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Medicare Rejects Most Bids for New Technology Add-On Payment

By Kerry Young, CQ Roll Call

August 5, 2015 -- Medicare last month approved only two of six pending requests for special payments that are meant to encourage hospitals to more quickly adopt expensive new breakthrough products. This falls in line with an historically low acceptance rate that's sparked industry complaints about the new technology add-on payment program.

In the case of one of the successful fiscal 2016 applications, influential trade groups joined Amgen Inc. in countering Medicare officials' skepticism about a special payment for the Blincyto cancer drug. The Biotechnology Industry Organization told the Centers for Medicare and Medicaid Services (CMS) that the agency has "taken an increasingly cramped interpretation" of regulations for the new technology add-on payment program (NTAP). The Pharmaceutical Research and Manufacturers of America, concurred, calling CMS' approach "too restrictive."

It "creates a significant barrier for innovators, as illustrated by the proposed denial of a NTAP designation for Blincyto, a precision medicine for treatment of a rare and aggressive form of leukemia," PhRMA argued in a June letter to CMS.

CMS as of last year had approved only about a third—19 of 53—applications for new technology add-on payments since 2001, when the program began, according to a study published in the February issue of Health Affairs. About $202 million was paid between fiscal 2002 and 2013 through the NTAP program, for which the Congressional Budget Office once projected a ten-year cost of $500 million, wrote John Hernandez, a research executive at medical-device maker Abbott Vascular and lead author of the paper, and his colleagues.

The biggest hurdle to securing NTAP payments, though, appears to be persuading Medicare officials that a new drug or medical device offers a true advantage to existing treatments.

CMS cited that as a factor last month in explaining rejections of NTAP applications in the fiscal 2016 hospital inpatient rule. CMS officials have taken steps to make companies aware of the high bar set for NTAP payments, while also allowing them to try to make their strongest case for their applications.

"We only want to make an add-on payment if those technologies are really a substantial clinical improvement or better than what is already out here," Marc Hartstein, CMS' director of the hospital and ambulatory group, reminded attendees at a February public meeting on the NTAP applications for fiscal 2016.

The NTAP program is meant to partially compensate hospitals for using new products that are not reflected already in Medicare's regular reimbursement calculations. CMS uses data from previous years, Hartstein explained. The NTAP payments cover about half of the estimated extra cost of using a product that's too new to the market to have been added into CMS' payments, which are pegged to diagnosis-related groups.

To qualify for add-on payments, the new products also must be expensive enough that hospital staff might balk at using them without some softening of the financial hit.

"If they are not particularly costly, there are not substantial barriers to adopting that technology so there is really no reason to make an add-on payment," Hartstein said.

Lawmakers are interested in possible revisions to the rules. The staff of the House Ways and Means Committee is taking a look at the program as it prepare to move legislation to overhaul certain Medicare payment practices for hospital care. In January, the House Energy and Commerce Committee also included a proposal addressing NTAP appeals in a discussion draft of its so-called Cures bill. This does not appear in the version (HR 6) that passed the House last month.

The Advanced Medical Technology Association said it is seeking more of an understanding about how Medicare officials make the decisions on NTAP. This would help companies in crafting their applications, said Don May, executive vice president for payment and health care delivery policy at AdvaMed, which represents makers of medical devices.

"There seems to be a disconnect between what CMS considers to be acceptable evidence and what others outside in the peer-review community think is a significant improvement," he said.

CMS has pleased AdvaMed by showing a willingness to make allowances for expensive new technologies in the agency's attempt to reshape Medicare through pilot programs, which sometimes offer hospitals and doctors a chance to share in savings.

Medicare last year decided to excluded new technology add-on payments that it allowed for an Abbott device, the MitraClip, used when certain heart valves don't close tightly enough, from calculations involved in its Bundled Payment for Care Improvement program, AdvaMed said. The agency since has expanded the policy to expand other NTAP payments when calculating target prices and other measures for the program, the group said.

Not all of the new technologies subsidized through NTAP have worked out. Among the first products was Eli Lilly & Co.'s sepsis drug Xigris, for which the additional reimbursement was cleared in fiscal 2003 and 2004, according to CMS. In 2011, the drug was withdrawn worldwide when new research failed to prove it could help prevent death in people suffering from septic shock.

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