Competitive Acquisition Program for Drugs

On March 4, CMS published a proposed rule dealing with the competitive acquisition program (CAP) for drugs under Part B. Comments on the rule are due by April 26.

This provision was part of the MMA of 2003. It is a voluntary program whereby physicians can elect to have a vendor(s) provide and bill for drugs provided to Medicare patients for use in the physician’s office. Essentially, the physician electing to participate in CAP would no longer need to bill the program nor the beneficiary for coinsurance for incident-to drugs. While the government indicates that this might yield some savings relative to the current system, its objective is to reduce the financial burden on physicians who no longer have to bill the program and beneficiaries for drugs.

CMS has flexibility in how the system is implemented, whether it is to be phased in or implemented for all drugs. CMS invites comments on the following options:

• Should it be implemented for all drugs furnished incident to a physician service?
• Should it be phased in by physician specialty? Under this option, CMS asks if it should initially be implemented for drugs commonly furnished by oncologists or, alternatively, begin with specialties that use fewer Part B covered drugs.

If the system were implemented by category of drugs (e.g., oncology drugs), vendors would be obligated to furnish all the drugs with HCPCS codes falling into that category. However, for multiple source drugs, vendors will not have to provide every drug (i.e., each NDC) within each HCPCS code.

CMS has the authority to exclude certain drugs from the CAP on the grounds that including them would have an adverse impact on access to those drugs. They have not yet made any finding to exclude drugs on this basis.

CMS discusses several options regarding the geographic area that vendors would need to provide services, i.e., if it should be national, regional, or a single state.

Some of the operational aspects of the system are as follows:

• A process will be established to assure that adjustments to payments will be made when payment was made but the drugs were never actually administered to the beneficiary.
• The vendor may not provide drugs to a physician unless the physician submits an order or prescription for the drug. However, physicians have the flexibility in terms of writing a prescription for drugs for a single treatment or a course of treatment.
• A process will be established by which physicians will need to submit information on beneficiaries to vendors for purposes of collection of deductibles and coinsurance.
• Drugs obtained under the CAP can be used to resupply inventories of drugs for other patients if the physician can demonstrate that the drugs are required immediately, the physician could not have anticipated the need for the drug, the vendor could not have delivered the drugs in a timely fashion, and the drugs were administered in an emergency situation.
• For the initial implementation of the CAP, CMS will designate on Medicare carrier to process all drug vendor claims.
• As a control to assure that vendors are billing only for drugs prescribed by physicians, a prescription number will be placed on the physician claim for drug administration services and this number will also be on the drug vendor claim. CMS notes that physicians will need to develop the appropriate software consistent with HIPAA guidelines for capturing prescription numbers. While CMS is considering various options to allow partial payment to the vendor when there is a problem with the prescription number until it is investigated, the vendor will not be able to bill the beneficiary for coinsurance until the carrier had verified that the physician administered the drug to the beneficiary.
• Physicians can treat a beneficiary with a drug from his or her stock in emergency situations. Physicians will also be allowed to obtain a drug under the ASP methodology in “furnish as written” cases when medical necessity requires that a specific formulation of a drug be furnished to the patient and it is not on the vendor’s list. (A modifier would be indicated on the physician’s claim form for this purpose.)
• CMS does not think that separate physical storage of CAP drugs is required, but paper or electronic inventory of drugs will be needed.
• If a drug could not be administered, the physician will need to notify the vendor and agreement will be needed on how to handle the unused drug consistent with State and Federal law.
• Mechanisms will be established to deal with disputes between the vendor and the physician or involving the beneficiary and the vendor.

The following are some of the issues relating to the CAP contracting process:

• Vendors will be required to demonstrate their ability to acquire and deliver drugs in a timely manner, including handing emergency situations.
• There will be an assessment of the vendor’s ability to ensure product integrity (e.g., trained personnel, proper storage facilities, compliance with all licensure, etc.)
• There will be financial solvency standards and other standards regarding management and administration.
• Vendors will be selected on the basis of both price and non-price aspects (e.g., quality).
• Bidding will be on the basis of a composite bid for a category of drugs (e.g., oncology drugs), which would be constructed on the basis of the bid for each HCPCS code weighted by the HCPCS’s share of the volume. It is assumed bidding will begin in mid 2005.
• Essentially, there will be a two step process. First, certain quality and financial thresholds must be met by all bidders, then winning bidders (up to the five lowest composite bids in each category) will be selected from those that meet the financial and quality criteria. They will not select any bid for a category where the composite bid exceeds 106 percent of the weighted ASP for that category.
• Once the winning bidders have been identified, a single price will be established for each drug based on the median of the prices offered by the winning bidders.
• The bids will be for a 3-year contract and a mechanism will be established for adjusting the prices for Year 2 and Year 3.

Other implementation issues:

• Physicians would make an annual election to participate in the CAP. This will likely be in the October 1 - November 15 period. Physicians making this election will agree to abide by various CAP rules, such as sharing information with the vendor, filing claims timely, and agreeing to comply with emergency drug replacement rules and requirements for using the “furnish as written" provision.
• By October 1, CMS will post on their Web site the vendors selected and the specific categories of drugs they will be providing.

Comments on the Rule

Overall, CMS seems to have done a good job in developing this proposed rule given the framework of the law. However, ASH may want to consider commenting on some of the options and issues open for comment:

• Should oncology drugs be included initially, or should it wait for CMS to gain some experience with the program?
• Are the administrative burdens on physicians who participate reasonable under the circumstances? That is, providing information to the vendor, inventory requirements, obtaining emergency drugs, returning unused drugs, providing drugs not on the vendor’s list (e.g., specific brand).
• Are the standards for the prospective vendors adequate?

Participating in CAP

This is a totally voluntary program; physicians who do not want to participate do not need to. The key question is whether the benefits (such as the ability to avoid financial losses with the current ASP system and the inability to collect deductibles and coinsurance) offset the disadvantages. Cons may include having two sources of drugs (one for Medicare and one for all other patients), unknowns regarding quality and reliability of the vendor, and the administrative complexities and hassles associated with the CAP.