Impact of Medicare Part B Reform on Private Insurance Reimbursement Howard M. Tag February 27, 2004.

Impact of Medicare Part B Reform on

Private Insurance Reimbursement

Howard M. Tag February 27, 2004

In light of DIMA, how will private In light of DIMA, how will private insurers change reimbursement insurers change reimbursement for office administered for office administered drugs?drugs?

Survey-based analysis

AgendaAgenda

• Housekeeping

• Demographics

• Survey results– 2003 baseline– 2004-2005 outlook

• Conclusions

• Reimbursement planning and solutions

• Pharmaceuticals, biologicals, devices, genomic-based diagnostics and therapeutics

• Since 1998

Special ThanksSpecial Thanks

• Survey design and analysis Elan B. Rubinstein, PharmD, MPH

• Recruitment and survey administrationNFO J Street

Slides Available Slides Available

www.taghealthcare.com“Archives”

DemographicsDemographics

Qualitative SurveyQualitative Survey

• January 2004

• 15 MCO Medical Directors

• 60 million covered lives

Markets and ProductsMarkets and Products

• All regions; East coast weighted

• 11/15 offer Medicare+Choice

• 5/15 also Carriers, FIs, DMERCs

MCO Products Reflect MCO Products Reflect National MarketNational Market

Other8%

POS15%

PPO38%

HMO39%

Results: 2003 BaselineResults: 2003 Baseline

FFS With Some Direct SupplyFFS With Some Direct Supply

• Chemo*: 11/15 AWP-based– 3 require direct supply – 1 capitated

• Non-Chemo: 8/15 AWP-based– 4 require direct supply – 2 give choice of direct supply or reimbursement at the

direct supply contract price– 1 capitated

________________________________________________* All references to chemotherapy include supportive care treatments

Average = 90% - 94% AWPAverage = 90% - 94% AWP

• Lower than Medicare’s 95% AWP

• Chemo and non-chemo usually same

• Range was 80% AWP to 110% AWP

Specialty Distributors Paid Specialty Distributors Paid Slightly LessSlightly Less

• Chemo: 3 plans that require direct supply, pay 90% AWP

• Non-Chemo: 4 pay 90% AWP; 2 pay 80% - 85% AWP

How MCO Infusion/Injection Payments How MCO Infusion/Injection Payments Compared to Medicare Fee Compared to Medicare Fee (2003)(2003)

1 2

5 5

1

0

5

10

15

Lower Same Higher

By 11-20% By 1-10%

2004 – 2005 Outlook2004 – 2005 Outlook

Medicare Rate Is Important in Medicare Rate Is Important in Commercial Reimbursement DecisionCommercial Reimbursement Decision

9

11

8

9

0 3 6 9 12 15

Non-Chemo

Chemo

2004 2003

2004: Few Changes Planned 2004: Few Changes Planned

• Only 3/15 will lower AWP-based reimbursement

– 2: additional 10% reduction

– 1: additional 5% reduction

Direct Supply Will IncreaseDirect Supply Will Increase

• Chemo (‘03 baseline = 3)– 5/15 will require for infusables– 6/15 for injectables

• Non-Chemo (’03 baseline = 6)– 8/15

Infusion/Injection Fee Infusion/Injection Fee Increases in 2004Increases in 2004

Up 21-50%

(2)

Up >50%

(2)

Up 20% or Less

(5)

No Increase

(6)

Some Movement from Medical Some Movement from Medical to Rx Benefitto Rx Benefit

• Infusables – 4/15

• Injectables – 5/15

MCOs likely to re-categorize from medical to prescription benefit:

Tiered FormulariesTiered Formularies

• 5/15 will have tiered formulary for office-based infusables/injectables

For 2005, ASP+6% Will Be Important In For 2005, ASP+6% Will Be Important In Private Ins Reimbursement DecisionPrivate Ins Reimbursement Decision

9

11

0 3 6 9 12 15

Non-Chemo

Chemo

ConclusionsConclusions

Modest Changes in 2004Modest Changes in 2004

• Few surveyed MCOs are likely to lower payments for office-based drugs and biologicals

• More than one-half will increase payments for infusion and injection procedures

Bigger Changes in 2005Bigger Changes in 2005

• 11/15 surveyed plans say Medicare conversion to ASP will be important factor in setting reimbursement for private insurance business

Direct Supply Will IncreaseDirect Supply Will Increase

• More plans will require physicians to use direct supply for office-based drugs

– Some will require for non-chemo drugs but not oncology

Other Changes in Small DosesOther Changes in Small Doses

• About one-third of surveyed plans will– Re-categorize drugs from medical to

prescription benefit or – Establish tiered formularies for office-

based products

1875 Eye Street, N.W.

Suite 900

Washington, DC 20006 USA

202.785.3800

www.taghealthcare.com