29 July 2004

Medicare Plan Would Cut Cancer Drug Coverage

Federal health officials plan to announce a proposal today that could save taxpayers at least $16 billion over the next decade by slashing the amounts Medicare pays for more than two dozen cancer and lung drugs, a move almost certain to raise an outcry among cancer specialists and some drug companies.

The health care industry has been bracing for rollbacks. But until today's report, few outside the Medicare agency have known the extent of the price cuts, which for some drugs would be as much as 89 percent below current levels. Besides saving the government money, the changes would directly benefit Medicare recipients, who pay 20 percent of the prices their doctors charge for the drugs.

Some cancer doctors, who along with a few other types of health care providers customarily pocket the difference between what Medicare pays for certain medications and what the drug makers actually charge the doctors, have warned that they will stop caring for Medicare patients if the price cuts become permanent. Companies that provide care to patients suffering from emphysema have also said that they may end their services; some of them have already stopped advertising for new patients.

Federal health officials who described the price proposals are estimating that the changes would reduce the typical cancer doctor's Medicare revenue by 8 percent next year.

"We believe that there is potential that the changes may have a really dramatically negative impact on our ability to deliver care in ways patients are accustomed to," said Dr. David Johnson, president of the American Society of Clinical Oncology.

The changes result from last year's Medicare drug law. The legislation's primary purpose was to set up a program that in 2006 will begin paying for prescription drugs dispensed by pharmacies. But the law also overhauled the way Medicare pays for certain drugs it already covers - mainly cancer and lung medications that are not available through pharmacies but are administered through intravenous tubes or mist machines.

Almost half of Medicare's drug budget of $10.5 billion went for cancer drugs, at rates that are based on supposed wholesale price lists provided by the drug makers. But the prices paid by doctors are typically much lower. Last year, 70 percent of oncologists' income came from drug mark-ups, according to Medicare data.

Medicare's system for paying for the drugs has long been criticized by watchdog agencies like the Government Accountability Office, the auditing arm of Congress.

To stop the government from paying big mark-ups, last year's law instructed Medicare to survey actual prices for drugs and pay accordingly. In the proposal to be released today, which is based on that continuing survey, Medicare plans to preview the prices it intends to pay for the 30 drugs on which it currently spends the most annually. In some cases, the government will propose slashing the prices by 89 percent, according to the federal health officials, who described the proposal on condition of anonymity.

To make up for part of the income that would be lost by doctors and other care providers, Medicare will increase its service payments to them while also paying a 6 percent surcharge above the new price of the drug. Care providers and drug makers will have the opportunity to file comments. Medicare officials plan to use that information and additional price surveys to determine a final price list that will be released in November and go into effect in January. Through the end of the current year, Medicare will continue to reimburse providers for the cost of drugs using the wholesale prices reported by drug makers.

Among the biggest proposed price cuts to be announced today are the 89 percent reductions for two drugs commonly used to help open lung passages for patients with emphysema and other chronic obstructive pulmonary disorders - albuterol sulfate and ipratropium bromide.

The prices paid by Medicare for both lung drugs will be reduced, health officials say, to 4 cents from 39 cents a unit for albuterol sulfate, and to 28 cents from $2.82 a unit for ipratropium bromide. The reductions for these two drugs alone will save the agency more than $1 billion each year, although officials acknowledge that some of the savings may be returned to providers in the form of increased service fees.

Most savings in oncology drug reimbursements would involve drugs that have cheaper, generic competitors. The price for each unit of Taxol from Bristol-Myers Squibb, for instance, would drop 81 percent, to $24.38, from this year's price of $138.28, because there are generic competitors. Depending on the course of treatment, a patient's Taxol therapy under current Medicare pricing can run into the thousands of dollars.

The Medicare agency's announcement has been anxiously awaited for months and is certain to ignite a fierce round of lobbying on Capitol Hill. Cancer doctors are expected to object the loudest because they have political clout and stand to lose substantial sums. More than 80 percent of cancer patients now receive their medications in doctors' offices instead of in hospitals, avoiding the added cost and stress of hospitalization.

Fearing the changes, some cancer doctors have sent letters to patients warning that they may have to check themselves into hospitals to receive care or they may soon be given older, more toxic cancer drugs. In some cases small offices with just a few doctors have consolidated with larger practices in hopes of winning bigger discounts from drug makers.

Other specialists will also be affected. Urologists can expect their revenue from Medicare to drop 13 percent, mostly because the price paid for Lupron, a drug for prostate cancer made by TAP Pharmaceuticals, will fall 50 percent, to $235.27, down from $500.58. Payments to obstetrician-gynecologists and rheumatologists will also be sharply reduced.

The lung-therapy payment cuts will have the most direct impact on the hundreds of companies that provide elderly patients with lung medication and the inhalation machines that turn lung medicines into mist. Those companies include Apria Healthcare, Lincare and PolyMedica.

Federal health officials are hoping that many of these patients will start using inhalers, which they say are cheaper and just as effective for most patients. But some Medicare critics have said the cutbacks could translate to lower-quality care for lung patients.

Representatives for Lincare refused to comment. Apria Healthcare executives could not be reached. A spokeswoman for PolyMedica said the price cuts might reduce the availability of respiratory medicines to the elderly.

Kay Cox, president of the American Association for Homecare, the trade association for the inhalation therapy industry, said, "We are extremely concerned about Medicare beneficiaries and how they will access these inhalation therapies under the new rules." Nearly a million patients use the machines - known as nebulizers - for inhalation therapy, according to the association. Patients generally operate the machines themselves at home.

Homecare companies and cancer doctors have said they use the price mark-ups to provide services for which Medicare has traditionally not paid. But critics say that the system creates incentives for doctors to prescribe more and costlier drugs than patients may need, and that it has led to spiraling costs.

Medicare's drug expenses last year of $10.5 billion were up from $2.9 billion in 1998. Largely because of higher drug costs, incomes among cancer doctors have risen faster than those among any other physician specialties, according to a recent survey.

Dr. Johnson, of the oncology society, said that cancer doctors had long agreed that Medicare's drug payment system needed to be changed, but he worried that the agency's proposals could lead some doctors to close their practices and others to send patients to hospitals to get care. "If reimbursements are reduced in a draconian way," he said, "somebody's going to pay."

Although most of Medicare's savings on cancer drugs would involve treatments with generic competitors, prices for drugs without such competition would also be reduced.

The price of Procrit, Johnson & Johnson's biggest seller, is to drop by 11 percent, to $9.78 a unit, from this year's price of $11.62. The price of Aranesp, Amgen's major seller, is to drop by 15 percent, to $17.08 from $21.20.

The price of AstraZeneca's prostate and breast cancer drug, Zoladex, would be slashed 38 percent, to $221.02 a unit, down from $375.99, under the proposal. Mary Linn Carver, an AstraZeneca spokeswoman, said the company supported the transparency that Medicare officials were bringing to cancer care with the new price system. But she said that if physicians lost money under the system, patient care could suffer.

Federal health officials say that patients have been spending more on their drug co-payments of 20 percent than providers spend to buy the drugs.

According to the American Association for Homecare, companies use the mark-up to provide such services as overnight delivery of drugs and 24-hour on-call patient support. But federal health officials said in interviews that Medicare did not pay for such services for patients with other diseases.

The federal officials said that many patients use nebulizers in place of inhalers mainly because Medicare does not pay for inhalers. That will change in 2006, when the new prescription drug program will include inhalers.

Dr. Norman H. Edelman, a spokesman for the American Lung Association, acknowledged that some patients used nebulizers instead of inhalers because of Medicare's rules. But he worried that these patients would not be able to afford either inhalers or nebulizers next year, when support for nebulizer therapy drops and before payments for inhalers begins.

Dr. Scott Manaker, a spokesman for the American Thoracic Society, said that the steep reductions would drive some companies to stop providing services to patients suffering from chronic obstructive pulmonary disease. The disease is the fourth-leading cause of death in the United States and includes illnesses like emphysema, chronic bronchitis and black lung. Most patients contract the disease from smoking.

"Patients may have real difficulty getting these medications," Dr. Manaker said.

By Gardiner Harris
NY Times

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