A report issued by the OIG on November 21, 2017 found that inclusion of the more costly self-administered versions of Orencia and Cimzia when calculating Medicare Part B costs caused Medicare and its beneficiaries to pay an additional $366 million between 2014 and 2016. OIG is calling for legislative change to address this issue.
The cost of drugs under Medicare Part B is based on an equation that includes manufacturer-reported calculations. Using Orencia as an example, CMS first used manufacturer-reported calculations for a physician administered version of the drug prior to 2014, but in the first quarter of 2014 the manufacturer began reporting data for a self-administered version at a significantly higher price. As is its protocol, CMS blended the data for the physician and self-administered versions of the drugs to come up with the Medicare Part B cost for the third quarter of 2014 going forward. The report found that inclusion of the self-administered version of Orencia, when blended with the physician administered version, caused the price of the drug to increase from $495 per month to $665 per month.
Both Orencia and Cimzia are used to treat arthritis, among other things, and were initially on the market as physician administered drugs only. OIG’s report found that Medicare beneficiaries paid $73.2 million in increased costs for Orencia and Cimzia between 2014 and 2016 because the self-administered versions of these drugs were included in calculating the Medicare Part B cost.
Both CMS and the U.S. District Court for the District of Columbia (in the case of Allergan, Inc. v. Burwell, No. CV 13-00264 (RJL), 2016 WL 1298960, at *1 (D.D.C. Mar. 31, 2016)), interpret the applicable law to require inclusion of noncovered versions of drugs such as those at issue here. In light of this interpretation, OIG is calling for CMS to seek legislative change that would “provide the agency flexibility to determine when noncovered versions of a drug should be included in Part B payment amount calculations” based on various factors including cost implications. CMS is not in agreement with OIG’s position. In comments provided in the report, CMS stated that it is concerned that modifying the legislation “could limit the flexibility afforded to healthcare professionals which could negatively impact access to medically necessary drugs as well as increase the cost of these drugs.”
The OIG report is available here.
