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Report Says CMS Should Consider Asking Lawmakers for ‘Least Costly’ Authority

Tuesday, November 27, 2012

The Centers for Medicare & Medicaid Services should consider asking Congress for authority to implement policies that would allow the agency to pay only for the least-expensive item or service within a group of comparable items, in light of a federal court ruling that said “least costly alternative” policies for Medicare beneficiaries are not allowed, the Department of Health and Human Services Office of Inspector General recommended in a report released Nov. 23.

“By seeking a legislative change to amend the current statutory Medicare provisions applicable to Medicare Part B drugs, CMS could regain the flexibility to implement LCA policies for certain clinically comparable products under circumstances it deems appropriate,” according to Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under Medicare Part B.

Court Ruling Nixes LCA Policy.

For certain Part B (doctor administered) drugs, CMS had been basing the Medicare reimbursement for a group of clinically comparable products on that of the least costly one. However, in 2009, a federal appeals court affirmed a lower court's decision that HHS may determine only whether a drug is reasonable and necessary and that the Medicare Act did not authorize the agency to use LCA policy in setting reimbursement amounts for covered drugs (245 HCDR, 12/24/09).

The report was requested by Rep. Ken Calvert (R-Calif.), a member of the House Committee on Appropriations, who indicated that the withdrawal of LCA policies for prostate cancer drugs “may have created an unintentional incentive for physicians to administer costlier drugs,” the OIG report said.

Calvert told BNA in a statement that, “given Medicare's current fiscal outlook, it is imperative that policy decisions be made with the program's fiscal health, as well as the beneficiary's health, in mind.”

Although he did not say whether he planned to introduce LCA legislation, he said he looked forward to working with other House members to address OIG's recommendations.

LCA Use for Cancer Drugs.

In 1995, Medicare contractors began using LCA policies to control the cost of luteinizing hormone-releasing hormone (LHRH) agonists used to treat prostate cancer. The policies set the payment amount for the more expensive drug (Lupron) at the level of its lower-priced alternative (Zoladex).

“However, some advocacy groups have voiced opposition to LCA policies, stating that they drive providers to base treatment decisions on cost rather than on clinical factors, such as an individual patient's response to a drug or its side effects,” the report said. “Others have expressed concern that LCA policies would ultimately push patients toward less expensive but more invasive methods for achieving hormone suppression, such as simple orchiectomy (i.e., the surgical removal of one or both testicles).”

After the 2009 court decision, which involved inhalation drugs, the report said that “CMS directed contractors to discontinue all LCA policies for Part B drugs.”

Millions in Savings.

In its analysis, OIG found that, if LCA policies had been in effect between the third quarter of 2010 and the second quarter of 2011, Medicare reimbursement for three of the prostate drugs would have been based on that of the least costly alternative.

Over the period, costs would have been reduced from $264.6 million to $231.3 million, yielding a total savings of $33.3 million or 13 percent, the report said, with 20 percent, or $6.7 million, realized by beneficiaries through reduced coinsurance.

The report said that, although the use of hormone therapy has been decreasing overall, a shift in utilization patterns in favor of costlier products coincided directly with the removal of LCA policies.

“LCA policies may be a useful tool for conserving taxpayer funds, provided that patients retain access to appropriate care,” the report concluded.

In September comments on the report, CMS agreed that legislative action would be needed before it could institute LCA policies and that any such request would appear in the administration's annual budget request.

By Mindy Yochelson  


The report is at https://oig.hhs.gov/oei/reports/oei-12-12-00210.pdf.

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