Plan Would Slash What Medicare Pays for Cancer Drugs

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July 27, 2004

Plan Would Slash What Medicare Pays for Cancer Drugs

By GARDINER HARRIS

 

Federal health officials plan to announce a proposal

today that could save taxpayers at least $16 billion

over the next decade by slashing the amounts Medicare

pays for more than two dozen cancer and lung drugs, a

move almost certain to raise an outcry among cancer

specialists and some drug companies.

 

The health care industry has been bracing for

rollbacks. But until today's report, few outside the

Medicare agency have known the extent of the price

cuts, which for some drugs would be as much as 89

percent below current levels. Besides saving the

government money, the changes would directly benefit

Medicare recipients, who pay 20 percent of the prices

their doctors charge for the drugs.

 

Some cancer doctors, who along with a few other types

of health care providers customarily pocket the

difference between what Medicare pays for certain

medications and what the drug makers actually charge

the doctors, have warned that they will stop caring

for Medicare patients if the price cuts become

permanent. Companies that provide care to patients

suffering from emphysema have also said that they may

end their services; some of them have already stopped

advertising for new patients.

 

Federal health officials who described the price

proposals are estimating that the changes would reduce

the typical cancer doctor's Medicare revenue by 8

percent next year.

 

" We believe that there is potential that the changes

may have a really dramatically negative impact on our

ability to deliver care in ways patients are

accustomed to, " said Dr. David Johnson, president of

the American Society of Clinical Oncology.

 

The changes result from last year's Medicare drug law.

The legislation's primary purpose was to set up a

program that in 2006 will begin paying for

prescription drugs dispensed by pharmacies. But the

law also overhauled the way Medicare pays for certain

drugs it already covers - mainly cancer and lung

medications that are not available through pharmacies

but are administered through intravenous tubes or mist

machines.

 

Almost half of Medicare's drug budget of $10.5 billion

went for cancer drugs, at rates that are based on

supposed wholesale price lists provided by the drug

makers. But the prices paid by doctors are typically

much lower. Last year, 70 percent of oncologists'

income came from drug mark-ups, according to Medicare

data.

 

Medicare's system for paying for the drugs has long

been criticized by watchdog agencies like the

Government Accountability Office, the auditing arm of

Congress.

 

To stop the government from paying big mark-ups, last

year's law instructed Medicare to survey actual prices

for drugs and pay accordingly. In the proposal to be

released today, which is based on that continuing

survey, Medicare plans to preview the prices it

intends to pay for the 30 drugs on which it currently

spends the most annually. In some cases, the

government will propose slashing the prices by 89

percent, according to the federal health officials,

who described the proposal on condition of anonymity.

 

To make up for part of the income that would be lost

by doctors and other care providers, Medicare will

increase its service payments to them while also

paying a 6 percent surcharge above the new price of

the drug. Care providers and drug makers will have the

opportunity to file comments. Medicare officials plan

to use that information and additional price surveys

to determine a final price list that will be released

in November and go into effect in January. Through the

end of the current year, Medicare will continue to

reimburse providers for the cost of drugs using the

wholesale prices reported by drug makers.

 

Among the biggest proposed price cuts to be announced

today are the 89 percent reductions for two drugs

commonly used to help open lung passages for patients

with emphysema and other chronic obstructive pulmonary

disorders - albuterol sulfate and ipratropium bromide.

 

The prices paid by Medicare for both lung drugs will

be reduced, health officials say, to 4 cents from 39

cents a unit for albuterol sulfate, and to 28 cents

from $2.82 a unit for ipratropium bromide. The

reductions for these two drugs alone will save the

agency more than $1 billion each year, although

officials acknowledge that some of the savings may be

returned to providers in the form of increased service

fees.

 

Most savings in oncology drug reimbursements would

involve drugs that have cheaper, generic competitors.

The price for each unit of Taxol from Bristol-Myers

Squibb, for instance, would drop 81 percent, to

$24.38, from this year's price of $138.28, because

there are generic competitors. Depending on the course

of treatment, a patient's Taxol therapy under current

Medicare pricing can run into the thousands of

dollars.

 

The Medicare agency's announcement has been anxiously

awaited for months and is certain to ignite a fierce

round of lobbying on Capitol Hill. Cancer doctors are

expected to object the loudest because they have

political clout and stand to lose substantial sums.

More than 80 percent of cancer patients now receive

their medications in doctors' offices instead of in

hospitals, avoiding the added cost and stress of

hospitalization.

 

Fearing the changes, some cancer doctors have sent

letters to patients warning that they may have to

check themselves into hospitals to receive care or

they may soon be given older, more toxic cancer drugs.

In some cases small offices with just a few doctors

have consolidated with larger practices in hopes of

winning bigger discounts from drug makers.

 

Other specialists will also be affected. Urologists

can expect their revenue from Medicare to drop 13

percent, mostly because the price paid for Lupron, a

drug for prostate cancer made by TAP Pharmaceuticals,

will fall 50 percent, to $235.27, down from $500.58.

Payments to obstetrician-gynecologists and

rheumatologists will also be sharply reduced.

 

The lung-therapy payment cuts will have the most

direct impact on the hundreds of companies that

provide elderly patients with lung medication and the

inhalation machines that turn lung medicines into

mist. Those companies include Apria Healthcare,

Lincare and PolyMedica.

 

Federal health officials are hoping that many of these

patients will start using inhalers, which they say are

cheaper and just as effective for most patients. But

some Medicare critics have said the cutbacks could

translate to lower-quality care for lung patients.

 

Representatives for Lincare refused to comment. Apria

Healthcare executives could not be reached. A

spokeswoman for PolyMedica said the price cuts might

reduce the availability of respiratory medicines to

the elderly.

 

Kay Cox, president of the American Association for

Homecare, the trade association for the inhalation

therapy industry, said, " We are extremely concerned

about Medicare beneficiaries and how they will access

these inhalation therapies under the new rules. "

Nearly a million patients use the machines - known as

nebulizers - for inhalation therapy, according to the

association. Patients generally operate the machines

themselves at home.

 

Homecare companies and cancer doctors have said they

use the price mark-ups to provide services for which

Medicare has traditionally not paid. But critics say

that the system creates incentives for doctors to

prescribe more and costlier drugs than patients may

need, and that it has led to spiraling costs.

 

Medicare's drug expenses last year of $10.5 billion

were up from $2.9 billion in 1998. Largely because of

higher drug costs, incomes among cancer doctors have

risen faster than those among any other physician

specialties, according to a recent survey.

 

Dr. Johnson, of the oncology society, said that cancer

doctors had long agreed that Medicare's drug payment

system needed to be changed, but he worried that the

agency's proposals could lead some doctors to close

their practices and others to send patients to

hospitals to get care. " If reimbursements are reduced

in a draconian way, " he said, " somebody's going to

pay. "

 

Although most of Medicare's savings on cancer drugs

would involve treatments with generic competitors,

prices for drugs without such competition would also

be reduced.

 

The price of Procrit, Johnson & Johnson's biggest

seller, is to drop by 11 percent, to $9.78 a unit,

from this year's price of $11.62. The price of

Aranesp, Amgen's major seller, is to drop by 15

percent, to $17.08 from $21.20.

 

The price of AstraZeneca's prostate and breast cancer

drug, Zoladex, would be slashed 38 percent, to $221.02

a unit, down from $375.99, under the proposal. Mary

Linn Carver, an AstraZeneca spokeswoman, said the

company supported the transparency that Medicare

officials were bringing to cancer care with the new

price system. But she said that if physicians lost

money under the system, patient care could suffer.

 

Federal health officials say that patients have been

spending more on their drug co-payments of 20 percent

than providers spend to buy the drugs.

 

According to the American Association for Homecare,

companies use the mark-up to provide such services as

overnight delivery of drugs and 24-hour on-call

patient support. But federal health officials said in

interviews that Medicare did not pay for such services

for patients with other diseases.

 

The federal officials said that many patients use

nebulizers in place of inhalers mainly because

Medicare does not pay for inhalers. That will change

in 2006, when the new prescription drug program will

include inhalers.

 

Dr. Norman H. Edelman, a spokesman for the American

Lung Association, acknowledged that some patients used

nebulizers instead of inhalers because of Medicare's

rules. But he worried that these patients would not be

able to afford either inhalers or nebulizers next

year, when support for nebulizer therapy drops and

before payments for inhalers begins.

 

Dr. Scott Manaker, a spokesman for the American

Thoracic Society, said that the steep reductions would

drive some companies to stop providing services to

patients suffering from chronic obstructive pulmonary

disease. The disease is the fourth-leading cause of

death in the United States and includes illnesses like

emphysema, chronic bronchitis and black lung. Most

patients contract the disease from smoking.

 

" Patients may have real difficulty getting these

medications, " Dr. Manaker said.

 

Copyright 2004 The New York Times Company