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NUCLEAR MEDICINE APC TASK FORCE 1850 Samuel Morse Drive Reston, VA 22090-5316 (703) 708-9000 Fax: (703) 708-9015 Academy of Molecular Imaging American College of Nuclear Physicians American College of Radiology American Society of Nuclear Cardiology Council on Radionuclides and Radiopharmaceuticals, Inc. National Electrical Manufacturers Association Society of Nuclear Medicine Society of Nuclear Medicine - Technologist Section November 19, 2002 Via Facsimile and Federal Express Thomas A. Gustafson, Ph.D. Director, Purchasing Policy Group Centers for Medicare and Medicaid Services MS C4-01-26 7500 Security Boulevard Baltimore, MD 21244-1850 Dear Dr. Gustafson: We are reviewing the November 1, 2002 Federal Register final rule on the Medicare hospital outpatient prospective payment system (HOPPS) for 2003. There are a number of issues very important for nuclear medicine which merit closer attention dealing with placement of nuclear medicine procedures into the nuclear medicine APCs and packaging of radiopharmaceuticals. On November 8, we submitted to CMS an initial request for clarification and will be developing more detailed comments and recommendations. An immediate priority for the Nuclear Medicine APC Task Force is CMS’ very sharp change in policy for radiopharmaceuticals, classifying these drugs as diagnostic tests or radioactive isotope therapies. The attached position paper strongly urges CMS to reconsider this dramatic reversal in prior CMS policy and we request an opportunity to meet with you at a mutually convenient time on December 12 or 13. We will contact your office to determine an appropriate time and date. We look forward to discussing these priority issues with you in the near future. Sincerely, /s/ Kenneth A. McKusick, M.D., FACR, FACNP Chair Enclosure Nuclear Medicine APC Task Force Thomas A. Gustafson, Ph.D. May 5, 2017 Page 2 cc: Cindy Read Paul Rudolf, M.D., J.D. Joan H. Sanow (w/encl.) November 19, 2002 Summary Comment to CMS on Change in Policy on Radiopharmaceuticals And Need for Unique Medicare Payment Method for Radiopharmaceuticals A. Introduction This memorandum objects to the Centers for Medicare and Medicaid Services’ (CMS) radical change in Medicare payment policy, suggesting that radiopharmaceuticals are not drugs. Below, we present CMS’ explanation for reclassifying radiopharmaceuticals, and then discuss the factual, legal, and policy reasons for continuing to treat radiopharmaceuticals as drugs. The Nuclear Medicine APC Task Force further renews its initial recommendations to clarify and reform payment for radiopharmaceuticals. These recommendations will help CMS implement the radiopharmaceutical provisions of the Medicare hospital outpatient prospective payment system (HOPPS) consistent with the law, advancing high quality care for Medicare patients, and establishing reasonable payment for providers. In brief, CMS should not reclassify radiopharmaceuticals as drugs for the following reasons: Both diagnostic and therapeutic radiopharmaceuticals are regulated as drugs or biologics by the Food and Drug Administration; Radiopharmaceuticals meet Medicare’s statutory definition as drugs; Reclassifying radiopharmaceuticals as diagnostic tests or radio-isotope therapy is inconsistent with the HOPPS statute, that clearly defines radiopharmaceuticals as drugs, and is inconsistent with CMS’ past practice to pay radiopharmaceuticals as drugs; CMS’ effort to reclassify radiopharmaceuticals will have adverse public policy consequences in creating inconsistent regulatory schemes; CMS’ effort to reclassify radiopharmaceuticals is a reversal of a significant policy and can only be proposed with appropriate advance notice and a reasonable opportunity for public comment; and A comprehensive payment approach is needed to clarify how radiopharmaceuticals should be paid under HOPPS, including consideration of actual sales prices, and the unique features associated with administration and disposal of radiopharmaceuticals. B. New CMS Policy that Radiopharmaceuticals are Not Drugs In the preamble to the most recent final rule on the Medicare HOPPS, the CMS presented a new policy on payment for radiopharmaceuticals. See 67 Fed. Reg. 66757 (Nov. 1, 2002). In its discussion about payment for a newly approved radiopharmaceutical, Zevalin, CMS stated that therapeutic radiopharmaceuticals would not be recognized as drugs, for purposes of payment under HOPPS, but rather as radioactive isotope therapy under Social Security Act section1861(s)(4). This section addresses one of many “medical and other health services” covered under Medicare, specifically listing: “(4) X-ray, radium, and radioactive isotope therapy, including materials and services of technicians.” Further, CMS will not recognize diagnostic radiopharmaceuticals as drugs, but rather as diagnostic tests, under Social Security Act § 1861(s)(3). This section specifically lists: (3) diagnostic X-ray tests (including tests under the supervision of a physician, furnished in a place of residence used as the patient’s home, if the performance of such tests meets such conditions relating to health and safety as the Secretary may find necessary and including diagnostic mammography if conducted by a facility that has a certificate (or provisional certificate) issued under section 354 of the Public Health Service Act), diagnostic laboratory tests, and other diagnostic tests. CMS states that it would not consider radiopharmaceuticals as drugs under the drug definitions in the Social Security Act section 1861(t) which provides: (t)(1) The term “drugs” and the term “biologicals”, except for purposes of subsection (m)(5) and paragraph (2), include only such drugs (including contrast agents) and biologicals, respectively, as are included (or approved for inclusion) in the United States Pharmacopoeia, the National Formulary, or the United States Homeopathic Pharmacopoeia, or in New Drugs or Accepted Dental Remedies (except for any drugs and biologicals unfavorably evaluated therein), or as are approved by the pharmacy and drug therapeutics committee (or equivalent committee) of the medical staff of the hospital furnishing such drugs and biologicals for use in such hospital. CMS states that a careful reading of this statutory language convinces them that inclusion of an item in USPDI does not necessarily mean that the item is a drug or biological. Inclusion is a necessary condition but, according to CMS, is not enough. See 67 Fed. Reg. at 66757. Rather, if CMS is to call a drug for CMS purposes, CMS -2- must make its own determination that the product is a drug or biologic. In the case of Zevalin, CMS determined it not to be a drug or biologic. CMS then determined that the entire class of therapeutic and diagnostic radiopharmaceuticals were not drugs or biologics. CMS identifies that Zevalin consists of a radioactive isotope that is delivered to its target tissue by a monoclonal antibody. “Because of the specific requirements associated with delivery of radioactive isotope therapy, any product containing a therapeutic radioisotope will be considered under the category of benefits described under Section 1861(s)(4) as a therapy.” Id. CMS then suggests that “similarly, the appropriate benefit category for all diagnostic radiopharmaceuticals, including the diagnostic formulation of Zevalin, is under Section 1861(3) for other diagnostic tests.” As discussed below, CMS’ characterization of Zevalin and the entire class of radiopharmaceuticals fails to reflect the facts about these products, misconstrues the law, is inconsistent with CMS’ prior policy and FDA regulatory status, and presents this radical change in substantive policy in violation of the Administrative Procedures Act. C. Factual Background on Radiopharmaceuticals The vast majority of radiopharmaceuticals, diagnostic and therapeutic, are included or approved for inclusion in the United States Pharmacopoeia, the National Formulary, other compendia, such as USP-DI, or are approved by the pharmacy or drug therapeutics committee (or equivalent committee) of the medical staff of the hospital furnishing the radiopharmaceutical. Moreover, every radiopharmaceutical is approved by the Food and Drug Administration as a drug or as a biologic. Radiopharmaceuticals are administered as part of nuclear medicine diagnostic or therapeutic procedures. The radiopharmaceutical is not the procedure, and commonly is NOT procedure-specific. While the radiopharmaceutical is an integral component, there are significant additional components of the procedure involving evaluation of the patient, patient preparation, administration of the radiopharmaceutical for diagnostic or therapeutic purposes, performance of diagnostic measurements of the biodistribution of the radiolabeled drug, use of various types of equipment, such as a gamma camera, physician supervision and interpretation services, nuclear medicine technologist services, highly specialized protective materials for storing, administering and disposing the radiopharmaceutical, to keep patients and hospital staff safe from over exposure, and other highly sophisticated equipment to perform, monitor and manage the procedure. D. Analysis – Radiopharmaceuticals are Drugs 1. HOPPS Statute Clear on its Face that Radiopharmaceuticals are Drugs. The Medicare statute authorizing transitional pass through payment for radiopharmaceuticals expressly states, “A radiopharmaceutical drug or biological -3- product used in diagnostic, monitoring and therapeutic nuclear medicine procedures…” Social Security Act section1833(t)(6) A)(iii) (emphasis added). The statute is clear on its face that radiopharmaceuticals are drugs for purposes of the pass through payment. CMS ignores this clear statutory description, and gives no reason to reject legislative direction, and administratively over-ride the statue, merely because a radiopharmaceutical is new. 2. HOPPS Statute Includes Radiopharmaceuticals as One Product in a Class of Drugs That Should be Treated Consistently. Looking at the larger context of HOPPS pass through statutory provisions, the statute consistently refers to a class of drugs, and specifically includes radiopharmaceuticals in that class. For example, section 1833(t)(6)(C) addresses the term of the pass through period and states “in the case of a drug or biological described in clause (i), (ii), or (iii) of subparagraph (A).” The reference to (iii) is the earlier section expressly on “radiopharmaceutical drugs” and clearly links radiopharmaceuticals as one in a larger class of drugs. Thus, the broader statutory context reinforces the specific statutory language making clear that radiopharmaceuticals are drugs. Basic principles of statutory construction require reading these provisions in a way that advances consistency in implementing the program. CMS’ approach rejects a consistent approach. 3. CMS Characterization of Radiopharmaceuticals as Diagnostic Tests or Therapy is a Misapplication of the Law. CMS’ suggestion that a diagnostic radiopharmaceutical is a diagnostic test under section 1861(s)(3) of the Social Security Act is a misapplication of the law. Simply stated, a radiopharmaceutical is not a test. Rather, it is a component of the test, which involves professional services, and a number of other products and resources. Using such an approach, CMS would have us believe that an engine is a car, or that fuel is an engine. CMS has properly characterized electrocardiograms, electroencephalograms, ultrasound procedures as diagnostic test under section 1861(s)(3), since these are bona fide diagnostic tests. CMS has never suggested that the products which are used to perform the test are the test. (CMS’ recent policy on home prothrombin testing represents another departure from past practice characterizing durable medical equipment as a diagnostic test.) CMS’ effort to recharacterize radiopharmaceuticals as tests is incorrect and unprecedented in CMS policy on drugs. 4. Radiopharmaceuticals Meet Statutory Definition as Drugs Radiopharmaceuticals meet the statutory definition as drugs under Social Security Act §1861(t), since they are either reported in the various drug compendia, or recognized by hospitals as drugs. For CMS to impose new conditions on -4- radiopharmaceuticals, that exceed the statutory definition, especially with no notice and comment, is arbitrary, capricious, and not within CMS’ authority. 5. The Food and Drug Administration (FDA) Regulates Radiopharmaceuticals as Drugs or Biologics. Need for Reasonably Harmonized Regulatory Schemes The FDA regulates radiopharmaceuticals as drugs or biologics, historically and currently finding that these products must meet the Federal Food Drug and Cosmetic Act requirements as drugs or biologics. FDA holds the manufacturers to the standards set for these products in the Center for Drug Evaluation and Research or the Center for Biologics Evaluation and Research. FDA and CMS are both agencies of the Department of Health and Human Services which should not allow its branches to create double standards. While FDA’s statutory authority differs from CMS’ authority, it is in the best policy interests for CMS and FDA to resolve potential ambiguities in regulations in a way that harmonizes these regulatory schemes. If not, manufacturers will be held to significantly different standards. Hospitals will also be at risk for confusing and contradictory regulatory requirements with no improvement in public health, safety or provider payment. 6. Prior CMS Practice has Been to Treat Radiopharmaceuticals as Drugs. For over five years, CMS has treated radiopharmaceuticals as drugs for payment purposes.1 CMS has processed HCPCS applications for radiopharmaceuticals as if they were drugs. CMS advised the Nuclear Medicine APC Task Force, which includes the Council for Radionuclides and Radiopharmaceuticals (CORAR) and manufacturers that to be eligible for pass through payment, manufacturers needed to obtain AWPs for radiopharmaceuticals. The AWPs have been the statutory basis for Medicare payment for drugs. CMS has published payment amounts based on AWPs for radiopharmaceuticals under HOPPS for three years. This November 1, 2002 discussion is a fundamental reversal in CMS’ prior practices and prior policy. 7. CMS Effort to Change Policy on Radiopharmaceuticals is Flawed Procedurally. CMS is making a radical change in prior policy with a procedure that is flawed and inadequate under the Administrative Procedures Act. Such a substantive change 1 HCFA Transmittal No 1717 (July 1997) updating the Medicare Intermediary Manual section 3631 instructed hospitals, among other things, to bill radiopharmaceuticals under revenue code 636 Drugs requiring Detailed Coding. -5- in policy for an entire class of products cannot be done simply by a comment in the preamble. In fact, CMS’ new position is essentially hidden is a discussion titled “Estimates of Pass through Spending” and within a discussion on Zevalin. CMS can only make such a change through appropriate advance notice and an opportunity for public comment. Further, CMS states that it believes that the pricing for Zevalin was excessive and would have placed an unnecessary burden on the Medicare trust fund. CMS has reacted to one product’s pricing by fundamentally restructuring the statutory basis for the entire class of products. We suggest this constitutes a regulatory over-reaction and can be better addressed by dealing with particular products, as CMS has by assignment to a new technology APC. There are other tools which CMS acknowledges are available, but which CMS chose not to use, i.e., CMS’ authority to establish more equitable payment under 1833(t)(2) (E) which could be considered if CMS exercised such authority consistent with fair play and due process, including public notice and comment. E. Relief Requested – Procedural Fairness and Direct Discussion on Payment Method for Radiopharmaceuticals CMS is struggling to determine payment for one new radiopharmaceutical drug. We acknowledge that payment for radiopharmaceuticals presents unique challenges since they have all the features of drugs, plus additional clinical and technological attributes which can make payment determinations more complex. The Nuclear Medicine APC Task Force firmly believes that new approaches to determining payment need to be fully explored with CMS, but not based on a unilateral and skewed analysis. Instead of changing the definition under which all radiopharmaceuticals are classified, CMS could issue a rulemaking proposing a payment methodology for radiopharmaceuticals. This gives the public fair notice of a proposed policy change and a reasonable opportunity to comment. To effectively prepare for such a public decisionmaking, the Nuclear Medicine APC Task Force requests the opportunity to meet with CMS, to develop a proposal. We urge CMS to consider using features in the “negotiated rulemaking process” which improve communication between the users of radiopharmaceuticals, the manufacturers of radiopharmaceuticals, and CMS that can efficiently arrive at a workable payment methodology within current authority. Such improved communication is critical at this juncture, and the Task Force offers to meet with CMS in November, December and January to expedite the process. The Nuclear Medicine APC Task Force has provided and would renew proposals for payment for radiopharmaceuticals, based on methods that use actual sales prices and adjustments important for hospitals. Such an approach could establish payment levels, likely quite different than those based on AWP, which more accurately reflect the net prices paid by hospitals or physicians, and the reasonable costs of the radiopharmaceuticals. -6- END NOTES -Further Statutory Background – Medicare Definition of Drugs Social Security Act section 1861(t) also includes a section defining anticancer chemotherapeutic regimens which by and large reinforces the need for CMS to apply drug definitions in harmony with FDA standards and authoritative sources. In recharacterizing radiopharmaceuticals, CMS has rejected such approaches. The provision on cancer drugs is as follows: (2)(A) For purposes of paragraph (1), the term “drugs” also includes any drugs or biologicals used in an anticancer chemotherapeutic regimen for a medically accepted indication (as described in subparagraph (B)). (B) In subparagraph (A), the term “medically accepted indication”, with respect to the use of a drug, includes any use which has been approved by the Food and Drug Administration for the drug, and includes another use of the drug if – (i) the drug has been approved by the Food and Drug Administration; and (ii)(I) such use is supported by one or more citations which are included (or approved for inclusion) in one or more of the following compendia: the American Hospital Formulary Service-Drug Information, the American Medical Association Drug Evaluations, the United States Pharmacopoeia-Drug Information, and other authoritative compendia as identified by the Secretary, unless the Secretary has determined that the use is not medically appropriate or the use is identified as not indicated in one or more such compendia, or (II) the carrier involved determines, based upon guidance provided by the Secretary to carriers for determining accepted uses of drugs, that such use is medically accepted based on supportive clinical evidence in peer reviewed medical literature appearing in publications which have been identified for purposes of this subclause by the Secretary. -7- The Secretary may revise the list of compendia in clause (ii)(I) as is appropriate for identifying medically accepted indications for drugs. -8-