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Fee for Service Trends:
A Look at Medicare Part B
Scott Reid, Pharm.D.
Vice President
Specialty Pharmacy Operations
National Medicare Prescription Drug Congress
Nov. 1, 2005
©2005 Caremark. All rights reserved.
This presentation contains confidential and proprietary information of Caremark and cannot be
reproduced, distributed, or printed without written permission from Caremark.
Snapshot of Caremark
Participation in Medicare
 Medicare Part B provider since 1983
 Home infusion: 1979-1996
 Specialty pharmacy: current
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Hemophilia
Oral oncology
AWP transition to average sale price (ASP)
 Coordination of benefits
 Competitive acquisition program: proposed
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Office administered drugs
ASP + 6%
 Part D: January 2006
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MRDD: September 2004
PDP and pharmacy provider
AWP-%
Medication therapy management (MTM)
Confidential and proprietary information. Not for distribution.
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Home Infusion Therapy
 Medicare Part B: prosthetic device / home medical
equipment benefit
 Payment available for drugs and supplies incident to the
use of a pump:
 Drug component
 Administration/catheter care kit
 Pump fee
 AWP model provided adequate payment to cover
product, professional services, ancillaries and services
 Professional services of a pharmacist and nurses are
not recognized under ASP, including:
 Patient education/training
 Medication management
 Care management and coordination
Confidential and proprietary information. Not for distribution.
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Home Infusion Therapy
 Not all infusion therapy drugs covered under
Medicare Part B
 Under the Medicare Modernization Act, infused
medications covered under Part B remain at 95%
of average wholesale price (AWP)
 Drugs not administered via an infusion pump are
covered under Part D
 Part D does not recognize or cover nondrug
products, supplies and services, causing problems
for infusion therapy providers where another
benefit/policy does not exist
 Final disposition of infusion products under further
review
Confidential and proprietary information. Not for distribution.
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Part B Pricing Reform:
Pharmacy Provider
 Physician services
 ASP +6%
 Increase in fees for existing procedure codes
 Implemented new codes for previously unrecognized
services / expenses
 Alternative to buy and bill
 Conversion to ASP + 6% does not recognize:
 Professional services of a pharmacist
 Care management
 “Buried” costs for pharmacies
 Pharmacies have no method to bill or receive payment
for professional services of a pharmacist
Confidential and proprietary information. Not for distribution.
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Part B Pricing Reform:
Pharmacy Provider
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Hemophilia payment methodology was amended to add an
administration fee for each unit dispensed
Potential access issue due to pricing methodology
CMS has addressed this issue in part by covering a
“dispensing / supply” fee for other Medicare Part B drugs:
 Inhalation
 Oral oncologics
 Transplant
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Dispensing fee to cover costs of service
Supply fee to cover higher costs of processing claims due to
lack of online adjudication
CMS will continue to evaluate to assure adequacy of
payment
Hospital outpatient prospective payment system:
 July 2005: CMS proposes ASP +8%
 Supported by hospital groups
Confidential and proprietary information. Not for distribution.
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ASP and Today’s
Pharmacy Marketplace
 Pricing system / benchmark developed to provide
more accurate reporting of drug prices to government
and other payors
 Weighted average of nonfederal sales from
pharmaceutical manufacturers to wholesalers
 Net of volume discounts, rebates, chargebacks and
other benefits tied to sale of drug
 Average is calculated across all classes of trade with
exception of hospitals and government programs
(Medicaid, 340B, federal supply schedule)
Confidential and proprietary information. Not for distribution.
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ASP and Today’s
Pharmacy Marketplace
 Rebates, discounts and other price reductions are not
available to all purchasers on an equal basis
 Pricing to providers varies significantly
 Reflects prices paid by wholesalers not by pharmacy
providers
 Rebates are not available to pharmacies
 Does not reflect acquisition price, costs of acquisition
and management of inventory of pharmacies
 Professional services of pharmacists
Confidential and proprietary information. Not for distribution.
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Competitive Acquisition Program
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Alternative to physician buy and bill
Uses ASP as basis for payment with mark-up of 6%
ASP calculation crosses over several classes of trade
Lag time between current prices and when ASP is set
Quantity dispensed by pharmacy may not be quantity paid
Logistical issues between provider processes and physician
/ clinic practices
Does not contemplate unused/unadministered drug
Wholesale versus pharmacy model … or other?
Fails to account for real expenses of delivering and
managing the program
Most potential providers are under water based on drug cost
alone
Waiting for revised rules
Confidential and proprietary information. Not for distribution.
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Medicare Part B and Part D
 Coverage under Part B versus Part D
 Immunosupressives: Organ transplants
 Oral antiemetics: Adjunct to oncologics
 Oral oncologics: drug is same as, precursor or
metabolite of IV drug already covered
 Inhalation drugs: nebulizer only inhalers under Part D
 Parenteral drugs not administered via a pump covered
under Part D
 Medicare Replacement Drug Demonstration drugs
 Further changes to be made after implementation after
further review and analysis by CMS
Confidential and proprietary information. Not for distribution.
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Summary
 Need an effective and timely method for calculating ASP
that more directly reflects the prices paid by pharmacies
 Percent mark-up must recognize and cover total cost of
providing medications and service
 Benefit design and coverage must be appropriate for the
service model and site of care
 Impact on specialty pharmacy’s ability to continue to
provide current services and optimize value to Medicare
beneficiaries, health plans and physicians
 Transition to ASP model will need to recognize and pay for
professional services of a pharmacist
 Adoption of new current procedural terminology codes for
MTM services and its application under a drug benefit
Confidential and proprietary information. Not for distribution.
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