1. Lauren Geyer Barnes Avalere Health LLC
Medicare Congress: Fee for Service Trends: A Look at Medicare Part B November 1, 2005
Lauren Geyer Barnes Avalere Health LLC

2. The projected increase in Medicare Advantage (MA) penetration
Three separate yet similar forces are altering the dynamics of Medicare Part B drug coverage
The projected increase in Medicare Advantage (MA) penetration
The advent of the Competitive Acquisition Program (CAP)
While the greatest change to drug coverage will be the implementation of the Medicare prescription drug benefit, the advent of this benefit, along with other changes enacted by MMA will alter the Medicare Part B coverage environment as well.
Not only will Part D offer some coverage for drugs currently covered under Part B, but the increase in MA penetration and the creation of a CAP for Part B drugs will allow private sector forces to impact Medicare Part B for the first time.
The implementation of Medicare Part D
Reference
11. Kaiser Family Foundation Web site. Medicare fact sheet: Medicare Advantage. March 2004.

3. The increase in MA penetration blurs the distinction between products covered under Medicare Part B vs Part D.
The increase in MA plans combined with the fact that MA plans will offer prescription drug coverage along with their Medicare Part B coverage, means that such plans will not be forced to distinguish between products as stringently as they needed to in the past. The use of specialty pharmacy, disease management, and strict utilization management programs, will likely cause the site of service to shift for certain injectable drugs.
*2004 CMS Office of the Actuary Cost Estimates
Reference
11. Kaiser Family Foundation Web site. Medicare fact sheet: Medicare Advantage. March 2004.

4. The increase in MA penetration blurs the distinction between products covered under Medicare Part B vs Part D.
*2004 CMS Office of the Actuary Cost Estimates

5. The increase in MA penetration blurs the distinction between products covered under Medicare Part B vs Part D.
*2004 CMS Office of the Actuary Cost Estimates

6. The increase in MA penetration blurs the distinction between products covered under Medicare Part B vs Part D.
*2004 CMS Office of the Actuary Cost Estimates

7. Contractors / Distributors
The CAP system will also cause the entrance of other providers into the Medicare Part B environment.
CMS
Manufacturers
CMS pays physicians for professional services only (administration of drugs and services)
Contractors buy drugs from manufacturers
CMS selects contractors based on price, quality, and administrative capabilities
Contractors negotiate with manufacturers to garner lowest possible price
CMS reimburses contractors for drugs
Contractors / Distributors
including Specialty Pharmacies, Pharmacy Chains, GPOs*, PBMs**, and Wholesalers
Physicians
Manufacturers supply contractors with drug
Patients pay copayments for the physician services and administration fees
Contractors deliver Part B drugs to physicians on a patient specific basis
The advent of CAP eliminates two of the core tenets of Medicare Part B drug coverage: that a physician must buy and bill for the product administered to a Medicare bene.
This means that products private sector entity will a lynchpin in the drug distribution and delivery channel. The CAP model itself is founded upon the private sector concept of specialty pharmacy. Hence, there is now the perfect pathway for private sector entities to influence Medicare Part B coverage and reimbursement decisions. The outside entities are key stakeholders as they now become critical providers of services in the Part B drug system.
Contractors bill and receive copayments directly from patients by drug
Patients
Data Flow
* GPO = Group Purchasing Organization
** PBM = Pharmacy Benefit Manager
Money flow
Product flow

8. Summary of CAP Roles and Responsibilities
Physician
Contractors
Manufacturer
Choice of 106% of ASP or CAP
May be able to keep spread by choosing ASP method, but must submit claims to be paid
CAP removes financial incentives from decision-making
Does not restrict prescribing behavior
Compete to obtain contracts from CMS
Accepts risk for unused inventories and denied claims
Submit claims and collect patient coinsurance and deductibles
Cannot have significant control over physician prescribing behavior
Required to provide routine drug delivery within 2 business days, emergency delivery within 1 business day
Negotiate prices with contractor
Conduct limited sales directly to physicians
May change sales force’s focus
Cannot structure formularies; limited ability to move market share and garner discounts

9. Some “B” Drugs Could Also be Paid in “D”, but Others Cannot with the decisions being made by Part D plans.
Type of Medicare Product
Part B Coverage
Potential for Part D Coverage
IV, Sub-q, IM
Drugs administered incident to a physician visit including drugs not usually self-administered
If drug is dispensed at a retail pharmacy it should be paid under Part D, even if it is not usually self- administered
Immunosuppressive
Covered if incident to a Medicare covered transplant
Covered for non-Medicare covered transplants
Oral anti-emetics oral cancer pro-drugs
Statutorily covered
Cannot be covered under Part D
Vaccines
Pneumococcal, influenza, and hepatitis B vaccines are statutorily covered
Additional vaccines that are “reasonable and necessary for the prevention of illness” are covered
DME
A Part D drug is not covered by Part A or Part B of Medicare
The Part D benefit does not alter Part B coverage
Part D plans must determine whether a drug would be covered under Part B based on local coverage policy
Part D will cover vaccines not covered by Part B, as well as insulin and related medical supplies

10. The MMA shifted the dynamics of Part B drug coverage for injectable products.
Not Covered
Covered
Grey Area
Pills
Injectables
Infusables
Pre 1990’s
Pills
Injectables
Infusables
Injectables
1990/
2000’s
Pills
Infusables
Injectables
2006+

11. New entities will be shaping the face of Medicare Part B coverage.
As of 2006, the private sector will have unprecedented influence on Medicare Part B coverage.
The impact of these changes could alter the demand and utilization for injectable products
The growth in the influence of this provider group will also cause CMS to examine ways in which to provide appropriate incentives to these entities.
CMS at the local and national level will also have to evaluate how to include these providers as key stakeholders in critical Medicare Part B drug coverage decisions going forward.
The private sector will have a voice in regard to day-to-day claim adjudication issues, and will also have a significant share of voice in the long term shape of the Medicare Part B program.
The Medicare program will be interested in the voice of the private sector as it will actually have the ability to utilize some of the private sector’s utilization management techniques which CMS has been precluded from doing so in the past due to statutory confines.
Hence, it is in CMS’ best interest to partner with these entities now.