Final Rule on Competitive Acquisition Program (CAP)

On July 6, CMS issued its final rule for the CAP which will go into effect January 1, 2006. The rule is an interim final rule and provides another opportunity to offer comments. However, it seems unlikely that any substantial changes will be made before the rule is implemented January 2006, although the comments could lead to changes in the CAP requirements and policies in subsequent years.

Overall, there were few major changes from the proposed rule published in March. Two of the more major comments specialty societies offered on the proposed rule were that (1) CMS should add an administrative fee for CAP participating physicians to compensate for the added administrative costs associated with CAP participation and (2) CMS should extend the 14 day deadline for physicians to submit the claim showing the drug order. Not surprisingly, CMS rejected both of these comments.

Implementation Plans

CMS decided not to phase in the CAP by specialty or by type of drug which was one of the options under consideration. Rather, the CAP will be implemented January 1, 2006, for 169 drugs which represent the bulk of Medicare expenditures for incident-to drugs. See Addendum B. below. The oncology drugs selected for inclusion in the CAP represent about 85% of Medicare expenditures for oncology drugs. CMS indicated that since the purpose of the CAP was to give physicians an alternative to billing the program for drugs, they thought it appropriate to implement the system for the bulk of Medicare drugs for all specialties. For the same reason, all geographic areas will be included in the CAP rather than to phase in the program by area. For 2006, there will be a single CAP area for the nation with uniform pricing. However, in the future, CMS indicated the CAP might be organized by geographical area or type of drug product.

The 169 drugs represent individual HCPCS codes and not necessarily individual brands of a product. For some HCPCS codes, there are, of course, multiple drugs with different NDC’s assigned. The vendors are only obliged to offer one drug for each HCPCS code so they do not need to offer a particular brand. Where medically necessary, however, physicians may want to prescribe a particular drug product in which case the physician and not the vendor will bill for the drug. See discussion below on the “furnish as written” exception.

Exclusions

Oral anti-emetics and oral chemotherapy agents are excluded from the system as are drugs furnished at home through an item of durable medical equipment. Other exclusions from the CAP are blood and blood products, IVIG, and a number of vaccines. Some of the excluded vaccines were identified in the statute such as influenza, pneumococcal, and Hepatitis B, and several were vaccines which CMS administratively chose to exclude because they are generally used in an emergency situation, such as rabies vaccine.

Also excluded are painkillers classified as Category II, III, and IV, controlled substances. This exclusion was imposed largely because of the special recordkeeping associated with opiates and similar products and presumably a question of control over these products. There was also a decision to exclude orphan drugs which are approved only for an orphan condition and/or which are not listed approved for some labeled use in the USP. Finally, contrast agents used for an imaging procedure were also excluded.

CMS did indicate that carriers could continue to apply their Least Costly Alternative policy to limit payment for a drug to the cost of some less expensive drug products which is considered as effective. However, since every carrier currently has a policy that limits payment for the injectible form of Leuprolide to the payment rate for Goserelin, CMS has chosen to exclude Leuprolide from the list of drugs covered under the CAP. (Otherwise, the vendor would be required to provide the product when ordered by a physician and sustain a financial loss.)

There were comments offered by physician groups that the CAP should include all drugs which had been identified by some specialty societies as drugs for which physicians were having a difficult time acquiring at 106% of ASP. While a special effort was not made to assure that such drugs were on the list, CMS indicated that virtually all the drugs identified as a pricing problem, such as Rituximib, are on the CAP list.

New Drugs

There are two categories of new drugs discussed in the rule. The first largely consists of drugs approved in the year prior to the bidding year, i.e., 2004. For certain of these drugs for which CMS does not have data on volume to include them in the composite bid process as discussed below, the vendors will be required to provide these drugs to physicians participating in the CAP. The vendors will include these drugs in their bidding submittal and payment will be tied to the ASP methodology. The bids for each drug on the list must not exceed 106% of ASP.

The other category of new drugs are those introduced even later, including after the bidding process began (e.g., within the three year contract period), which may not have yet have an ASP price or even a HCPCS code assigned. While vendors will not be required to include these drugs in their listing of drugs covered under the CAP, they are encouraged to do so. These are drugs which require a separate HCPCS code, i.e., not a generic version of some existing drug. Vendors who want to offer these drugs can have them added to their list at the next quarterly update with payment based on the ASP methodology.

Furnish as Written

When a physician determines that it is medically necessary to dispense a particular formulation (i.e, brand) of a drug that is not on the vendor’s list, the physician is free to order such drug by indicating a “furnish as written” modifier on the claim. In such event, the physician will bill the carrier under the ASP methodology. CMS indicated that it is expected that any use of the "furnish as written" alternative will not be frequent occasions and will be subject to post pay audit. If the carrier finds upon audit that there was not medical justification, CMS indicated that the claim for the drug would be denied.

Content of the Physician’s CAP Drug Order

The following are the items that would need to be provided by the physician in ordering drugs.

• Date
• Beneficiary name, address and phone number
• Physician identifying info, including shipping address, PIN and UPIN
• Drug name
• Strength
• Quantity
• Dose
• Frequency/instructions
• Range of dates of administration
• Beneficiary HIC number
• MediGap information, if applicable
• Medicaid information if applicable
• Date of birth, allergies, height and weight, ICD, gender

For repeat orders, the information to be furnished can be abbreviated.

CAP Enrollment Process

By October 1, 2005, CMS will have available on the CAP Web site information on the vendors selected and the NDC codes for the particular drugs they will be offering through the program. This will be used by physicians in making their decision on participating in the CAP. Educational information will be provided to physicians to fully explain their responsibilities under the CAP.

Bidding Process

Vendors will be selected for a three year contract on the basis of a composite bid for all of the 169 drugs on the list. Entities interested in being CAP vendors will submit a proposed price for each of the 169 drugs. MS will weight the bid prices for each of these drugs by the proportion of expenditures for these drugs and a composite bid will be calculated. Up to five vendors with the lowest composite bids and who otherwise meet the required technical and financial responsibilities for being a CAP vendor will be selected. No vendor will be accepted if their composite bid exceeds 106% of the ASP prices in the aggregate which will assure that CAP will yield budget savings to Medicare. Once the low bidders have been identified, the national fee for any given HCPCS code will be based on the median of the bid price for each of the HCPCS codes. The fee, however, will be inflated to reflect the anticipated increase in drug costs between now and the midpoint of 2006.

Other information about CAP Process

• Vendors will need to be licensed in all states that services are to be provided.
• Vendors will be subject to a variety of financial and other conditions to assure that they are capable of performing their responsibilities in a high quality fashion.
• Drugs will need to be delivered in two business days after ordering and in one business day for an emergency order.
• The CAP vendor will be subject to the local carrier’s medical review policies, LCD's, LCA's, etc. The physicians are obliged to support any vendor appeals such as a coverage denial since the physician of course ordered the drug.
• Vendors are free to ask beneficiaries to sign an Advance Beneficiary Notice (ABN) when they have reason to believe that a drug order is inconsistent with an LCD.
• In response to concern that CAP vendors may be less understanding than physicians regarding an ability to pay coinsurance or deductibles, when questions of ability to pay come up, the vendor must be prepared to (1) refer the patient to a charitable organization, (2) implement a reasonable payment plan, and/or (3) consider full or partial waiver of co-pay based on the patient’s financial circumstances.

Addendum B. – New Drugs for CAP Bidding for 2006