Keeping you updated on the latest Medicare and Part D news

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CMS Announces Over $380 Million in Medicare Savings from Accountable Care Organizations

Medicare’s Accountable Care Organization (ACO) models, which were created under the Affordable Care Act, are voluntary groups of hospitals and health care providers who work together to provide high quality, coordinated care while reducing health care costs. When an ACO meets or exceeds care quality standards and reduces spending, it will share the in the savings it achieves for Medicare overall.

There are two types of ACOs, differentiated by the amount of risk health care providers are willing to undertake- Medicare Shared Savings (lower-risk) and Pioneer(higher-risk). In 2012, 114 ACOs signed up for the former and 32 for the latter.

According to interim financial analysis released by CMS, ACOs achieved savings exceeding $380 million in their first year. Of the 32 original Pioneer ACOs, 9 left the program or switched to the lower-risk model. The 23 remaining Pioneer ACOs achieved gross savings of $147 million for Medicare. Of the 114 Medicare Shared Savings ACOs, 54 spent less than projected and 29 reduced costs enough to share in the savings for Medicare. Final results are expected later in the year, but the interim analysis indicates a strong start for CMS’ ACO initiatives and a promising alternative to the fee-for-service model.

CMS Press Release



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Not All FDA Approvals are Created Equal

02/11/14 Update: FDA Commissioner Margaret Hamburg responded to the results of the AMA study.

A recent study in the Journal of the American Medical Association found wide variations in the quality and quantity of trial evidence used by the FDA for drug approvals between 2005 and 2012. The authors reviewed the approval of 188 novel therapeutic agents approved during this period and discovered that over a third of of the agents were approved on the basis of a single trial. The FDA guidance suggests that manufacturers provide at least two trials that independently demonstrate the efficacy of the drug. However, there are also circumstances in which a single trial might be sufficient for FDA approval (e.g., fast-tracking drugs for life-threatening diseases).

The study authors also found variations in trial features, such as duration, endpoints, and patient completion rates. According to Dr. Joseph Ross, the study’s senior author, about 45 percent of trials tested a “surrogate endpoint” rather than the “clinical endpoint” (e.g., the study showed that a drug reduced tumor size, but did not analyze whether the drug improved survival rates for cancer patients). Additionally, over 40 percent of the 188 drugs studied were meant to treat long-term conditions such as asthma and diabetes; however, more than half of these drugs were approved using trials lasting less than six months. Thus, the long term effects are not fully known when the drug enters the market and strong post-marketing surveillance is needed. Overall, variations in the quantity and rigor of evidence needed for FDA approval can have serious implications on prescribers and patients deciding to use newly approved drugs.



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FDA Warns Against High-Dose Acetaminophen Combination Drugs

The FDA issued a Safety Alert this week asking health care professionals to stop prescribing and dispensing prescription combination drug products containing more than 325 milligrams of acetaminophen per dosage unit.

Three years ago, the FDA asked manufacturers of prescription combination drug products to limit the amount of acetaminophen to no more than 325 milligrams per dosage unit. More than half of manufacturers have voluntarily complied with this request, and the FDA is now pursuing stronger measures to remove high-dose acetaminophen combination drugs from the market.

To read more about the safety risks of acetaminophen overdose, please click here to view a previous blog post.

FDA Safety Alert

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Maryland’s Bold Plan Caps Hospital Spending and Moves Away From Fee-For-Service Model

Currently, Maryland is the only state in the nation where an independent state commission sets hospital rates for all payers, meaning that private insurers and Medicare pay the same. This unique arrangement dates back to the 1970s, when the state received a waiver from Medicare to pay Maryland’s hospitals different rates than the rest of the nation. 

The U.S. Department of Health and Human Services recently approved Maryland’s bold new initiative to build on this oversight. In addition to setting hospital rates, Maryland can now give each of the state’s 46 hospitals a budget and limit health spending growth to 3.58 percent for the next five years. The growth limit reflects Maryland’s average annual per capital growth rate over the past decade. To work within their new budgets, hospitals aim to sharply reduce the number of infections acquired in the hospital as well as readmissions. Since hospitals have a firm budget and quality targets to meet, they are expected to shift from a fee-for-service to a pay-for-performance model and becoming more accountable to patients.

During the five-year demonstration program, Maryland is required to generate $330 million in Medicare savings. If Maryland fails to meet performance goals, state hospitals will transition to the national Medicare payment systems over two years. Maryland’s experiment will serve as a model for the rest of the nation on whether government regulation can drastically reduce health spending.  If successful, it is likely that other states will emulate Maryland’s initiative.



CMS Releases Policy Proposals for Medicare Part D

CMS recently released a variety of policy changes for the Part D program titled Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs. The proposal will be published on January 10, 2014 and open for comments for 60 days. According to CMS, the proposed changes would yield $1.3 billion in savings between 2015 and 2019.

Notable components of the proposal include:

-changing the criteria for protected drug classes.

  • Sponsors are currently required to cover all drug products within the protected classes, but CMS hopes to identify more cost- efficient formulary requirements.

-greater regulation of preferred pharmacy networks.

  • In 2014, more than 70% of Part D plans use preferred pharmacy networks, up from around 40% in 2013. This has been cause for concern for CMS since an analysis of the top 25 brand and top 25 generic drugs showed that some preferred pharmacy networks had higher costs. CMS wants to ensure that preferred pharmacy networks produce cost savings, and that savings are passed on to beneficiaries.

greater CMS oversight of physicians and non-physician practitioners

  • The proposal would require all physicians and non-physician practitioners who write prescriptions covered by Part D to be enrolled in Medicare. Furthermore, CMS would have the authority to exclude practitioners with improper prescribing habits or a suspended/revoked license. Starting in 2015, sponsors must deny claims, including at the point of sale, which do not have an active and valid National Provider Identifier (NPI).

including U.S. citizenship or lawful presence as a requirement to enroll in Part D plans

-increased data sharing and program integrity investigation

  • CMS proposed the ability to release unencrypted prescriber identifiers and pharmacy identifiers to a broader audience of requestors, representing a change in current regulations governing the release of Prescription Drug Event (PDE) data. The goal is to encourage external researchers to investigate areas of program integrity and quality.
  • CMS also wants the authority to directly request information from all relevant entities stemming from the sponsor, as well as remove the current provision allowing sponsors to choose how requested information will be provided to CMS. Currently, CMS’ fraud contractors cannot request information such as a beneficiary’s medical records directly from practitioners and hospitals; they can only request data through the sponsors, who act as a middleman. In publications such as ProPublica, the Part D program has undergone severe criticism for a lack of fraud controls (see previous blog post). The current proposal would increase CMS’ ability to investigate fraud and improper prescribing practices, as well as take action against prescribers.

-limiting parent organizations to one Prescription Drug Plan (PDP) sponsor contract per PDP region, and limiting stand-alone PDP sponsors to two plans per PDP region

  • The proposed limitations aim to encourage true competition between PDP contracts, increase efficiency, and preserve the integrity of performance ratings. When the same parent organization has multiple PDP contracts within the same region, CMS believes that competition is compromised and that duplicate contracts do not provide better options than could be offered by a single contract. Furthermore, parent organizations can move lower performing plans into separate contracts to improve the ratings of their better performing contracts, which undermines the accuracy of performance ratings. 
  • CMS also proposed changing the bidding process to accept only one basic and one enhanced bid per stand-alone PDP sponsor by 2016. Generally, the distinguishing feature between plans is coverage in the coverage gap (a.k.a. the donut hole). As the coverage gap closes, CMS believes that the meaningful differences between plan options will decrease and that two plan options, one basic and one enhanced, are sufficient to address beneficiary needs. Currently, many sponsors submit three bids per region each service year, one basic and two enhanced, which is not only inefficient but also a source of risk segmentation. If this limitation took effect in CY2013, it would have reduced the total number of stand alone plans by 13 percent, but only impacted 2 percent of overall stand-alone PDP enrollment. 

The proposal can be accessed here. Extended analysis is expected once the proposal is formally published and open for comments.