument that we are incentivized to prescribe expensive drugs because of the margin we obtain on them – Half Full: With additional resources and focus on continuous quality improvement we can decrease

• ther drivers of costs

– Half Empty: Spiraling drug spending not restrained by this approach

Consolidated Payments for Oncology Care

Payment Reform to Support Patient-Centered Care for Cancer

ASCO’s ¡Clinical ¡Prac/ce ¡Commi3ee ¡Payment ¡ Reform ¡Work ¡Group ¡ ¡ ¡ (JOP Jul 1, 2014:254-258; published

• nline
• n April 15, 2014) ¡

What About Drugs?

• Reforming cancer care reimbursement is

not complete as long as “Buy n Bill” remains

• Reform will need to account for impact on

infrastructure that brings drugs to practices

• Delay in addressing ASP+6% is an

acknowledgement of reality, not hypocrisy

What About Drugs?

To the Editor: We take a decidedly contrary position to that expressed by Polite et al in “Payment for Oncolytics in the United States: A History of Buy and Bill and Proposals for Reform.” Medicare drug reimbursement based on average sales price (ASP) is not under attack in the Congress; actually, the facts prove the exact opposite…. In actuality, sequestration was a failsafe device that Congress created to motivate a “super committee” of select members to reduce federal spending…. Many members of Congress believe that the Centers for Medicare & Medicaid Services (CMS) should exempt Medicare Part B drug reimbursement from the sequester cut…. The contention held by some that ASP-based reimbursement incentivizes use of higher priced drugs is unproven… The real incentive to use more expensive drugs exists in hospitals where 340B drug discounts provide up to a significant 100% margin on cancer drugs… Payment reform in oncology should first be directed at increased Medicare and private pay spending for drugs and services in the hospital setting.

CMS Chief Eyes Oncology Payment System… Comments from Jonathan Blum, CMS Medicare Director December 10, 2012 Does the incentive structure that was created in 2003 best serve these competing goals of beneficiary access and value… Some have suggested that the ASP plus 6 percent drives physician behaviors in ways that might not serve these two goals…I'm not sure what the future holds and I'm not sure what the answer is, but it's

• ne that we're watching carefully.

It's one that we're mindful of and it's striking how much we're spending for a handful of drugs

CMS Chief Eyes Oncology Payment System…

Comments from Jonathan Blum, CMS Medicare Director December 10, 2012 CMS is considering new pay systems for

• ncology services, including the way that

expensive cancer drugs are reimbursed under Part B. Expensive injectable cancer drugs are one

• f the most difficult issues in addressing

Medicare spending in Part B….about 10 drugs account for a disproportionately large portion of Part B spending. But the payment system needs to be changed for all oncology services, not just drugs, and the replacement likely will be "global" in nature. There is a growing sense in the agency, particularly in the innovation center, that

Recent Legislative Activity on ASP

• March 2013: The Sequester Reduced ASP+6 to ASP+4.3
• April 2013: HR 1416 which set out to reverse the sequester cuts on ASP

received 124 cosponsors but never made it out of any committee

• December 2013: Murray-Ryan Budget Agreement extended the cut for 2

additional years to 2023

• December 2014: “Cromnibus” bill extended the cuts to 2024
• President’s budget in 2014 proposed to reduce ASP+4.3 to ASP+3-Savings
• f $20 billion over 10 years
• Medicare Access and CHIP Reauthorization Act (MACRA)/”Doc Fix” did not

cut ASP but also did not restore it to ASP+6%.

• Final Political Analysis: Congress and the President are not losing sleep
• ver ASP+4.3 but we thought they recognized that further cuts would have

to happen in a discussion of much broader payment reform: ASP, 340B, Site Neutral payments, Alternative Payment Models

The debt hasn’t gone away….even if the “Super Committee” did….

Understanding the Potential Sources of Threat, Opportunities and Challenges

• Threat: Congress-They Need the Money
• Threat: Executive Branch-Need the Money and are concerned by the

potential perverse incentives

• Threat: Medpac, charged with advising the Congress on Medicare

Issues-Policy concerns with perverse incentives

• Threat: Oncology Practices-small and medium size practices facing

increasing number of underwater drugs and see “buy and bill” as a liability rather than a secure revenue stream

• Opportunity-Convert current drug margins into payments for

uncompensated services before they disappear-UnitedHealth Episode Payment Pilot

• Challenge-If ASP+6 goes away, can the current efficient drug

distribution system be maintained?

Federal Budget 101

• Federal Budget Divided into Two Pots
• Discretionary Spending (defense and non-defense): 34% of budget
• Mandatory Spending (Taxes, Medicare, Medicaid, Social Security): 60% of budget
• Discretionary Spending Has “caps” and if caps are exceeded then automatic

cuts go into place

• Mandatory Spending controlled by Pay-As-You Go (PAYGO) legislation
• Any legislative changes to taxes or mandatory spending that increase multi-year deficits

must be "offset" or paid for by other changes to taxes or mandatory spending that reduce deficits by an equivalent amount

• Violation of PAYGO triggers across-the-board cuts ("sequestration") in selected

mandatory programs to restore the balance between budget costs and savings.

Source: Center on Budget and Policy Priorities

The Concern of Medicare Part B Spending

• Spending on Medicare Part B is nearly $300 billion and will exceed Part

A by 2019

• Spending on drugs represents over $20 billion of this and most are
• ncology related drugs
• Choices to reduce spending in Part B are constrained

– Medicare Beneficiaries: reduced benefits, reduced access, increased premiums, increased cost sharing-Politically difficult – Providers: Lower fee schedules (SGR reform just passed) or reduction in coverage for services like drugs

• Congress and Executive love cuts with easy and predictable “scoreable”

savings-anything with a formula like ASP+X or Hospital Market Basket +x

Sources: CBO and Medpac

Understanding the Politics of Medicare and the Federal Budget

Answer of bank robber Willie Sutton to the question of why he robbed banks:

“Because that’s where the money is”

Medicare Payment Advisory Committee: March 2015

Medicare Payment Advisory Committee: March 2015

To the Editor: First, let us be clear, our JOP article was written as an invitation to American Society of Clinical Oncology (ASCO), Community Oncology Alliance (COA), and other interested parties to consider viable replacement options to buy-and-bill as part of an overall outpatient

• ncology payment reform strategy.

We respectfully disagree with the point by Thompson et al that ASP-based reimbursement is not under political threat. They note sequestration's 2% cut to ASP, resulting in a reimbursement change from ASP +6% to ASP +4.3%, was unintended and not supported by many members of Congress. While this may be true, Congress has had two clear opportunities to fix this problem… In neither of these two bills was ASP restored to +6% despite the fact that they undid much of the sequester's other effects. Policymakers often articulate the perception that ASP-reimbursement incentivizes the overutilization of expensive, branded chemotherapies. This perception persists despite arguments, largely among members of the

• ncology community, regarding the quality of the supporting evidence.

We also agree with the authors that 340B reform should be undertaken, but disagree that the 340B drug discount program for qualified medical providers is the root cause of all ills in oncology. Although this is a frequent COA talking point, the argument is simply not credible.

Why Acting Now May be Prudent

• Offering alternatives now may be a chance to negotiate

retention of 6%, transferring resources to a “management fee”—can still show savings

• ASP+6 could be reduced by 2% or more as early as

next year

• Waiting might mean lower ASP, weaker negotiating

position, fewer resources to the system

• Every 1% reduction = ~$155 million/year

Why Some Think Not

• This is a game of “chicken” and ASCO is blinking
• Many practices benefitting from ASP now and some

can survive even if the percent is lowered

• Some near retirement and want to ride this out
• Some are convinced ASP is too hot a potato,

Congress won’t see enough benefit to take it on

• We should not underestimate the opposition that will

come from industry, USON, GPOs, COA and others

However, even if Congress doesn’t touch ASP, the system is on its way to one in which fee for service is

• disappearing. We are at risk.

Assessing Alternative Models

Chemotherapy management fee Bundled payments PCMH

New Ideas

Stand By

Stephen ¡S. ¡Grubbs, ¡MD ¡ Vice ¡President, ¡Clinical ¡Affairs, ¡ASCO ¡

• Dr. ¡Grubbs ¡joined ¡the ¡Clinical ¡Affairs ¡Department ¡of ¡The ¡American ¡Society ¡of ¡Clinical ¡Oncology ¡

(ASC0) ¡in ¡July ¡2015 ¡after ¡31 ¡years ¡as ¡a ¡practicing ¡medical ¡oncologist ¡in ¡Newark, ¡ Delaware ¡at ¡the ¡ Helen ¡F. ¡Graham ¡Cancer ¡Center. ¡He ¡served ¡as ¡managing ¡partner ¡of ¡his ¡ independent ¡medical ¡ practice, ¡Medical ¡Oncology ¡Hematology ¡Consultants, ¡PA. ¡

¡

He ¡is ¡a ¡chemical ¡engineering ¡graduate ¡of ¡Purdue ¡University ¡and ¡graduate ¡of ¡the ¡Thomas ¡ Jefferson ¡University ¡Medical ¡School. ¡Medical ¡postgraduate ¡training ¡in ¡Internal ¡Medicine ¡was ¡ completed ¡at ¡the ¡Medical ¡Center ¡of ¡Delaware ¡and ¡Hematology ¡and ¡Oncology ¡at ¡the ¡Dartmouth ¡ Hitchcock ¡Medical ¡Center. ¡He ¡served ¡as ¡the ¡Principal ¡Investigator ¡of ¡the ¡Delaware ¡Christiana ¡ Care ¡NCORP ¡and ¡Board ¡ member ¡of ¡the ¡NCI ¡sponsored ¡Alliance ¡cooperative ¡research ¡group. ¡He ¡ remains ¡a ¡member ¡of ¡ the ¡Alliance ¡Foundation ¡Board ¡and ¡executive ¡committee. ¡He ¡is ¡a ¡member ¡

• f ¡the ¡state ¡of ¡ Delaware ¡Cancer ¡Consortium ¡Council ¡and ¡is ¡chair ¡of ¡the ¡Early ¡Detection ¡and ¡

Prevention ¡ Committee. ¡He ¡is ¡a ¡past ¡member ¡of ¡the ¡ASCO ¡Board ¡of ¡Directors ¡as ¡well ¡as ¡the ¡ Ethics, ¡Finance, ¡ Research, ¡and ¡Government ¡Affairs ¡Committees. ¡

¡

• Dr. ¡Grubbs ¡is ¡a ¡Clinical ¡Assistant ¡Professor ¡of ¡Medicine ¡of ¡the ¡Thomas ¡Jefferson ¡Medical ¡

School ¡faculty. ¡ He ¡has ¡served ¡as ¡a ¡member ¡of ¡the ¡National ¡Cancer ¡Institute ¡Clinical ¡Trials ¡ Advisory ¡ Committee, ¡co-­‑chair ¡of ¡the ¡Clinical ¡Trials ¡Subcommittee ¡of ¡the ¡NCI ¡Community ¡ Cancer ¡Centers ¡ Program ¡(NCCCP), ¡and ¡the ¡IOM ¡Committee ¡on ¡Cancer ¡Clinical ¡Trials ¡and ¡the ¡ NCI ¡Cooperative ¡ Group ¡Program. ¡ ¡ He ¡has ¡been ¡an ¡active ¡community ¡based ¡clinical ¡trial ¡investigator ¡with ¡the ¡NCI ¡sponsored ¡ CALGB, ¡ECOG, ¡NSABP, ¡and ¡Alliance ¡Cooperative ¡Groups ¡since ¡1984 ¡and ¡is ¡the ¡recipient ¡of ¡the ¡ 2007 ¡Association ¡of ¡Community ¡Cancer ¡Centers ¡David ¡King ¡Community ¡Clinical ¡Scientist ¡

• Award. ¡

¡ ¡

2016 CMS Part B Drug Demonstration Model

Washington State Medical Society April 22, 2016 Stephen S. Grubbs, MD Vice President ASCO Clinical Affairs

CMS Proposed Rule 3/8/2016

• Proposed rule under a waiver authority of

CMMI to model Part B drug reimbursement

• Comments due 5/9/2016
• Payment Model Phase I

– Begins later this year – “no later than 60 days” post final rule

• Payment Model Phase II

– Begins no earlier than 1/2017 – Test various Value Based Purchasing (VBP)

• Model for 5 years

Payment Model Phase I

• Measure impact of reimbursing change from ASP 106% to

ASP 102.5% + flat Add On – Add on $16.80 and can be changed annually by CPI for Medical Care – Add On calculated from difference in drug reimbursements divided by “drug days” – System (not oncology) wise “revenue neutral” – Sequestration to be applied (ASP + 0.86% and $16.53 add on)

• Groups to be assigned by Primary Care Service Area

(PCSA)

Payment Model Phase II

• Tests various Value Based Purchasing

(VBP) approaches

• Mandatory Participation

– Control Group (current system) – Modified ASP Group – VBP Group – Both Modified ASP and VBP Group

• Assigned by Primary Care Service Area
• Begins no sooner than 1/2017

CMS Goals

• Impact prescribing behavior to control Part B

drug spending growth

• “Modest” shift of reimbursement from

hospital and specialists with high drug costs to low drug cost specialists

• Consider other ways to control spending

– Bundled Payments – Episodes of Care – Modified Competitive Acquisition Program (CAP)

ASCO Response

• Issued statement on day of announcement

in strong opposition and joined coalition letters of opposition.

• Engaged media
• Congress

– State Societies template letter – ACT Network template letter for members – Active with Congressional committees of jurisdiction with legislative solution

ASCO Response

• Analysis of practice impact

– Clinical Affairs practice modelling – Outside analyst assessments

• Engaging patient advocacy group support
• Meeting with CMS leadership
• Formal response to CMS in development

The Tool

• Perform this analysis for the Medicare portion of your business for Q4

2015.

• Step 1. Enter the number of units of each drug billed to Medicare

patients during Q4 2015 on the tab labeled "Step 1 - ASP." Please include data for the four J9999/NOC drugs included on the spreadsheet if possible. Add additional NOC drugs in the space provided if data is available.

• Step 2. To calculate "$16.53 per drug per day" we are using the drug

administration codes as a surrogate for "per drug per day." We have excluded the drug admin codes used for hydration or for multiple hours

• f the same drug. Enter the number of units billed in Q4 2015 for each
• f the drug administration codes listed on the tab labeled "Step 2 -

$16.53 per drug per day.“

• Step 3. Enter the number of FTE hematology/oncology physicians in

the practice in C11. The rest of the data on this tab will populate automatically.

Practice Reporting

• Received data from 30 practices representing 427

FTE HemOnc physicians in 21 states

• Range of practice size from 1 to 60+; average 14.2
• Included 4 new drugs (NOC/J9999) introduced late

in 2015 – ramucirumab (Cyramza) – pembrolizumab (Keytruda) – nivolumab (Opdivo) – daratumumab (Darzalex)

• 18 practices reported on NOC drugs, utilization

varied dramatically

Loss per practice without NOC drugs

30 practices reporting

$(450,000.00) $(400,000.00) $(350,000.00) $(300,000.00) $(250,000.00) $(200,000.00) $(150,000.00) $(100,000.00) $(50,000.00) $- Average Median Actual Adjusted (removed outliers)

Range (for average)

Actual: $286,687 - $(2,016,440) Adjusted: $36,038 - $(1,136,201)

Loss per practice including NOC drugs 18 practices reporting

$(900,000.00) $(800,000.00) $(700,000.00) $(600,000.00) $(500,000.00) $(400,000.00) $(300,000.00) $(200,000.00) $(100,000.00) $- Average Median

Range (for average)

Actual: $32,846 – $(3,399,537)

Underwater Drugs

• Underwater = Practice acquisition cost >

reimbursement amount from Medicare

• Questions: How many drugs are

underwater today at ASP + 4.3%? How many drugs would be underwater at ASP + 0.86%?

• 7 practices have provided data to date
• Average # of drugs reported: 98 (range 59 –

129)

% of drugs underwater ASP + 4.3% vs. ASP + 0.86%

0% 10% 20% 30% 40% 50% 60% 1 2 3 4 5 6 7 % of drugs underwater at 4.3% % of drugs underwater at 0.86%

Average % increase = 14%

ASCO Proposed Arguments Phase I

• Patient care will be adversely impacted

– Disruption of patient services

• CMS proposal is not budget-neutral for oncology

– Diversion to hospitals will increase costs to system – Accelerates practice consolidation – Will eliminate funding necessary for practices to prepare for MACRA and OCM

• Current methodology is problematic

– CMS does not adequately reimburse for other services provided – Model exacerbates and places services at risk

• Risk of incentivizing physicians to not prescribe best

treatment and no patient protection

ASCO Proposed Arguments Phase I

• Hypothesis of changing prescription behavior is

flawed – Few opportunities to substitute less expensive drugs in oncology – More expensive drugs still provide greater margin than inexpensive drugs – Manufacturer drug pricing of new drugs will not be affected

• Medicare recipients will be cared for but infusion

services may not be provided by the practice

ASCO Supports Value Based Oncology Care

• PCOP and OCM offer more appropriate ways to

reimburse oncologists

– Drugs should not be singled out of a more comprehnsive payment reform

• Pathways, QOPI, CancerLinQ and ASCOs value

measures are better tools to manage care and measure quality

• Tools like ASCO’s Value Framework and

Choosing Wisely could serve as evidence-based tools used to support shared decision-making