The buy-and-bill system used to acquire and be paid for oncolytics should be replaced, but a better process is not at all clear. That is the conclusion of panelists at a Care Delivery and Practice Management Education Session titled “Alternatives to ASP-Plus-Six: What Are the Options?” at the American Society of Clinical Oncology Annual Meeting.
The current payment system is generally called ASP+6, referring to the fact that the Medicare program bases its payment for drugs on the average sales price plus six percent to cover overhead costs. The 2012 budget sequester cut drug reimbursement, making the so-called ASP+6 rate actually ASP plus 4.3 percent. Although this was originally intended as a stopgap measure, the sequester has been extended through 2024.
That move underscored the fact that large line items in the federal budget that are based on a formula—like drugs purchased by the Medicare program—are easy targets for lawmakers looking for costs to cut.
“We think ASP+6 is under threat, and we need to start thinking what the alternatives might be,” Blase N. Polite, MD, MPP, Assistant Professor of Medicine at the University of Chicago Center for Clinical Cancer Genetics and Global Health Medicine, said in an interview in advance of the meeting. “There aren't easy answers, so we aren't pretending there is a magic bullet. But the conversation needs to start so people can start weighing in with their ideas.”
The ASP+6 Problem
ASP+6, one element of the Medicare Modernization Act, went into effect in 2006, with Congress expecting it would reduce its outlay for prescription drugs. Indeed, it has reduced Medicare's drug spending, but the program has had unintended consequences that create inequities in the cancer care market, said Rena M. Conti, PhD, a health economist and Assistant Professor of Hematology/Oncology at the University of Chicago.
The Medicare program sets its reimbursement to oncology practices for the use of drugs to treat patients based on ASP, but each practice negotiates the price it will pay to acquire drugs, she explained in an interview before the meeting. Large practices get volume-based discounts that make their acquisition costs much lower than those of small practices. Moreover, hospital-based practices that are eligible for 340B pricing through a program originally intended to help safety-net hospitals and other selected safety net clinics can buy drugs at lower prices than independent practices.
That purchase-price differential is so significant that small practices may be “underwater,” meaning that Medicare reimbursement can be less than the price the practice paid to acquire the drug, while large practices are able to generate a profit when they use the same drug. This inequity has helped fuel the consolidation of oncology practices, which has its own cost and access consequences for patients and payers.
Some private insurers followed Medicare's lead to base their drug reimbursement on average sales price, but most pay higher rates than ASP+6, Conti noted. This incentivizes practices to search for privately insured cancer patients, and send uninsured and Medicaid insured cancer patients to other care sites, such as hospitals.
Moreover, ASP+6, by its nature, provides a financial incentive to choose high-priced branded drugs over cheaper generic drugs, because the potential to generate revenue from the buy-and-bill system increases in proportion to the base price of a drug.
“Practices face financial incentives to seek out branded substitutes for chemotherapy drugs that have gone off patent,” Conti said.
Options to Consider
Despite the problems with ASP+6, finding a better option is not simple, said the session's Chair, Jeffery C. Ward, MD, an oncologist at Swedish Cancer Institute in Edmonds, Washington, also speaking in advance of the meeting.
“We have a huge infrastructure that allows me to order a drug today to give to a patient tomorrow. Any changes to the drug reimbursement system have to be done in a way that's not going to impact our ability to access drugs on a timely basis for our patients.”
Polite was the first author—Ward and Conti were among several coauthors—of an article, “Payment for Oncolytics in the United States: A History of Buy and Bill and Proposals for Reform,” that identified alternatives to ASP+6 (JOP 2014;10:357-363).
The alternatives fall into two groups: those that would preserve the buy-and-bill concept but alter the way payment is calculated, and those that replace buy-and-bill with a system that removes physicians, practices, and hospitals from buying drugs.
Among those options:
- Medicare could reimburse practices based on the invoice price they actually pay for drugs or perhaps an average invoice price for all oncologists, potentially stratified by practice size and setting;
- Medicare could reimburse practices and thereby the pharmaceutical industry based on the level of evidence that supports its use in a given situation;
- The Department of Health and Human Services or another federal agency could take responsibility for negotiating drug acquisitions on behalf of physicians and hospitals or setting payment limits;
- Medicare could move its oncolytic coverage from Part B, the outpatient benefit for Medicare patients, to Part D, the drug benefit—This would allow large health plans and pharmacy benefit managers to negotiate discounts with manufacturers; and
- The now-defunct Competitive Acquisition Program (CAP), through which physician practices acquired drugs from a vendor that directly billed Medicare for the drugs, could be resurrected with modifications. The program was suspended in 2008 after two years because of low participation by physicians and only a single vendor.
While each of the alternatives has some benefits, the panelists showed little enthusiasm for any of them—“All are fraught with problems,” Polite said.
The Bundled Payment Issue
Both government and private payers would like to see the ASP+6 issue melt away by overhauling the entire system currently used to pay for cancer care. They believe cancer care costs can be curtailed by replacing the current fee-for-service payment system with an alternate payment model that financially incentivizes oncology practices to lower the total cost of care while hitting certain quality thresholds.
Several models currently being tested differ, but, in almost all cases, ASP+ payment is not relevant; rather, practices receive a payment for an episode of cancer care, including the cost of drugs, and they succeed financially if they keep costs low.
Those alternative payment models, including CMS's Oncology Care Model, may work well for large practices that can accept the financial risk inherent in bundled payments, Conti said. And they will work well for hospital-owned practices. But many small independent practices will find it difficult to participate in those alternative payment models.
Thus, despite the strong push from payers to move oncology into the bundled payment world, she forecasts that many practices will continue to be paid in the fee-for-service system for the foreseeable future.
“There is still a need to reform the ASP+ system because many oncology practices will continue to rely on revenue from buying and billing chemotherapy for the foreseeable future,” she said.