Medicare Program; International Pricing Index Model for Medicare Part B Drugs, 54546-54561 [2018-23688]

Download as PDF 54546 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules facilities. We do not see a need for the EPA to continue investing its resources to complete this rule to develop a ‘‘more workable and sustainable regulatory framework’’ as originally anticipated when we proposed these ISR-specific standards, especially where current production is reduced and little or no growth is expected in the near future. The statutory authorities providing for this ongoing regulatory and licensing function remain unchanged. Thus, the appropriate regulatory authorities may decide on a case-by-case basis to revise their own pre-existing regulations based on these authorities if they deem it necessary to assist with their management of ISR facilities in a particular state or local area. In addition, we find support for our decision to withdraw the proposed rule in the NRC’s comments on the 2017 Proposal. As explained above, the EPA developed the proposed standards partly based on its understanding, after consultation with the NRC, that the anticipated growth in the number of ISR facilities highlighted a need for standards specific to ISR facilities, rather than continuing to apply standards that were originally written to address surface disposal of uranium mill tailings.35 However, the NRC expressed the following view in its public comments on the proposed rulemaking: The NRC’s current regulations, at 10 CFR part 40, Appendix A, and those of the various Agreement States, as supplemented by sitespecific license conditions, guidance documents (e.g., NRC’s ‘‘Standard Review Plan for In Situ Leach Uranium Extraction License Applications,’’ NUREG–1569), and the operational experience and technical expertise of the regulatory agency staff, constitute a comprehensive and effective regulatory program for uranium in situ recovery operations (ISR) facilities.36 khammond on DSK30JT082PROD with PROPOSAL Considering the prevailing economic conditions affecting current and projected production, which leads the NRC now to expect significantly fewer future license applications, as opposed to the large increase that it expected at the time the rulemaking process was initiated (which was motivation for the proposal), we conclude that withdrawing this proposal is appropriate. III. Statutory Authority The statutory authority for this notice is provided by section 275 of the Atomic 35 82 FR at 7402–3; 80 FR 4164–7. 36 EPA–HQ–OAR–2012–0788–0312 VerDate Sep<11>2014 17:16 Oct 29, 2018 at 1. Jkt 247001 Energy Act (AEA), as added by section 206 of UMTRCA (42 U.S.C. 2022) and the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.). drug costs translated into a set payment amount, would lead to higher quality of care for beneficiaries and reduced expenditures to the Medicare program. IV. Impact Analysis DATES: Because the EPA is not promulgating any regulatory requirements, there are no compliance costs or impacts associated with today’s final action. ADDRESSES: V. Statutory and Executive Order Reviews Today’s action does not establish new regulatory requirements. Hence, the requirements of other regulatory statutes and Executive Orders that generally apply to rulemakings (e.g., the Unfunded Mandate Reform Act) do not apply to this action. Dated: October 18, 2018. Andrew R. Wheeler, Acting Administrator. [FR Doc. 2018–23583 Filed 10–29–18; 8:45 am] BILLING CODE 6560–50–P DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Chapter IV [CMS–5528–ANPRM] RIN 0938–AT91 Medicare Program; International Pricing Index Model for Medicare Part B Drugs Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Advance notice of proposed rulemaking with comment. AGENCY: We are issuing this advance notice of proposed rulemaking (ANPRM) to solicit public comments on potential options we may consider for testing changes to payment for certain separately payable Part B drugs and biologicals (hereafter called ‘‘drugs’’). Specifically, CMS intends to test whether phasing down the Medicare payment amount for selected Part B drugs to more closely align with international prices; allowing privatesector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business; and changing the 4.3 percent (postsequester) drug add-on payment in the model to reflect 6 percent of historical SUMMARY: PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 31, 2018. In commenting, please refer to file code CMS–5528–ANPRM. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the ‘‘Submit a comment’’ instructions. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–5528–ANPRM, P.O. Box 8013, Baltimore, MD 21244–8013. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–5528– ANPRM, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Hillary Cavanagh, 410–786–6574 or the IPI Model Team at IPIModel@ cms.hhs.gov. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http:// www.regulations.gov. Follow the search instructions on that website to view public comments. E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951. I. Executive Summary khammond on DSK30JT082PROD with PROPOSAL A. Purpose The Medicare program and its beneficiaries currently pay more for many high-cost drugs than many other countries.1 The Centers for Medicare & Medicaid Services’ (CMS) Center for Medicare and Medicaid Innovation (‘‘Innovation Center’’) is taking action on President Trump’s goal to lower drug costs for Medicare beneficiaries by exploring a potential model that seeks to ensure the Medicare program pays comparable prices for Part B drugs relative to other economically-similar countries. The potential International Pricing Index (IPI) model would have several goals, including: reducing Medicare program selected expenditures and beneficiary cost-sharing for separately payable Part B drugs (for example, drug administered in physician offices and hospital outpatient departments), preserving or enhancing quality of care for beneficiaries, offering comparable pricing relative to international markets, removing providers’ financial incentive to prescribe higher-cost drugs while creating revenue stability, minimizing disruption to the current supply chain, and increasing Medicare efficiency and value to reduce federal spending and taxpayer dollars. With this advance notice of proposed rulemaking (ANPRM), the CMS is soliciting public feedback on key design considerations for developing the IPI Model. The IPI Model aims to drive better quality for Medicare beneficiaries and reduce Medicare drug spending by offering comparable pricing relative to other countries and addressing flawed incentives in the current payment system. Currently, Medicare pays substantially more than other countries for the highest-cost physician administered drugs.2 In addition, the 1 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/pdf-report/ comparison-us-and-international-prices-topspending-medicare-part-b-drugs. 2 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 current Medicare payment system has several features that may be causing greater utilization of higher priced drugs.3 Under the current system, Medicare pays doctors and hospitals a fee set at 6 percent of the price of the drug so that the dollar amount of the add-on increases with the price of the drug rather than a set payment reflecting the service being performed. The current buy-and-bill system also requires physicians to purchase highcost Part B drugs and wait for Medicare reimbursement, exposing practices to financial risk and jeopardizing their ability to operate and provide care in their communities. We are proposing to design the IPI Model to achieve the following: (1) Reduce expenditures while preserving or enhancing the quality of care for beneficiaries; (2) ensure the United States (U.S.) is paying comparable prices for Part B drugs relative to other countries by phasing in reduced Medicare payment for selected drugs based on a composite of international prices; (3) reduce out-of-pocket costs for included drugs for Medicare beneficiaries, and thereby increase access and adherence due to decreased drug costs; (4) maintain relative stability in provider revenue through an alternative drug add-on payment for furnishing drugs that removes the current percentage-based drug add-on payments, which creates incentives for higher list prices and to prescribe higher cost drugs; (5) reduce participating health care providers’ burden and financial risk associated with furnishing included drugs by using private-sector vendors to purchase and take title to included drugs; and (6) introduce greater competition into the acquisition process for separately payable Part B drugs. B. Summary of Major Provisions In section III. of this ANPRM, we discuss the model concept design for the IPI Model. This IPI Model would focus on selected separately payable Part B drugs and biologicals (hereafter called ‘‘drugs’’). Specifically, the IPI Model would initially focus on Part B single source drugs, biologicals, and biosimilars that encompass a high percentage of Part B drug utilization and spending. The Innovation Center would test this model under section 1115A of accessed via https://aspe.hhs.gov/pdf-report/ comparison-us-and-international-prices-topspending-medicare-part-b-drugs. 3 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/pdf-report/ comparison-us-and-international-prices-topspending-medicare-part-b-drugs. PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 54547 the Social Security Act (the Act), which authorizes testing models expected to reduce program expenditures, while preserving or enhancing the quality of care furnished to beneficiaries. The model under consideration would include physicians, hospitals, and potentially other providers and suppliers in selected geographic areas. The IPI Model test would include the following components: • Set the Medicare payment amount for selected Part B drugs to be phased down to more closely align with international prices; • Allow private-sector vendors to negotiate prices for drugs, take title to drugs, and compete for physician and hospital business; and • Increase the drug add-on payment in the model to reflect 6 percent of historical drug costs. • Pay physicians and hospitals the add-on based on a set payment amount structure; CMS would calculate what CMS would have paid in the absence of the model, before sequestration, and redistribute this amount to model participants based on a set payment amount. These and other components of the potential model are described in greater detail in this ANPRM. We are considering issuing a proposed rule in the Spring of 2019 with the potential model to start in Spring 2020. The potential model would operate for five years, from Spring 2020 to Spring 2025. Of note, as discussed in section III.I. of this ANPRM, the IPI Model may have an impact on Medicaid drug rebates and payments, which we continue to explore. With the release of this ANRPM, we solicit public input on our intended model design to inform our ongoing work to develop the IPI Model. II. Background A. Overview of Supply Chain 1. Current Distribution System In the U.S., Part B drugs that are administered in the outpatient setting usually flow from the manufacturer through drug wholesalers (or specialty distributors) to the provider or supplier. At each step of the process, the drugs are sold to the next entity in the supply chain and that entity takes title to the drug. Distribution management systems are employed to order drugs, track sales and shipments, manage price and customer lists, record financial transactions, and support other industry processes. Figure 1 provides a high-level E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules view of this ‘‘buy and bill’’ system 4 and existing relationships between the various entities, including product movement, financial flow, and contract relationships.5 The role of the health care provider within the buy-and-bill system is to seek out low cost drug suppliers and purchasing mechanisms (for example, by joining a group purchasing organization (GPO)), order, buy (or use financing), receive, and store drugs, administer drugs to patients, file claims to bill insurers for payment, and collect patient cost-sharing. There are many different buying strategies that enable physicians and hospitals to obtain lower drug prices. These strategies include using GPOs, group purchasing arrangements, wholesaler/distributor price lists, the 340B Prime Vendor,6 and directly negotiated agreements with manufacturers. Similarly, the current drug distribution system accommodates a variety of purchasing mechanisms and specialized distribution processes, for example, cold chain and product tracing compliance.7 Physicians generally purchase Part B drugs from a wholesaler, distributor, or specialty pharmacy. Hospitals generally purchase for their outpatient departments through their hospital pharmacy’s arrangement with a drug wholesaler. Physicians and hospitals also have arrangements with manufacturers, individually or through their GPOs, for discounts that are tied to prescribing, for example volume discounts based on purchases of drugs for all patients that are treated. Drug wholesalers, distributors, and specialty pharmacies negotiate with manufacturers on the price they will pay to acquire drugs. When applicable, contract pricing controls the price that the health care provider will pay to the wholesaler, distributor, or specialty pharmacy, while shipping and handling and other terms may vary. Through a process called the ‘‘chargeback process,’’ manufacturers reduce the final drug prices to wholesalers and other 4 The ‘‘buy and bill’’ system refers to health care providers purchasing drugs for administration to patients followed by the submission of claims to a payer. 5 Reprinted with permission. Drug Channels, ‘‘Follow the Vial: The Buy-and-Bill System for Distribution and Reimbursement of ProviderAdministered Outpatient Drugs,’’ October 14 2016, accessed via: https://www.drugchannels.net/2016/ 10/follow-vial-buy-and-bill-system-for.html. 6 The Health Resources and Services Administration (HRSA) administers the 340B Drug Pricing Program that allows certain hospitals and other health care providers (‘‘covered entities’’) to obtain discounted prices on ‘‘covered outpatient drugs’’ (as defined at section 1927(k)(2) of the Act) from drug manufacturers. The 340B Prime Vendor is responsible for securing subceiling discounts on outpatient drug purchases and discounts on other pharmacy-related products and services for participating public hospitals, community health centers, and other safety-net health care providers electing to join the 340B program. 7 A cold chain ensures that a product maintains a desired temperature all the way through the supply chain from manufacturing to delivery/ administration. Product tracing allows a user to track every step of the supply chain. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 PO 00000 Frm 00023 Fmt 4702 Sfmt 4702 E:\FR\FM\30OCP1.SGM 30OCP1 EP30OC18.001</GPH> khammond on DSK30JT082PROD with PROPOSAL 54548 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules distributors to reflect the contract prices that were applied to health care providers’ drug purchases. Increasingly, specialty pharmacies are supplying oncology drugs to health care providers that have chosen to remove themselves from the buy and bill system—or private payers are mandating use of ‘‘white bagging’’ or ‘‘brown bagging’’ (that is, pharmacy dispensed drugs delivered to the practitioner by the pharmacy or patient) to control drug costs.8 However, Medicare does not mandate use of or encourage white bagging or brown bagging.9 khammond on DSK30JT082PROD with PROPOSAL 2. Prior Competitive Acquisition Program Under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which established section 1847B of the Act, we have authority to implement the ‘‘Competitive Acquisition Program’’ or ‘‘CAP’’ for Part B drugs that are not paid on a cost or prospective payment basis. The CAP was implemented in the mid-2000s. The CAP was an alternative to the average sales price (ASP) methodology that is used to pay for the majority of Part B drugs, particularly drugs that are administered during a physician’s office visit. Instead of buying drugs for their offices, physicians who chose to participate in the CAP would place a patient-specific drug order with an approved CAP vendor; the vendor would provide the drug to the office and then bill Medicare and collect costsharing amounts from the patient. Drugs were supplied in unopened containers (not pharmacy-prepared individualized doses like syringes containing a patient’s prescribed dose). When the CAP was in place, most Part B drugs used in participating physicians’ offices were supplied by the approved CAP vendor. Unlike the buy and bill process that is still used to obtain many Part B drugs, physicians who participated in the CAP did not buy or take title to the drug. Physician participation in the CAP was voluntary, but physicians had to elect to participate in the CAP. CAP drug claims were processed by a designated carrier. CMS conducted bidding for CAP vendors in 2005. The first CAP contract period ran from July 1, 2006 until December 31, 2008. One drug vendor 8 Robinson and Howell. Specialty Pharmaceuticals: Policy Initiatives to Improve Assessment, Pricing, Prescription, and Use. Health Affairs 2014:33(10);1745–50. 9 ‘‘Brown bagging’’ is a term used when the patient obtains the drug at a pharmacy and then brings it to the physician for administration. ‘‘White bagging’’ is a term used when the specialty pharmacy ships directly to the physician office or hospital outpatient department for administration. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 participated in the program, providing drugs within approximately 180 Healthcare Common Procedure Coding System (HCPCS) billing codes (including heavily utilized drugs in Part B) to physicians across the United States and its territories. The parameters for the second round of the vendor contract were essentially the same as those for the first round. While CMS received several qualified bids for the subsequent contract period, shortly before the second contract period began, contractual issues with the successful bidders led to the postponement of the program, and the CAP has been suspended since January 1, 2009. 3. Challenges With the Statutory CAP As described previously, the CAP operated for a brief time from 2006 to 2008. The Part B drug market has changed since that time. Higher cost drugs, particularly biologicals manufactured by sole sources, are driving increasing Part B drug expenditures.10 Many of the highest price drugs and biologicals available today were not contemplated when the CAP program was established. While distribution channels have remained concentrated, today’s providers and suppliers have access to more sophisticated technologies such as electronic ordering systems and virtual inventory management systems. Since 2009, physicians have faced growing financial risks under the buy and bill approach, as the prices of Part B drugs have increased. Hospitals have varying ability to negotiate discounts, so some hospitals face similar financial challenges for the outpatient drugs they provide. Further, the rising costs of prescription drugs in the Medicare Part B program strain federal resources as well as beneficiaries’ wallets. As envisioned, the CAP had the potential to reduce risk for enrolled physicians and Medicare expenditures. As implemented, the CAP was tied to the ASP payment under section 1847A of the Act and did not achieve savings.11 In the aggregate, the submitted bids could not exceed a threshold that was based on ‘‘point in time’’ ASP data combined with historical utilization data. The submitted bids fed into the composite bid analysis and vendor 10 Medicare Part B Drug Spending Dashboard accessed via: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/Information-on-Prescription-Drugs/ MedicarePartB.html. 11 Evaluation of the Competitive Acquisition Program for Part B Drugs: Final Report, December 2009, accessed via: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/Reports/downloads/CAPPartB_Final_ 2010.pdf. PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 54549 selection process. These time consuming, imprecise mechanisms, along with other features of the CAP, limited the appeal of the program for vendors. There was no guarantee for the CAP vendors that the CAP payments would cover their drug acquisition and operating costs. Participating physicians reported that CAP requirements were challenging to integrate into efficient practice patterns and treatment regimes, especially for oncologists who prescribe dosages that may change on the day of treatment, and physicians who need to administer antibiotics urgently. Recently, we have heard from stakeholders, including physician and hospital groups, and beneficiary advocates, that a CAP-like approach with improvements, particularly in regards to onsite availability of drugs, could potentially address concerns about the financial burdens associated with furnishing Part B drugs and their rising costs, and address challenges experienced in the CAP. Stakeholder feedback on the CAP has been considered in the development of the potential IPI Model described in this ANPRM. In addition, comments received on a Request for Information on a potential model to leverage the authority under the CAP for Part B drugs and biologicals that was included in the Calendar Year 2019 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule (83 FR 37046) and comments received on the HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (83 FR 22692) were considered. B. Rising Cost of Prescription Drugs 1. Medicare Spending Medicare Part B drug expenditures have increased significantly over time. From 2011 to 2016, Medicare FFS drug spending increased from $17.6 billion to $28 billion under Medicare Part B, representing a compound annual growth rate (CAGR) of 9.8 percent, with per capita spending increasing 54 percent, from $532 to $818.12 The number of Medicare Part B FFS beneficiaries and the number of these beneficiaries who received a Part B drug increased over the 5-year period (2011 through 2016). However, the increase in total Medicare drug spending during this period is more fully explained by increases in the prices of drugs and mix of drugs for those beneficiaries who received them than by increases in Medicare enrollment and drug utilization. The 12 Spending and Enrollment Data from Centers for Medicare and Medicaid Services Office of Enterprise Data and Analytics. E:\FR\FM\30OCP1.SGM 30OCP1 54550 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules CAGR in number of Medicare Part B FFS beneficiaries is less than 1 percent between 2011 and 2016. 2. International Prices Relative to U.S. Prices Drug acquisition costs in the United States exceed those in Europe, Canada, and Japan, according to a Department of Health and Human Services (HHS) analysis 13 of drug acquisition costs for Medicare Part B physician-administered drugs. The HHS analysis compared United States drug acquisition costs for a set of Medicare Part B physicianadministered drugs to acquisition costs in 16 other developed economies— Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden, and the United Kingdom (UK). Among the 27 products included in the analysis, acquisition costs in the U.S. were 1.8 times higher than in comparator countries.14 Acquisition cost ratios ranged from U.S. prices being on par with international prices for one drug, to U.S. prices being up to 7 times higher than the international prices. There is variability across the 16 countries in the study as well, with no one country consistently acquiring drugs at the lowest prices. The U.S. has the highest ex-manufacturer prices for 19 of the 27 products. As a result, Medicare beneficiaries and the Medicare program are bearing unnecessary, potentially avoidable costs for Part B drugs. khammond on DSK30JT082PROD with PROPOSAL III. Model Concept Design The potential IPI Model would leverage and improve upon the CAP approach by paying physicians and hospitals for drug-related costs, providing more flexibility for drug ordering and distribution, and by having model vendors compete for business from physicians and hospitals. Through the potential IPI Model, we seek to test ways to remove physicians and hospitals outpatient departments from the buy and bill process, without creating undue disruption to the distribution system. CMS is considering contracting with a number of private-sector vendors that 13 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/ pdf-report/comparison-us-and-international-pricestop-spending-medicare-part-b-drugs. 14 Acquisition cost ratios ranged from U.S. prices being on par with international prices for one drug, to U.S. prices being up to 7 times higher than the international prices. There is variability across the 16 countries in the study as well, with no one country consistently acquiring drugs at the lowest prices. The U.S. has the highest acquisition costs for the vast majority of the 27 products. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 would supply physicians, hospital outpatient departments, and other included providers and suppliers with the drugs and biologicals that CMS would include in the model in all of the model’s selected geographic areas. Similar to the CAP, the model vendors, rather than the health care providers, would take on the financial risk of acquiring the drugs and billing Medicare. Instead of paying the model vendors based on bid amounts, as section 1847B of the Act prescribes for the CAP, under the IPI Model Medicare would pay the vendor for the included drugs based on international prices discussed in section III.D. of this ANPRM, which would be intended to lower the amount Medicare pays for included drugs and beneficiary costsharing. The model vendors would have flexibility to offer innovative delivery mechanisms to encourage physicians and hospitals to obtain drugs through the vendor’s distribution arrangements, such as electronic ordering, frequent delivery, onsite stock replacement programs, and other technologies. Physicians and hospitals in the model test would select the vendors that best provide customer service and support beneficiary choice of treatments, and would be able to engage with multiple vendors for different drugs and to change vendors. In addition to the Medicare drug administration payment that would still be made to physicians and hospitals, the model would pay physicians and hospitals a ‘‘drug add-on amount’’ that would be different from the current drug add-on amount. Outside of the designated model test areas and for drugs not included in the model, health care providers would continue to use the buy and bill approach and the current Medicare FFS payment policies would apply. This ANPRM describes features of a potential model in more detail, such as how an international pricing index could be developed and tested. We intend to waive program requirements to the extent necessary to test the model design that we would implement through notice and comment rulemaking. We seek feedback on a number of potential model elements described in the following sections of this ANPRM. These include: • What limitations would be in place on the entities that could participate as vendors (e.g. pharmacies, manufacturers, providers themselves)? • Which countries should be included in calculating an international pricing index? How frequently should international data be updated? • What should be the schedule for phasing in the spending target? PO 00000 Frm 00025 Fmt 4702 Sfmt 4702 • Should we introduce health care provider bonuses to incentivize reductions in cost or utilization relative to a benchmark? A. Model Vendors 1. Testing Alternative to CAP Requirements As CMS develops the IPI Model, we seek to minimize disruption within the drug distribution system while increasing competition, lowering U.S. drug prices, and removing the incentive for higher list prices. Under the CAP, the CAP vendor had to acquire the CAP drug and ship the drug to the ordering physician after receiving a beneficiaryspecific order. Under the IPI Model we are considering, vendors would have the flexibility to offer a variety of delivery options, including beneficiary-specific prescriptions, pre-ordering approaches such as onsite inventory management solutions, and other arrangements that would not require physicians and hospitals to purchase the drugs or face greater buying costs. Physicians and hospitals would select the vendors that offer delivery mechanisms that best meet their patient care needs, practice size and location(s), and support needs. Agreements between the vendors and physicians/hospitals would establish the terms of their arrangements and would include appropriate guardrails to protect all parties, including beneficiaries and the Medicare program. CMS seeks feedback on whether CMS should be a party to and/or regulate these agreements, and whether the agreements should specify obligations to ensure the physical safety and integrity of the included drugs until they are administered to an included beneficiary, how drug disposition would be handled, and data sharing methods, confidentiality requirements, and potentially other requirements. 2. Eligible Vendors Under the potential IPI Model, we would intend to allow greater flexibility than under the CAP in the types of entities that could be selected as a model vendor (in accordance with applicable laws), and to minimize the impacts on drug distribution processes. Under the CAP, specialty pharmacies were the only entities that met the CAP vendor criteria, and only one such vendor participated in the program. To increase competition, the IPI Model would potentially allow entities such as GPOs, wholesalers, distributors, specialty pharmacies, individual or groups of physicians and hospitals, manufacturers, Part D sponsors, and/or other entities to perform the role of E:\FR\FM\30OCP1.SGM 30OCP1 khammond on DSK30JT082PROD with PROPOSAL Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules model vendor as long as they could satisfy the vendor qualification requirements. We are interested in ways to minimize any potential concerns that could arise by allowing a broader set of entities to be vendors, and how health care providers operating as vendors might be able to operate in all geographic areas included in the model. We seek input on the types of entities that would be allowed to be model vendors, the potential for perverse incentives that could be introduced by potentially allowing health care providers to be model vendors and/or allowing model vendors to charge health care providers for distributionrelated activities, and whether there should be guardrails in place to prevent perverse incentives. We would require that model vendors purchase and take title to the included drugs, but to allow for innovative distribution approaches, model vendors would not be required to take physical possession of the drugs. For example, if a manufacturer establishes a limited distribution program, model vendors could negotiate with the manufacturer ways to purchase the drug while the established limited distribution entity would continue to ship the drug to the physician or hospital for administration. We would expect that all model vendors would operate on a national basis; that is, model vendors potentially would be required to serve all of the selected model geographic areas and supply all included drugs to the physicians and hospitals that enroll with the vendor. The model would promote competition among multiple national vendors; vendors would compete for agreements with physicians and hospitals and other health care providers that would be included in the model. Physicians and hospitals would not be required to use only one vendor; we would encourage model participants to obtain drugs from the most cost effective model vendors. Enrolling with more than one vendor would allow physicians and hospitals more options for obtaining drugs timely, although the minimum requirement would be that model participants maintain enrollment with at least one vendor in order to furnish included drugs to the beneficiaries they serve timely. Model vendors would operate enrollment for physicians and hospitals and would send periodic enrollment reports and other documentation to CMS to support model operations. In addition, model vendors would be prohibited from paying rebates or volume-based incentive payments to physicians and hospitals. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 54551 3. Model Vendor Responsibilities 4. Model Vendor Payment The model vendors’ responsibilities would be based on the responsibilities of the CAP contractor under section 1847B of the Act and would be specified in a model vendor agreement. The model vendors would be responsible for such activities as— • Negotiating with manufacturers for the vendor’s drug acquisition prices for included drugs; • Establishing mechanisms for the model vendor to take title to, but not necessarily physical possession of, included drugs, and arranging for the distribution of included drugs to participant health care providers for administration to included beneficiaries; • Establishing mechanisms within the vendor’s arrangements with manufacturers, physicians, hospitals, and other included providers and suppliers to receive compensation for vendor services; • Implementing processes for participant health care providers to enroll with the vendor and to obtain included drugs; • Meeting applicable licensure requirements in each State in which the vendor would supply included drugs and be enrolled in Medicare as a participating supplier, unless the model vendor distributes included drugs under contract with one or more entities, in which case the vendor must require that such entities meet applicable licensure requirements and be enrolled in Medicare as a participating supplier; • Establishing mechanisms for physicians and hospitals to notify the vendor of the disposition of an included drug; • Submitting claims for included drugs in accordance to model billing instructions established by CMS; • Paying manufacturers for included drugs that were administered; • Operating vendor-administered payment arrangements, such as indication based pricing, or outcomesbased agreements; • Developing and implementing program integrity safeguards to ensure that all model requirements and applicable Medicare requirements are followed; • Participating in model activities, including monitoring and evaluation activities; • Providing support and technical assistance to participant health care providers; and • Performing other functions and requirements as specified in the model vendor agreement, such as administrative requirements. Physicians and hospitals would pay the model vendor for distribution costs and would collect beneficiary costsharing, including billing supplemental insurers.15 Informational drug claims would be submitted to the Medicare Administrative Contractor (MAC) along with claims for drug administration. In addition, similar to how the CAP operated, under the model, vendors would submit claims to Medicare and would be paid an applicable amount for the Part B drug that was administered to an included beneficiary. The model payment amounts to vendors for included drugs would be updated quarterly. The payment amount is described in section III.D. of this ANPRM. Unlike the CAP, under the potential model CMS would not solicit bid amounts for drugs. To the extent it would be legally allowable, vendors’ agreements with physicians and hospitals could include provisions for delivery fees and other vendor costs.16 On a periodic basis, for example quarterly, CMS would ensure that payment to the model vendors for administered drugs is substantiated by the physician and hospital submitted claims. We seek feedback on other options for model vendor payment, including whether payment should include an administration fee from CMS and whether vendors’ agreements with physicians and hospitals could include provisions for delivery fees and other vendor costs. We are considering whether, given the flexibilities that model vendors and physicians and hospitals would have under the model, the model should include dispute resolution support, and if so, what such support should include. PO 00000 Frm 00026 Fmt 4702 Sfmt 4702 5. Model Vendor Selection We intend to operate a competitive selection process to identify the model vendors that would participate in the IPI Model. As we solicit applications for potential model vendors, we would encourage a variety of qualified entities to apply, including new business arrangements that could fulfill the vendor role on a national basis. We intend to select three or more model vendors so that physicians and hospitals have a number of vendors from which to obtain drugs and so that model vendors compete on the basis of 15 We envision that existing Medicare crossover claims processing steps could be leveraged to support billing supplemental insurers. 16 We envision that model vendors would compete, in part, for physicians and hospitals based on low fees. E:\FR\FM\30OCP1.SGM 30OCP1 54552 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules customer service and cost, but solicit comment as to whether three vendors is an appropriate floor. The solicitation for model vendors would specify in more detail the model vendor requirements. The model vendor solicitation would also specify the selection factors, which may include: The ability to negotiate with manufacturers; the ability to ensure product integrity; The ability to establish a customer service/grievance process; financial performance and solvency; record of integrity and the implementation of internal integrity measures; internal financial controls; maintenance of appropriate licensure to purchase drugs and biologicals; and ability to meet the model vendor agreement requirements within 6 months. We would refuse to establish a model vendor agreement with an entity for reasons including— • Exclusion of the entity under section 1128 of the Act from participation in Medicare or other Federal health care programs; or • Past or present violations or misconduct related to the pricing, marketing, distribution, or handling of drugs covered under the Medicare program. We would similarly include reasons to terminate a model vendor in the model vendor agreement. In addition, to ensure that selected model vendors would be able to perform their responsibilities under the model vendor agreement without influence from parties that have a financial interest related to included drugs or participating health care providers, we are considering including conflict of interest requirements similar to those established for the CAP in 42 CFR 414.912. khammond on DSK30JT082PROD with PROPOSAL 6. Requests for Feedback and Information We are inviting public comment on the factors that would be necessary to allow CMS to identify entities that would most likely perform the responsibilities of a model vendor efficiently and effectively with minimal start up time. • We seek information about the types of entities that could serve as national vendors for the model. Should CMS require model vendors to enroll any included health care provider? If included physicians and hospitals could be model vendors, should they be required to be a vendor for other health care providers, and should they have to operate on a national basis? Should any vendor be required to provide services on a national basis? VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 • We are also interested in public comment on the potential guardrails that would be appropriate if manufacturers and/or health care providers could serve as model vendors. Also should CMS receive shared savings based on the difference between a model vendor’s negotiated price and CMS’ payment amount? If so, how would CMS operationalize this shared savings approach? • What should be the potential responsibilities of model vendors and model participants (included physicians, hospitals, and potentially other providers and suppliers) under the model. Specifically, are there ways that vendors and model participants could collaborate to enhance quality and reduce costs? • What would be the ability of the potential types of entities that could be model vendors to negotiate for drug prices that would be at or below the IPI Model payment? Would certain types of entities have advantages or face additional challenges? • Are there processes that model vendors could use to increase their price negotiation leverage with manufacturers and lower their potential loss exposure without increasing burdens on beneficiaries, physicians, and hospitals? • Are there unsurmountable challenges related to physicians and hospitals paying for distribution costs and to continue to collect beneficiary cost-sharing, including billing supplemental insurers? • Should physicians and hospitals receive bad debt payments if beneficiaries fail to satisfy cost-sharing obligations? • Is there a need for the model to include billing and dispute resolution support, and if so, what should such support include? • Should CMS pay the model vendors or should providers pay the model vendors for the responsibilities associated with taking title to drugs and distributing drugs? What incentives are established if CMS pays the model vendors? • What should be the reasons for excluding entities from serving as a model vendor or terminating a model vendor agreement, as well as appropriate conflict of interest requirements? • Should the role for the model vendors include entering into valuebased payment arrangements (for example, indication-based pricing or outcomes-based agreements)? And if so, should there be requirements around these arrangements? PO 00000 Frm 00027 Fmt 4702 Sfmt 4702 B. Model Participants, Compensation and Selected Geographic Areas 1. Model Participants IPI Model participants would include all physician practices and hospital outpatient departments (HOPDs) that furnish the model’s included drugs in the selected model geographic areas. CMS is considering whether to also include durable medical equipment (DME) suppliers, Ambulatory Surgical Centers (ASCs), or other Part B providers and suppliers that furnish the included drugs. Model participation would be mandatory for the physician practices, HOPDs, and potentially other providers and suppliers, in each of the selected geographic areas. We intend to provide a more comprehensive list of health care providers included under the model if a proposed rulemaking moves forward. For purposes of the potential IPI Model, beneficiaries would be included in the model if they are furnished any of the included drugs by a model participant in one of the selected geographic areas. More specifically, the following beneficiary eligibility criteria would be used based on the date that the included drug was furnished— • The beneficiary is enrolled in Medicare Part B; • The beneficiary is not enrolled in any group health plan or United Mine Workers of America health plan; 17 and • Medicare FFS is the primary payer. Medicare FFS beneficiaries who are not eligible for inclusion in the model would continue to receive drugs that were obtained by their health care provider using the buy and bill approach. Under the IPI Model, model participants in the selected geographic areas would have to enroll with at least one model vendor and obtain included drugs from a model vendor for administration to included Medicare FFS beneficiaries. Model participants would have to follow model-specific billing instructions to submit informational drug claims and the model add-on payment. To reduce beneficiary impact, model participants would continue to collect beneficiary cost-sharing. We are considering ways to ensure the reconciling of beneficiary cost-sharing that model participants 17 The United Mine Workers of America Health and Retirement Funds (‘‘The Funds’’) is a Medicare Health Care Prepayment Plan (HCPP) and is the Medicare payer for non-facility Part B services. As such, providers bill the Funds for Medicare Part B services. The Funds’ payment to the provider includes the Medicare amount plus the Medicare coinsurance and deductible amount, making it unnecessary for the provider to submit claims to two payers. E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules khammond on DSK30JT082PROD with PROPOSAL would be collecting. An administrative approach that deducts the cost-sharing amounts from Medicare payments made for other services to the model participants could be feasible and would be less disruptive for beneficiaries. 2. Model Geographic Areas The model would require the participation of physician practices and HOPDs (and potentially other providers and suppliers) in selected geographic areas across the U.S. and its territories, which would allow the Innovation Center to gain experience and insight into using an alternative payment methodology for drugs included in the model. We anticipate the selected geographic areas would include 50 percent of Medicare Part B spending on separately payable Part B drugs. The mandatory participation of physician practices and HOPDs (and potentially other health care providers that furnish included drugs) in the selected geographic areas would avoid having expected financial performance in the model influence the physician practice/ HOPD’s decision to participate or not. It also would ensure we capture the experiences of various types of physician practices and HOPDs in different geographic areas with varying characteristics and historic utilization patterns. For the IPI Model, we are considering a randomized design with the randomization to intervention and comparison groups occurring at the geographic unit of analysis. There are two main factors that need to be considered when selecting geographies for the model: (1) The most appropriate geographic unit (ZIP code, county, core based statistical area, state, etc.) that reflects how care is delivered in markets, and (2) the geographic scope of the model, or the number of geographic units needed to generate statistically credible findings. Typically, the more geographic units available for random assignment to the model’s intervention and comparison groups the better. However, there is a tradeoff between the size of the geographic unit and the number of units available for assignment. We are considering using CBSAs (Core Based Statistical Areas) as the primary unit of analysis in the model. CMS is further considering whether it would be necessary to use larger geographic units such as aggregations of CBSAs (metropolitan statistical areas or combined statistical areas) to avoid the potential for routine shifts in the site of care to a practice location with a different assignment under the model. Geographic areas VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 located outside CBSAs would not be included in the randomization to intervention or comparison groups. Health care providers outside of the randomized geographies could potentially have the opportunity to opt into the model. However, health care providers that are not part of the randomized treatment and control groups, but that opt into the model, would not be included in the evaluation sample. 3. Potential Drug Add-on Payment Medicare Part B covers drugs administered by physicians in physician offices and hospital outpatient departments and certain drugs in other settings. In addition to payment for drug administration, Medicare Part B typically pays for separately payable Part B drugs at the average sales price (ASP) of a given drug, plus 6 percent of the ASP as an add-on (with sequestration, the actual payment allowance is ASP + 4.3 percent). This add-on payment can help to cover the costs of drug ordering, storage and handling borne by physicians and hospitals, payments to join group purchasing organizations (GPOs) or other entities with similar purchasing arrangements, as well as a portion of the drug costs themselves, in instances when the drug is acquired at a price more than ASP. However, the drug addon payment may encourage increased utilization, particularly of higher-cost drugs, since doing so increases revenue for the physician or hospital when the add-on is higher than drug acquisitionrelated costs. This section describes our thinking on alternative methods for making the drug add-on payment a set payment amount rather than as a percentage of ASP. We intend to structure the potential IPI model such that physicians and hospitals would be incentivized to seek out lower cost drugs for their beneficiaries, reduce inappropriate utilization, continue to pay for certain distribution costs, continue to bill Medicare for drug administration, albeit following model-specific instructions, and continue to collect beneficiary costsharing for included drugs. The goals for the model add-on payments would be to hold health care providers harmless to current revenue to the greatest extent possible; create an incentive to encourage appropriate drug utilization; remove the incentive to prescribe higher-cost drugs; and create incentives to prescribe lower-cost drugs in order to reduce beneficiary cost sharing. We have considered several different structures for the set payment amount. PO 00000 Frm 00028 Fmt 4702 Sfmt 4702 54553 a. Potential Alternative to the ASP AddOn CMS would base payment calculations for the alternative compensation on six percent (+6 percent) of the included Part B drugs’ ASP, which would represent an increase from the +4.3 percent add-on that currently is paid due to sequestration, and would support appropriate drug utilization under the model structure. That is, in total the alternative compensation for model participants would approximate the expected add-on amount for included drugs in the absence of the model, before sequestration. Because the alternative compensation would not be paid in a manner that is tied directly to the ASP of an administered drug, there would not be an incentive for use of higher cost drugs when an alternative is available. As described in section III.D. of this ANPRM, Medicare payment for the drugs themselves would be to the model vendors; model participants would no longer ‘‘buy and bill’’ Medicare for included Part B drugs administered to included beneficiaries. Payment for drug administration services, when applicable, would continue to be separately billed by model participants to Medicare; there would be no change in the payment for drug administration services under the model. Beneficiary cost-sharing would apply to the modelspecific alternative compensation payments and for model payments for included drugs. b. Description of Alternative Add-on Payment Amount Model participants would be paid a set payment amount per encounter or per month (based on beneficiary panel size) for an administered drug, which would not vary based on the model payment for the drug itself. We are considering whether to set a unique payment amount for each class of drugs, physician specialty, or physician practice (or hospital). That is, there would be a set payment amount per administered drug that would be based on—(1) which class of drugs the administered drug belongs to; (2) the physician’s specialty; or (3) the physician’s practice. If used, specialties would likely be defined broadly rather than at a subspecialty level (for example, ophthalmology rather than neuro-ophthalmology) given the difficulty of doing this through claims data, although CMS may identify an alternative approach. We would calculate the final payment amount, by drug class, physician specialty, or physician practice, annually based on E:\FR\FM\30OCP1.SGM 30OCP1 54554 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules khammond on DSK30JT082PROD with PROPOSAL the +6 percent of ASP revenue that model participants would have garnered without sequestration in the most recent year of claims data. Total model payments to a model participant would vary based on utilization under an encounter-based model. To incentivize reduced utilization where appropriate, CMS is considering creating a bonus pool, where model participants would achieve bonus payments for prescribing lower-cost drugs or practicing evidencebased utilization. Importantly, as described in section III.F.3. of this ANPRM, we would monitor drug utilization carefully throughout the model to ensure beneficiary access to drugs is not compromised. 4. Requests for Feedback and Information We welcome input from stakeholders on the potential approach for defining model participants, selecting geographic areas, and calculating an alternative to the ASP add-on for the IPI Model. Specifically, we would like to receive information on which alternative addon option is preferable and how the specific payment methodology might be designed. For example: • The exclusion of certain types of physician practices and/or HOPDs from the model. For example, should we consider excluding small physician practices/HOPDs (for example, those with 3 or fewer physicians) from the model or establish a low-volume threshold that would exclude those physician practices and HOPDs that fall below the threshold from participating in the model? How could CMS analyze an appropriate threshold? • The inclusion of additional Part B providers and suppliers that furnish and bill for any of the model’s included drugs as well as the inclusion of providers that are paid on a cost basis, such as PPS-exempt cancer hospitals, children’s hospitals, or critical access hospitals. • The potential approach to selecting geographic areas for the intervention and comparison groups in the model. Are there particular regions of the country that would need adjustments or exclusions from the model (for example, rural areas)? • How should we operationalize the model for large provider networks that cover some regions that are included and some that are excluded? • Should class of drugs, physician specialty, or physician practice determine the payment amount? Are there other characteristics that should determine the alternative add-on payment amount? VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 • How should a per month alternative add-on payment be determined? How and how often should a beneficiary panel size be determined? • The potential inclusion of a bonus pool. Should a bonus pool be included in the model? If so, how should the model participant bonus pool be constructed to meet the goals of the model to incentivize the use of lowercost drugs and clinically appropriate utilization? How could a bonus pool be constructed to best protect and enhance quality under the model? How should CMS handle variable low-volume estimates and missing data values when assessing performance for purposes of a bonus pool? • The potential phase in of an alternate provider compensation. Should CMS phase in a change from percentage-based add-on payments to set payment amounts, or should set payment amounts be implemented in Year 1 of the potential IPI Model? • How should CMS implement an administrative process to account for beneficiary cost-sharing for drugs that is collected by model participants? C. Included Drugs 1. Background The Part B drug benefit includes many types of drugs and encompasses a variety of care settings and payment methodologies. Of the approximately $28 billion per year of FFS Part B drug spending in 2016, about $23.6 billion or 84 percent, is for drugs administered incident to a physician’s services. Among the ‘‘incident to’’ drugs, over 90 percent of spending is for single source drugs and biologicals (including biosimilars) as defined in section 1847A of the Act.18 We plan to begin the model with these two broad groups of drugs both because they encompass most of the Part B spending, and as a result of their status as drugs with a single manufacturer, they allow for a more straightforward comparison to an international pricing metric. Examples of included drugs would be cancer drugs and adjunct therapy for cancer and related conditions, biologicals used for the treatment of rheumatoid arthritis and other immune mediated conditions, and drugs used to treat macular degeneration. For purposes of the model, we also would include HCPCS codes that contain only products with a single manufacturer, even if they are 18 Office of Enterprise Data and Analytics analysis of CMS, Chronic Conditions Data Warehouse, a database with 100 percent of Medicare enrollment and fee-for-service claims data, available at: http:// ccwdata.org/. PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 multiple source drugs as defined in section 1847A of the Act. 2. Potential Included Drugs In Years 1 and 2 of the potential IPI Model, we would include single source drugs, biologicals, biosimilars, and multiple source drugs with a single manufacturer that we identify from what we believe are reliable sources of international pricing data, prior to direct data collection, as discussed in section III.D. of this ANPRM. In Years 3, 4 and 5, we would broaden the scope of included drugs to incorporate more of these single source drugs and biologicals as more sources of international pricing data become available, and we are considering further increasing the number of Part B drugs included in the model as discussed later in this section. We would begin with these two broad groups of drugs—single source drugs and biologicals—as they encompass most drugs used by most physician specialties that bill under Part B. At a minimum, we believe that we could begin the model by including most of the HCPCS codes that appear in the recent HHS report; 19 these drugs represent over 50 percent of Part B drug allowed charges in 2017. As we consider including more drugs over time, we would prioritize single source drugs and biologicals. We are also considering including HCPCS codes for drugs and biologicals that are clinically comparable, but not interchangeable, to those initially included in the model, particularly drugs and biologicals (including biosimilars) used incident to a physician’s services, for example adding additional biologicals use to treat rheumatoid arthritis and other inflammatory diseases, including biosimilars if they are marketed. The OPPS packages certain drugs with costs below a certain threshold and for policy reasons. This model would only include drugs that are separately paid under the OPPS, including drugs on pass-through payment status, and for which the drug’s HCPCS code is assigned a distinct Ambulatory Payment Classification (APC) group for use when the drug is furnished in a HOPD. The model would include any separately payable drug or biological furnished in an HOPD, including any of the HOPD’s off-campus provider-based departments (PBDs), regardless of whether those PBDs are excepted or nonexcepted under section 1833(t)(21)(B)(ii) of the 19 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/ pdf-report/comparison-us-and-international-pricestop-spending-medicare-part-b-drugs. E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules Act, as added by section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114–74). For purposes of included drugs, we would remove any HCPCS codes that become inactive if they are not replaced by a successor code, and we would not include HCPCS codes for which a product becomes unavailable. If pricing data were available for other heavily utilized incident to drugs, we would consider adding them to the model. Over the course of the model, we seek to include HCPCS codes that encompass at least 75 percent of allowed charges in Part B. We note that HCPCS codes for products that are used across multiple settings, such as clotting factors or immunoglobulin G, would be included based on overall Part B use, but the model would only include those drugs when they are administered incident to a physician’s service. In addition, we are considering including multiple source drugs and drugs provided in other settings. Specifically, we are considering including multiple source drugs because we are concerned that price increases among generic drugs are also contributing to the rising payments for Part B drugs. Increasing the number of drugs included in the model over time could also be accomplished by setting; however, drug acquisition and billing within Part B settings outside of the physician office and outpatient hospital may not be conducive to a CAP vendorlike approach. We are also considering the best ways to include newly approved and marketed drugs in the model. We anticipate that international pricing data for some but not all of these drugs would be available. We include a discussion of the potential alternatives for payments for new therapies in section III.D.5. of this ANPRM. We anticipate that newly effective HCPCS codes could be added to the model on a quarterly or annual basis. Based on experiences with the CAP, we are concerned about issues such as the lag time resulting from the provider having to obtain drugs from regular channels before the drug is available 54555 from the vendor, the lead time for the development of vendors’ acquisition arrangements, and the potential unavailability of pricing benchmarks for new drugs immediately after a drug is marketed. Although we are not currently able to estimate exactly what the distribution of drugs over the course of the model may look like, Table 1 presents the percentage of the total allowed Part B charges for 2017 for Part B drugs. Table 1 lists the percentage of the total spending for the following two groups of HCPCS codes: The top 50 drugs by allowed charges in the office and hospital outpatient departments for 2017 and the top 100 such drugs. Spending for biologicals (including biosimilars), single source drugs, multiple source drugs and potentially excluded drugs within each of the three groups is also shown. We believe that this information is a reasonable preliminary estimate of the potential scope of this model and its possible incorporation of additional Part B drugs during the 5-year model duration. TABLE 1—GROUPS OF DRUGS AS A PERCENTAGE OF TOTAL PART B SPENDING Percentage of total allowed charges Number of drugs Top 50 Drugs ......................................... Top 100 Drugs ....................................... 81 94 The potential inclusion of a large subset of Part B drugs should not be interpreted to mean model participants would be required to obtain all products that are subject to inclusion from a specific model vendor. We would anticipate several model vendors to be available and that model participants could enroll with one or more model vendors. khammond on DSK30JT082PROD with PROPOSAL 3. Potential Excluded Drugs We are considering excluding the following: drugs that are identified by the FDA to be in short supply (similar to the exclusion from the AMP price substitution policy for drugs in short supply (77 FR 69141)); and drugs paid under miscellaneous or ‘‘not otherwise classified’’ (NOC) codes, such as J3490, due to the operational complexity of identifying if drugs paid under the NOC codes are included model drugs. Thus, compounded drugs would be excluded from the model. We also plan to exclude radiopharmaceuticals and ESRD drugs 20 Excluding VerDate Sep<11>2014 biologicals. 17:16 Oct 29, 2018 Jkt 247001 Biologicals: percentage of total allowed charges Single source drugs: 20 percentage of total allowed charges 65 73 4. Requests for Feedback and Information We are seeking information on the following: • Whether the data that CMS uses to determine the inclusion of drugs and biologicals should be limited to claims from the physician’s office and hospital outpatient department settings, or whether other settings should be included. • The drugs to include in the model. Specifically, we are seeking information on how to incorporate multiple source drugs. • Whether to include Part B drugs in all settings in which they are separately payable or only in certain settings. • Whether quarterly updates for HCPCS codes included in the model are Frm 00030 Fmt 4702 Sfmt 4702 Potential excluded drugs: percentage of total allowed charges 0¥<1 1 4 6 12 15 paid under the authority in section 1881 of the Act. Finally, we also would exclude drugs that are packaged under the OPPS when they are furnished by a hospital outpatient department. If these drugs met other criteria, they would be included in the model when furnished by physician offices. PO 00000 Multiple source drugs: percentage of total allowed charges feasible. Feedback from the perspective of potential model participants and vendors are especially encouraged. • The best way to include new drugs in the model as they become available. • Whether to determine inclusion of drugs based on on-label (FDA approved) indications only, or whether CMS should consider on-label and off-label use (if supported by clinical guidelines and/or compendia). We seek comment as to whether aspects of mandatory participation would require physicians and hospitals to have an agreement with a single vendor or would require physicians and hospitals to obtain all drugs included in the model via a single vendor. D. Model Payment Methodology for Vendor Supplied Drugs 1. Calculating the Model’s Medicare Part B Drug Payment The Medicare payment for separately payable Part B drugs is typically based on ASP of a given Part B drug, plus 6 percent of the ASP as an add-on payment. For the potential IPI Model, E:\FR\FM\30OCP1.SGM 30OCP1 khammond on DSK30JT082PROD with PROPOSAL 54556 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules CMS is considering testing an alternative payment for included drugs based on the international pricing, except where the ASP is lower. CMS would calculate the model payment to model vendors for included drugs through a multi-step process. Given current estimates of the differential between U.S. and international pricing, the model payment may be close to parity with international comparators. Additionally, Manufacturer sales through the IPI model would be included in current ASP reporting. The potential calculation steps would include the following: • CMS would calculate an average international price for each Part B drug included in the model based on a standard unit that is comparable to that in the drug HCPCS code. • CMS would then calculate the ratio of Medicare spending using ASP prices for all Part B Drugs included in the model to estimated spending using international prices for the same number and set of drugs. In order to do this calculation, CMS would multiply Part B volumes by the ASP prices and then by the international prices. The resulting ratio of Medicare spending under ASP versus Medicare spending under the international prices holding volume and mix of drugs constant would represent the International Price Index (IPI). • CMS would also establish the model Target Price for each drug by multiplying the IPI by a factor that achieves the model goal of more closely aligning Medicare payment with international prices, which would be about a 30 percent reduction in Medicare spending for included Part B drugs over time, and then multiplying that revised index (IPI adjusted for spending reduction) by the international price for each included drug. CMS would calibrate the revised index to account for any drugs with ASP below the Target Price. The percentage reduction between ASP and Target Price would vary for each drug. We would monitor price changes and recalibrate as needed. • CMS would phase-in the Target Price over the 5 years of the model, as a blend of ASP and the Target Price. For each calculation, if ASP is lower than the Target Price for an included drug, the model would set the payment amount to ASP for that drug. The potential phase-in would use the following blend of ASP and Target Price: VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 Year Percentage of ASP and target price Year 1 ...... 80 percent ASP and 20 percent Target Price. 60 percent ASP and 40 percent Target Price. 40 percent ASP and 60 percent Target Price. 20 percent ASP and 80 percent Target Price. 100 percent Target Price. Year 2 ...... Year 3 ...... Year 4 ...... Year 5 ...... • As with current Part B drug payments, we would plan to update the model payment amount for each drug periodically based on new ASP and international pricing data. 2. Data Sources on International Drug Sales CMS is considering including collection of international drug sales data for purposes of the IPI Model. In the interim, before these data could be available, CMS is considering relying on existing data sources for calculating the model payment to model vendors for included drugs. a. Existing Data Sources CMS has evaluated several existing data sources to determine the availability of international drug price information. Based on our review, we believe there are appropriate sources that could be used for purposes of the potential IPI Model. These data sets include those provided by private companies or data obtained through review of publicly filed materials by manufacturers in other countries. Examples may include IQVIA’s MIDAS dataset, the dataset used in the recent HHS analysis.21 Alternatively, CMS can try to construct price comparisons from public sources from each country. One example of a public source is the UK’s Drug Tariff, which lists the National Health Service (NHS) reimbursement rates for prescription drugs.22 We believe that existing data sources may include all the information necessary to calculate the IPI and Target Prices. We are interested in better understanding the extent to which existing data sources for international sales completely capture drug information in every international market that we are considering for inclusion in our payment methodology and how private market drug sales are included in 21 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/ pdf-report/comparison-us-and-international-pricestop-spending-medicare-part-b-drugs. 22 See https://www.nhsbsa.nhs.uk/pharmaciesgp-practices-and-appliance-contractors/drug-tariff. PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 countries that provide drugs through public insurance. b. CMS Data Collection We are considering including a data collection system for manufacturers to report to CMS their international drug sales data to support the calculation of the IPI and the Target Price for each drug. We acknowledge that manufacturers have numerous and varying arrangements in other countries as well as in the U.S., so we are considering how we would determine the definition of manufacturer to ensure that U.S. manufacturers would robustly report this information to CMS. Under the Medicaid Drug Rebate Program in section 1927 of the Act, manufacturers are required to provide information to CMS on a quarterly basis to support the ASP calculations (as well as to support calculations for WAC and AMP 23) for Part B drugs. Using the same framework, for the purposes of the potential IPI Model, we could require manufacturers to provide international drug sales data for prices and units sold. We envision that we would require quarterly reporting on the international sales information and CMS would provide reporting instructions. The instructions would include information such as instructions for the unit level at which the manufacturer would report the sales information, which countries to include and how to account for the exchange rate, and use of reasonable assumptions. We anticipate that the units of measure for the international drug sales data would be the same as the units in a corresponding drug product’s HCPCS code. For example, products reported in milligrams of drug in the U.S. would be reported in milligrams, and products reported in international units of biological activity would be reported in the same units of corresponding biological activity. We acknowledge that this potential approach could create situations where very large numbers of units would be reported, and we seek information on alternative units of measure to consider. We recognize that it would take some time to establish the infrastructure and reporting instructions to collect and validate international sales information directly from manufacturers for purposes of a model. In light of this, we are considering whether existing data sources could be used to establish the IPI and Target Price in the short term and transition to using manufacturer reported data when available. We seek comment on the potential use of 23 WAC means wholesaler acquisition cost and AMP means average manufacturer price. E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules existing data sources and new data sources to establish the IPI and the Target Price. 3. Frequency of Data and Model Payment Updates We are considering examining the IPI and model payments on a quarterly basis, on the same schedule and using the same quarterly sales period duration as ASP data. We believe that we could use quarterly updates of existing data sources in the short term while we set up the infrastructure to collect and validate international drug sales information from the manufacturers on a quarterly basis (the data would be reported to CMS within 30 days of the close of the quarter). We seek comment on whether to examine the international pricing data, and recalculate the IPI and Target Prices on a quarterly, annual or other basis. We also seek feedback on the mechanism for reporting of international sales, and on any additional requirements that would be needed to ensure a feasible process to collect valid international sales information for the countries that would be included in the IPI, as discussed in the following section of this ANPRM. We also seek comment on ways to ensure confidentiality of reporting of international drug pricing to CMS. khammond on DSK30JT082PROD with PROPOSAL 4. Potential Included Countries We are considering using pricing data from the following countries: Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, and the United Kingdom. We are considering including these countries as they are either economies comparable to the United States or they are included in Germany’s market basket for reference pricing for their drug prices, and existing data sources contain pricing information for these countries. Some of the countries above have far lower per-capita incomes than the U.S. However, these countries were not consistently the lowest-priced countries according to the HHS analysis.24 We seek comment on the countries included in our analysis to establish the IPI, Target Price, and model payment amounts. 5. Establishing Model Payments for New Drugs Entering the Market For newly approved and marketed Part B drugs that would be included in the model, there could be some time lag 24 ‘‘Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures’’ accessed via https://aspe.hhs.gov/ pdf-report/comparison-us-and-international-pricestop-spending-medicare-part-b-drugs. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 or other issues associated with capturing international sales information. In the absence of international pricing data, CMS could still calculate a model payment amount by applying a standard factor. CMS could, for example, assume the same ratio for the new drug as the IPI, which would be the average volume-weighted payment amount across all Part B drugs included in the model. We seek comment on options for calculating the model payment for new drugs that may not yet have international sales. 6. Requests for Feedback and Information We welcome input from stakeholders on the potential approach for establishing model payments for included drugs based on international pricing. For example: • What sources of international pricing data capture drug information for the international markets that should be included in our payment methodology? • Are there particular data sources to establish payment amounts based on international pricing that would best support this effort? • How should private market drug sales included in countries that provide drugs through public insurance be included? How should CMS protect manufacturer reported international pricing information? • What is the appropriate frequency for updating the international pricing information that we use in calculating the Part B payment under the model? • How should manufacturers report international pricing information? Are there specific issues with data reporting processes that stakeholders would like the agency to consider, especially mechanisms that could reduce burden? • How should we define manufacturer to ensure that all relevant entities that sell single source drug products, biologics, biosimilars and, if applicable, multiple source drugs report under the model? • Are there areas of concern in data collection and reporting that could lead to inaccurate price calculations? • Which countries should be included in our international price index calculations? Should the countries vary? What characteristics should CMS consider to analyze these countries? • Are there specific considerations in the comparison of international and ASP prices that CMS should address? • How should CMS standardize data collection and reporting? What should be the target reduction to ASP payment (that is, Target Price), and what should PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 54557 be the schedule for phasing down to the target savings amount? • How would such a change in payment policy, as described in this section, affect incentives in the market? How could using international reference pricing affect innovation incentives in the biopharmaceutical market? E. Potential Foreign Market Considerations Using international sales data in the potential IPI Model could raise considerations for drug prices, drug availability, and sales data in foreign markets. For example, manufacturers may seek to raise prices or limit foreign sales. However, existing, multiyear pricing relationships in foreign markets may minimize this response. There are also potential model implications in considering manufacturers’ responses in foreign markets. For example, there may be a decrease or lack of international sales to serve as inputs to the model’s IPI calculation, if manufacturers withdraw or do not launch included drugs in foreign markets. Similarly, manufacturers may also adjust their product launch strategies within the U.S. Requests for feedback and information: • CMS welcomes input from stakeholders on the potential considerations related to foreign markets and the potential model payment approach that would rely on international sales data. For example the following: • What foreign market considerations should CMS consider in developing the potential IPI Model? • How should CMS monitor for changes in foreign markets that could impact the IPI Model? • What are ways to address changes in foreign sales that could impact model payment calculations? F. Beneficiary Impact and Model Monitoring In addition to existing beneficiary protections, we would plan to actively monitor the IPI Model test to ensure it is operating effectively and meeting the needs of beneficiaries, health care providers, and the Medicare program. 1. Impact on Beneficiary Cost-Sharing We would expect beneficiary costsharing for included drugs under the potential IPI Model would either be the same or lower than the non-model costsharing. Medicare payment policy for beneficiary cost-sharing would remain the same but since the IPI Model should reduce Medicare payment for some Part B drugs, the 20 percent beneficiary E:\FR\FM\30OCP1.SGM 30OCP1 54558 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules coinsurance would be similarly proportionately reduced. For those beneficiaries dually eligible for Medicare and Medicaid, the coinsurance paid for by the beneficiary or state would similarly be reduced. If the Part B payment remains unchanged under the IPI Model, for example, for those drugs where Medicare payment is similar to international prices, costsharing would remain the same. To minimize impact on beneficiaries, their health care provider would continue to collect cost-sharing for included drugs. khammond on DSK30JT082PROD with PROPOSAL 2. Medicare Ombudsman We plan to coordinate with the Medicare Beneficiary Ombudsman to ensure that any Model-related beneficiary complaints, grievances, or requests for information submitted would be responded to in a timely manner. 3. Monitoring Consistent with other Innovation Center Models, we would also implement a monitoring program for the IPI Model to ensure the model is meeting the needs of Medicare beneficiaries, health care providers and the Medicare program. These monitoring activities would enable CMS to access timely information about the effects of the Model on beneficiaries, providers, suppliers, and on the Medicare program and to facilitate real time identification and response to potential issues. We envision using Medicare claims and other available program data to analyze and monitor the Model’s implementation, including actively looking at real-time data to identify potential impacts on beneficiaries, health care providers, model vendors, and the Medicare program. We would use these findings to inform Model oversight and the potential need for action to address findings. As an example, CMS may conduct real-time analyses of claims and administrative data, such as monthly updates and historic comparisons of trends, including ensuring appropriate drug utilization and program spending, as well as changes in site-of-service delivery, mortality, hospital admissions, and other indicators present in claims and administrative data to identify any potential issues related to access and utilization. CMS would also consider how to best understand beneficiary experience in the model. We would consider surveys but would also be interested in other potential strategies to include beneficiary experience in our monitoring activities. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 We are inviting public feedback on the appropriate beneficiary outcomes to monitor and how to monitor and measure such outcomes, as well as patient experience, in a way that minimizes burden on included health care providers and beneficiaries. G. Interaction With Other Models In designing each Innovation Center model, CMS considers potential overlap between a new model and other ongoing and potential models and programs. Based on the type of overlap, such as provider or beneficiary, operating rules are established for whether or not providers and beneficiaries can be part of both models as well as how to handle overlap when it is allowed to occur. These policies help to ensure that the evaluation of model impact is not compromised by issues of model overlap and that the calculation of Medicare savings is not overestimated due to double counting of beneficiaries and dollars across different models. In this vein, CMS has begun to review which models would have significant overlap with the potential IPI Model. One example is the Oncology Care Model (OCM) which runs through mid2021. The OCM would require new policies that address model overlap due to the potential inclusion of some of OCM’s initiating cancer therapies in the IPI Model and the probable overlap of some geographic areas with OCM practices included in the IPI Model. The IPI Model would potentially overlap with other Innovation Center models that operate in the same geographic areas and include Part B drug spending in the calculation of model payments, incentive payments or shared savings, and the Medicare Shared Savings Programs. We plan to carefully explore these potential overlaps and consider ways address overlap issues as we further develop the IPI Model. H. Interaction With Other Federal Programs With respect to single source or innovator multiple source drugs (which Medicaid recognizes to include biologicals and biosimilars), the term ‘‘Medicaid Best Price’’ is the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, non-profit entity or governmental entity within the U.S. with certain exclusions. We seek comment on how to avoid unintended consequences on the interaction of the IPI Model with other federal programs. PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 1. Impact on ‘‘Best Price’’ Since the model payments to model vendors for drugs is a Medicare payment and it is not a ‘‘price available from the manufacturer,’’ the model payment amounts would not be included in the manufacturer’s determination of best price. However, since the model payment amounts would drive manufacturer drug prices down, the model may impact a manufacturer’s best price. In order for model vendors to purchase included drugs in the U.S. at prices that would not lead to financial loss, the prices available from the manufacturer would need to be competitive with the model payments. Therefore, such manufacturer sales to the model vendors could potentially lower best price and potentially increase Medicaid rebates. Medicaid programs could benefit. Specifically, if the manufacturer lowers prices available to a model vendor at or below the model payment rate, such prices would be considered in the manufacturer’s determination of best price and may reset the manufacturer’s best price. This is particularly possible because the model payment amount includes the impact of sales outside of the U.S., which are typically lower than prices in the U.S., while a manufacturer’s best price represents prices available only to purchasers in the U.S. We seek public comments on how manufacturers would respond to these factors as they relate to model vendors and Medicaid drug rebates. 2. Impact on Average Manufacturer Price (AMP) Similarly, the model payment amounts to model vendors would not be part of the AMP determination. AMP is defined at section 1927(k)(1) of the Act. Generally, AMP is determined based on the average price paid to the manufacturer for a drug in the U.S. by wholesalers and retail community pharmacies with certain exclusions. The AMP for a Part B drug will likely be determined using the AMP computation for 5i drugs,25 which would include sales that are not generally dispensed through retail community pharmacies (see 42 CFR 447.504(d)), such as sales to physicians, pharmacy benefit managers (PBMs) and hospitals. In this case, it is likely the manufacturer’s sale to a model vendor (or price paid) that would be included in the AMP or 5i AMP and due to the downstream effects of the model payment approach, may lower AMP. If the AMP is lower, it may result in potentially lowering the Medicaid drug 25 Inhalation, infusion, instilled, implanted or injectable drugs. E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules rebate paid to states (the rebate, in part, is based on a percentage of AMP), although the rebate would also be affected because ‘‘best price’’ may be lower as described above. We continue to consider how the model may impact the Medicaid program. Authority for implementing innovative payment and quality models under 1115A of the Act does not completely include Title XIX waiver authority, and thus, such waiver authority does not extend to the Medicaid Drug Rebate Program, which is authorized under Title XIX at section 1927 of the Act. We welcome public feedback, including from State Medicaid programs, on this issue. 3. Interaction With 340B Program The Health Resources and Services Administration (HRSA) administers the 340B Drug Pricing Program that allows certain hospitals and other health care providers (‘‘covered entities’’) to obtain discounted prices on ‘‘covered outpatient drugs’’ (as defined at 1927(k)(2) of the Act) from drug manufacturers. HRSA calculates a 340B ceiling price for each covered outpatient drug, which represents the maximum price a manufacturer can charge a covered entity for the drug. Several types of hospitals as well as clinics that receive certain federal grants from the HHS may enroll in the 340B program as covered entities. Such entities located in the selected model geographic areas would be included in the IPI Model and would be supplied included drugs for included beneficiaries through a model vendor. khammond on DSK30JT082PROD with PROPOSAL 4. Impact on 340B Ceiling Price Covered entities that enroll in the 340B Program can purchase drugs at no more than a ‘‘ceiling price’’, which are calculated based on a drug’s AMP net the Medicaid unit rebate amount. Since the Medicaid unit rebate amount is based partly on AMP minus best price, to the extent the potential model affects a drug’s AMP and best price, the 340B prices would be affected. I. Quality Measures Congress created the Innovation Center for the purpose of testing innovative payment and service delivery models that are expected to reduce program expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. In the IPI Model, we are considering collecting quality measures to help us better understand the impact of this model on beneficiary access and quality of care. We intend to identify quality measures to be collected as part of this model that VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 reflect national priorities for quality improvement and patient-centered care consistent with the measures described in section 1890(b)(7)(B) of the Act, to the extent feasible. To this end, we are interested in several categories of measures, specifically: patient experience measures, medication management measures, medication adherence, and measures related to access and utilization. We are sensitive to concerns regarding adding administrative burden to model participants. Some models (for example, the Bundled Payments for Care Improvement Advanced Model) are currently structured to include quality measures that are calculated directly by CMS or collected during the evaluation and do not require the submission of additional data by providers and suppliers. We are considering following this approach, to the extent feasible, and to assess the quality of care for purposes of real-time monitoring of utilization, hospitalization, mortality, shifts in siteof-service and other important indicators of patient access and outcomes, without requiring providers or suppliers to report additional data. We seek information on the categories and types of quality measures CMS can incorporate in the model that are targeted and judicious, while still capturing key indicators of patient experience, access, and medication management. We welcome recommendations for specific measures. J. Legal Considerations and Potential Waivers of Medicare Program Requirements for Purposes of Testing the Model We plan to test the potential IPI Model under the authority of section 1115A of the Act and to waive certain Medicare program requirements as necessary solely for purposes of testing the potential model. Under section 1115A(d)(1) of the Act, the Secretary of Health and Human Services may waive the requirements of Titles XI and XVIII and of sections 1902(a)(1), 1902(a)(13), 1903(m)(2)(A)(iii), and 1934 of the Act (other than subsections (b)(1)(A) and (c)(5) of such section) as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models described in section 1115A(b) of the Act. We plan to waive requirements of the following provisions as may be necessary solely for purposes of testing the Model. The purpose of this flexibility would be to allow Medicare to test approaches described in the ‘‘Model Payment Methodology’’ section, with the goal of reducing Medicare expenditures while improving or PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 54559 maintaining the quality of beneficiaries’ care as we implement and test this potential model. • Section 1833(t) of the Act and 42 CFR 419.64 related to Medicare payment amounts for drugs and biologicals under the OPPS as necessary to permit testing of a modified payment amount for included drugs using the pricing approaches described in this section; • Section 1847A of the Act and 42 CFR 414.904 and 414.802 related to use of ASP+6 percent and WAC as necessary to permit testing of a modified payment using the pricing approaches described in this paper. • Section 1847B of the Act and 42 CFR 414.906 through 414.920 related to the Medicare Part B Drug Competitive Acquisition Program (CAP) requirements as necessary to permit testing using a CAP-like approach for the acquisition of included therapies through vendor-administered payment arrangements. • Other requirements under title XVIII of the Act as may be necessary solely to test separate payment for included therapies furnished to included beneficiaries by participant health care providers not paid under the outpatient prospective payment system or section 1847A of the Act. K. Model Termination CMS may terminate the potential IPI Model for reasons including, but not limited to, the following: CMS determines that it no longer has the funds to support the Model; or CMS terminates the Model in accordance with section 1115A(b)(3)(B) of the Act. L. Model Evaluation Models operated under section 1115A of the Act are required to have an evaluation that must include an analysis of the quality of care furnished under the model and the changes in spending by reason of the model. The evaluation of the model would help inform the Secretary and policymakers whether this model, as designed, reduces program expenditures while maintaining or improving the quality of care furnished to Medicare beneficiaries. Whenever feasible, a comparison group composed of entities similar to the model participants but not exposed to the model is used to determine the model impact. In this particular potential model, intervention and comparison groups would be determined through a random selection or assignment process. A randomized design helps minimize the impact of unmeasurable factors that may E:\FR\FM\30OCP1.SGM 30OCP1 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules khammond on DSK30JT082PROD with PROPOSAL contribute to providers’ and suppliers’ likelihood to participate in the model. Our inability to control for these unobserved differences could lead to biased or incorrect estimates in the evaluation of the model’s impact on quality of care and spending. We note that to the extent that model sales affect the overall ASP calculation, we may experience evaluation challenges with the comparison group geographic areas not selected for the model. We seek input on the evaluation approach to examine the IPI Model’s impact on Medicare spending and quality of care including potential alternatives. VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 M. Potential Impacts of Implementing the IPI Model 1. Financial Impacts This section outlines the potential financial impact of implementing the potential IPI Model on federal Medicare and Medicaid spending. There are many uncertainties around estimating the financial effects of this model. In addition to the various policy parameters that are either currently unspecified or subject to change throughout the policy development process, the expected change in beneficiary, provider, vendor, and manufacturer behavior would significantly affect the financial impact of the model. The current analysis of this model reflects many generalized assumptions that are likely to change pending further policy development and PO 00000 Frm 00035 Fmt 4702 Sfmt 4725 additional analysis. As such, the estimates shown below should be considered an approximate measure of the potential savings of the potential model, and subsequent analyses would likely be materially different from those shown below as additional information becomes available. a. Medicare and Dual MedicareMedicaid Impacts The following table presents the potential financial impact of the model. For 2020–25, federal Medicare spending is estimated to be reduced by $16.3 billion and Medicaid spending for Medicare-Medicaid dual beneficiaries is expected to be reduced by $1.6 billion, of which $0.9 billion is reduced federal spending and $0.7 billion is reduced State spending. E:\FR\FM\30OCP1.SGM 30OCP1 EP30OC18.002</GPH> 54560 Federal Register / Vol. 83, No. 210 / Tuesday, October 30, 2018 / Proposed Rules Note the following: • No changes in utilization are assumed in this analysis. • Medicare Advantage spending would be reduced proportionately to the reduction in FFS spending. • Included drugs would represent 61 percent of Part B allowed drug spending in years 1 and 2, 81 percent of Part B allowed drug spending in years 3 and 4, and 94 percent of allowed drug spending in year 5. • The Medicaid impact represents the portion of Medicare cost-sharing that is paid on behalf of dual beneficiaries. It is estimated based on the change in Medicare cost-sharing and current dual beneficiary enrollment. No assumptions are made for State price limitations that would limit the beneficiary cost-sharing paid for by Medicaid. • Effects on private market cannot be estimated at this time and are not reflected in this analysis. khammond on DSK30JT082PROD with PROPOSAL b. Medicaid Impacts Based on a review of the Part B drugs that constituted the majority of Part B drug spending in 2017, as well as the top reported Medicaid drugs that were also covered by Part B, the affected drugs reimbursed by Medicaid spending totaled at least $4 billion in 2017, or an estimated 6 percent of gross Medicaid drug spending. The model may impact AMP, ASP, best price, and 340B pricing for these affected drugs, reducing both reimbursements as well as rebates. CMS would seek comment on whether we should exempt prices offered under the model from AMP and Best Price calculations. burden that are not covered under the provisions in section 1115A(d)(3) of the Act 26 or otherwise covered under a PRA exemption, a detailed discussion of the requirements and burden will be submitted to OMB for approval. In accordance with the implementing regulations of the PRA at 5 CFR 1320.11, interested parties will also be provided an opportunity to comment on such information through subsequent proposed and final rulemaking documents. V. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will review all comments we receive by the date and time specified in the DATES section of this preamble, as we continue to consider the model presented in this ANPRM. In accordance with the provisions of Executive Order 12866, this ANPRM was reviewed by the Office of Management and Budget. Dated: October 25, 2018. Seema Verma, Administrator, Centers for Medicare & Medicaid Services. Dated: October 25, 2018. Alex M. Azar II, Secretary, Department of Health and Human Services. [FR Doc. 2018–23688 Filed 10–25–18; 4:15 pm] BILLING CODE 4120–01–P 2. Potential Impacts on Medicare Providers and Suppliers Participating in the Potential IPI Model The potential IPI Model would affect a significant number of health care providers that would furnish included drugs to included Medicare beneficiaries. The effect of the model on individual hospitals, physicians, practitioners, and other providers and suppliers would depend on individual practice patterns and the drugs that would be selected for inclusion. DEPARTMENT OF THE INTERIOR IV. Collection of Information Requirements This ANPRM is a general solicitation of comments on several options pertaining to the potential IPI Model and thereby not subject to OMB review as stated in the implementing regulations of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et seq.) at 5 CFR 1320.3(h)(4). Should the outcome of the ANPRM result in any information collection requirements or AGENCY: VerDate Sep<11>2014 17:16 Oct 29, 2018 Jkt 247001 Fish and Wildlife Service 50 CFR Part 17 [Docket No. FWS–R1–ES–2007–0024; FXES11130900000C6–189–FF09E42000] RIN 1018–AU96 Endangered and Threatened Wildlife and Plants; Removing the Hawaiian Hawk From the Federal List of Endangered and Threatened Wildlife Fish and Wildlife Service, Interior. ACTION: Proposed rule; document availability and reopening of comment period. We, the U.S. Fish and Wildlife Service (Service), announce the SUMMARY: 26 As stated in section 1115A(d)(3) of the Act, Chapter 35 of title 44, U.S.C., shall not apply to the testing and evaluation of models under section 1115A of the Act PO 00000 Frm 00036 Fmt 4702 Sfmt 4702 54561 reopening of the public comment period on the August 6, 2008, proposed rule to remove the Hawaiian hawk or io (Buteo solitarius) from the List of Endangered and Threatened Wildlife (List) under the Endangered Species Act of 1973, as amended (Act). Comments submitted during the 2008 comment period, 2009 reopened comment periods, and 2014 reopened comment period do not need to be resubmitted, and will be fully considered in preparation of our final rule. We are reopening the comment period once more to present information we have received since 2014 that is relevant to our consideration of the status of the Hawaiian hawk. We encourage those who may have commented previously to submit additional comments, if appropriate, in light of this new information. In addition, we are also seeking input on considerations for post-delisting monitoring of the Hawaiian hawk. Our goal is to respond to comments and come to a final determination on the status of the Hawaiian hawk in the form of a final rule by the end of 2018. DATES: The comment period for the proposed rule published August 6, 2008, at 73 FR 45680 is reopened. To ensure that we are able to consider your comments and information, they must be received or postmarked no later than November 29, 2018. Please note that, if you are using the Federal eRulemaking Portal (see ADDRESSES, below), the deadline for submitting an electronic comment is 11:59 p.m. Eastern Time on this date. We may not be able to address or incorporate information that we receive after the above requested date. ADDRESSES: You may submit comments by one of the following methods: (1) Electronically: Go to the Federal eRulemaking Portal: http:// www.regulations.gov. In the Search box, enter FWS–R1–ES–2007–0024, which is the docket number for this rulemaking. Then, click on the Search button. On the resulting page, in the Search panel on the left side of the screen, under the Document Type heading, click on the Proposed Rule box to locate this document. You may submit a comment by clicking on ‘‘Comment Now!’’ Please ensure that you have found the correct rulemaking before submitting your comment. (2) By hard copy: Submit by U.S. mail or hand-delivery to: Public Comments Processing, Attn: FWS–R1–ES–2007– 0024, U.S. Fish and Wildlife Service, MS: BPHC, 5275 Leesburg Pike, Falls Church, VA 22041–3808. We request that you send comments only by the methods described above. We will post all comments on http:// E:\FR\FM\30OCP1.SGM 30OCP1

Agencies

[Federal Register Volume 83, Number 210 (Tuesday, October 30, 2018)]
[Proposed Rules]
[Pages 54546-54561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23688]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Chapter IV

[CMS-5528-ANPRM]
RIN 0938-AT91


Medicare Program; International Pricing Index Model for Medicare 
Part B Drugs

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Advance notice of proposed rulemaking with comment.

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SUMMARY: We are issuing this advance notice of proposed rulemaking 
(ANPRM) to solicit public comments on potential options we may consider 
for testing changes to payment for certain separately payable Part B 
drugs and biologicals (hereafter called ``drugs''). Specifically, CMS 
intends to test whether phasing down the Medicare payment amount for 
selected Part B drugs to more closely align with international prices; 
allowing private-sector vendors to negotiate prices for drugs, take 
title to drugs, and compete for physician and hospital business; and 
changing the 4.3 percent (post-sequester) drug add-on payment in the 
model to reflect 6 percent of historical drug costs translated into a 
set payment amount, would lead to higher quality of care for 
beneficiaries and reduced expenditures to the Medicare program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on December 31, 
2018.

ADDRESSES: In commenting, please refer to file code CMS-5528-ANPRM. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-5528-ANPRM, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-5528-ANPRM, 
Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Hillary Cavanagh, 410-786-6574 or the 
IPI Model Team at [email protected].

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to 
view public comments.

[[Page 54547]]

    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Executive Summary

A. Purpose

    The Medicare program and its beneficiaries currently pay more for 
many high-cost drugs than many other countries.\1\ The Centers for 
Medicare & Medicaid Services' (CMS) Center for Medicare and Medicaid 
Innovation (``Innovation Center'') is taking action on President 
Trump's goal to lower drug costs for Medicare beneficiaries by 
exploring a potential model that seeks to ensure the Medicare program 
pays comparable prices for Part B drugs relative to other economically-
similar countries. The potential International Pricing Index (IPI) 
model would have several goals, including: reducing Medicare program 
selected expenditures and beneficiary cost-sharing for separately 
payable Part B drugs (for example, drug administered in physician 
offices and hospital outpatient departments), preserving or enhancing 
quality of care for beneficiaries, offering comparable pricing relative 
to international markets, removing providers' financial incentive to 
prescribe higher-cost drugs while creating revenue stability, 
minimizing disruption to the current supply chain, and increasing 
Medicare efficiency and value to reduce federal spending and taxpayer 
dollars. With this advance notice of proposed rulemaking (ANPRM), the 
CMS is soliciting public feedback on key design considerations for 
developing the IPI Model.
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    \1\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
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    The IPI Model aims to drive better quality for Medicare 
beneficiaries and reduce Medicare drug spending by offering comparable 
pricing relative to other countries and addressing flawed incentives in 
the current payment system. Currently, Medicare pays substantially more 
than other countries for the highest-cost physician administered 
drugs.\2\ In addition, the current Medicare payment system has several 
features that may be causing greater utilization of higher priced 
drugs.\3\ Under the current system, Medicare pays doctors and hospitals 
a fee set at 6 percent of the price of the drug so that the dollar 
amount of the add-on increases with the price of the drug rather than a 
set payment reflecting the service being performed. The current buy-
and-bill system also requires physicians to purchase high-cost Part B 
drugs and wait for Medicare reimbursement, exposing practices to 
financial risk and jeopardizing their ability to operate and provide 
care in their communities.
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    \2\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
    \3\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
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    We are proposing to design the IPI Model to achieve the following: 
(1) Reduce expenditures while preserving or enhancing the quality of 
care for beneficiaries; (2) ensure the United States (U.S.) is paying 
comparable prices for Part B drugs relative to other countries by 
phasing in reduced Medicare payment for selected drugs based on a 
composite of international prices; (3) reduce out-of-pocket costs for 
included drugs for Medicare beneficiaries, and thereby increase access 
and adherence due to decreased drug costs; (4) maintain relative 
stability in provider revenue through an alternative drug add-on 
payment for furnishing drugs that removes the current percentage-based 
drug add-on payments, which creates incentives for higher list prices 
and to prescribe higher cost drugs; (5) reduce participating health 
care providers' burden and financial risk associated with furnishing 
included drugs by using private-sector vendors to purchase and take 
title to included drugs; and (6) introduce greater competition into the 
acquisition process for separately payable Part B drugs.

B. Summary of Major Provisions

    In section III. of this ANPRM, we discuss the model concept design 
for the IPI Model. This IPI Model would focus on selected separately 
payable Part B drugs and biologicals (hereafter called ``drugs''). 
Specifically, the IPI Model would initially focus on Part B single 
source drugs, biologicals, and biosimilars that encompass a high 
percentage of Part B drug utilization and spending. The Innovation 
Center would test this model under section 1115A of the Social Security 
Act (the Act), which authorizes testing models expected to reduce 
program expenditures, while preserving or enhancing the quality of care 
furnished to beneficiaries. The model under consideration would include 
physicians, hospitals, and potentially other providers and suppliers in 
selected geographic areas. The IPI Model test would include the 
following components:
     Set the Medicare payment amount for selected Part B drugs 
to be phased down to more closely align with international prices;
     Allow private-sector vendors to negotiate prices for 
drugs, take title to drugs, and compete for physician and hospital 
business; and
     Increase the drug add-on payment in the model to reflect 6 
percent of historical drug costs.
     Pay physicians and hospitals the add-on based on a set 
payment amount structure; CMS would calculate what CMS would have paid 
in the absence of the model, before sequestration, and redistribute 
this amount to model participants based on a set payment amount.
    These and other components of the potential model are described in 
greater detail in this ANPRM.
    We are considering issuing a proposed rule in the Spring of 2019 
with the potential model to start in Spring 2020. The potential model 
would operate for five years, from Spring 2020 to Spring 2025. Of note, 
as discussed in section III.I. of this ANPRM, the IPI Model may have an 
impact on Medicaid drug rebates and payments, which we continue to 
explore.
    With the release of this ANRPM, we solicit public input on our 
intended model design to inform our ongoing work to develop the IPI 
Model.

II. Background

A. Overview of Supply Chain

1. Current Distribution System
    In the U.S., Part B drugs that are administered in the outpatient 
setting usually flow from the manufacturer through drug wholesalers (or 
specialty distributors) to the provider or supplier. At each step of 
the process, the drugs are sold to the next entity in the supply chain 
and that entity takes title to the drug. Distribution management 
systems are employed to order drugs, track sales and shipments, manage 
price and customer lists, record financial transactions, and support 
other industry processes. Figure 1 provides a high-level

[[Page 54548]]

view of this ``buy and bill'' system \4\ and existing relationships 
between the various entities, including product movement, financial 
flow, and contract relationships.\5\
---------------------------------------------------------------------------

    \4\ The ``buy and bill'' system refers to health care providers 
purchasing drugs for administration to patients followed by the 
submission of claims to a payer.
    \5\ Reprinted with permission. Drug Channels, ``Follow the Vial: 
The Buy-and-Bill System for Distribution and Reimbursement of 
Provider-Administered Outpatient Drugs,'' October 14 2016, accessed 
via: https://www.drugchannels.net/2016/10/follow-vial-buy-and-bill-system-for.html.
[GRAPHIC] [TIFF OMITTED] TP30OC18.001

    The role of the health care provider within the buy-and-bill system 
is to seek out low cost drug suppliers and purchasing mechanisms (for 
example, by joining a group purchasing organization (GPO)), order, buy 
(or use financing), receive, and store drugs, administer drugs to 
patients, file claims to bill insurers for payment, and collect patient 
cost-sharing. There are many different buying strategies that enable 
physicians and hospitals to obtain lower drug prices. These strategies 
include using GPOs, group purchasing arrangements, wholesaler/
distributor price lists, the 340B Prime Vendor,\6\ and directly 
negotiated agreements with manufacturers. Similarly, the current drug 
distribution system accommodates a variety of purchasing mechanisms and 
specialized distribution processes, for example, cold chain and product 
tracing compliance.\7\
---------------------------------------------------------------------------

    \6\ The Health Resources and Services Administration (HRSA) 
administers the 340B Drug Pricing Program that allows certain 
hospitals and other health care providers (``covered entities'') to 
obtain discounted prices on ``covered outpatient drugs'' (as defined 
at section 1927(k)(2) of the Act) from drug manufacturers. The 340B 
Prime Vendor is responsible for securing subceiling discounts on 
outpatient drug purchases and discounts on other pharmacy-related 
products and services for participating public hospitals, community 
health centers, and other safety-net health care providers electing 
to join the 340B program.
    \7\ A cold chain ensures that a product maintains a desired 
temperature all the way through the supply chain from manufacturing 
to delivery/administration. Product tracing allows a user to track 
every step of the supply chain.
---------------------------------------------------------------------------

    Physicians generally purchase Part B drugs from a wholesaler, 
distributor, or specialty pharmacy. Hospitals generally purchase for 
their outpatient departments through their hospital pharmacy's 
arrangement with a drug wholesaler. Physicians and hospitals also have 
arrangements with manufacturers, individually or through their GPOs, 
for discounts that are tied to prescribing, for example volume 
discounts based on purchases of drugs for all patients that are 
treated. Drug wholesalers, distributors, and specialty pharmacies 
negotiate with manufacturers on the price they will pay to acquire 
drugs. When applicable, contract pricing controls the price that the 
health care provider will pay to the wholesaler, distributor, or 
specialty pharmacy, while shipping and handling and other terms may 
vary. Through a process called the ``chargeback process,'' 
manufacturers reduce the final drug prices to wholesalers and other

[[Page 54549]]

distributors to reflect the contract prices that were applied to health 
care providers' drug purchases. Increasingly, specialty pharmacies are 
supplying oncology drugs to health care providers that have chosen to 
remove themselves from the buy and bill system--or private payers are 
mandating use of ``white bagging'' or ``brown bagging'' (that is, 
pharmacy dispensed drugs delivered to the practitioner by the pharmacy 
or patient) to control drug costs.\8\ However, Medicare does not 
mandate use of or encourage white bagging or brown bagging.\9\
---------------------------------------------------------------------------

    \8\ Robinson and Howell. Specialty Pharmaceuticals: Policy 
Initiatives to Improve Assessment, Pricing, Prescription, and Use. 
Health Affairs 2014:33(10);1745-50.
    \9\ ``Brown bagging'' is a term used when the patient obtains 
the drug at a pharmacy and then brings it to the physician for 
administration. ``White bagging'' is a term used when the specialty 
pharmacy ships directly to the physician office or hospital 
outpatient department for administration.
---------------------------------------------------------------------------

2. Prior Competitive Acquisition Program
    Under the Medicare Prescription Drug, Improvement and Modernization 
Act of 2003, which established section 1847B of the Act, we have 
authority to implement the ``Competitive Acquisition Program'' or 
``CAP'' for Part B drugs that are not paid on a cost or prospective 
payment basis. The CAP was implemented in the mid-2000s.
    The CAP was an alternative to the average sales price (ASP) 
methodology that is used to pay for the majority of Part B drugs, 
particularly drugs that are administered during a physician's office 
visit. Instead of buying drugs for their offices, physicians who chose 
to participate in the CAP would place a patient-specific drug order 
with an approved CAP vendor; the vendor would provide the drug to the 
office and then bill Medicare and collect cost-sharing amounts from the 
patient. Drugs were supplied in unopened containers (not pharmacy-
prepared individualized doses like syringes containing a patient's 
prescribed dose). When the CAP was in place, most Part B drugs used in 
participating physicians' offices were supplied by the approved CAP 
vendor. Unlike the buy and bill process that is still used to obtain 
many Part B drugs, physicians who participated in the CAP did not buy 
or take title to the drug. Physician participation in the CAP was 
voluntary, but physicians had to elect to participate in the CAP. CAP 
drug claims were processed by a designated carrier.
    CMS conducted bidding for CAP vendors in 2005. The first CAP 
contract period ran from July 1, 2006 until December 31, 2008. One drug 
vendor participated in the program, providing drugs within 
approximately 180 Healthcare Common Procedure Coding System (HCPCS) 
billing codes (including heavily utilized drugs in Part B) to 
physicians across the United States and its territories. The parameters 
for the second round of the vendor contract were essentially the same 
as those for the first round. While CMS received several qualified bids 
for the subsequent contract period, shortly before the second contract 
period began, contractual issues with the successful bidders led to the 
postponement of the program, and the CAP has been suspended since 
January 1, 2009.
3. Challenges With the Statutory CAP
    As described previously, the CAP operated for a brief time from 
2006 to 2008. The Part B drug market has changed since that time. 
Higher cost drugs, particularly biologicals manufactured by sole 
sources, are driving increasing Part B drug expenditures.\10\ Many of 
the highest price drugs and biologicals available today were not 
contemplated when the CAP program was established. While distribution 
channels have remained concentrated, today's providers and suppliers 
have access to more sophisticated technologies such as electronic 
ordering systems and virtual inventory management systems.
---------------------------------------------------------------------------

    \10\ Medicare Part B Drug Spending Dashboard accessed via: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/MedicarePartB.html.
---------------------------------------------------------------------------

    Since 2009, physicians have faced growing financial risks under the 
buy and bill approach, as the prices of Part B drugs have increased. 
Hospitals have varying ability to negotiate discounts, so some 
hospitals face similar financial challenges for the outpatient drugs 
they provide. Further, the rising costs of prescription drugs in the 
Medicare Part B program strain federal resources as well as 
beneficiaries' wallets.
    As envisioned, the CAP had the potential to reduce risk for 
enrolled physicians and Medicare expenditures. As implemented, the CAP 
was tied to the ASP payment under section 1847A of the Act and did not 
achieve savings.\11\ In the aggregate, the submitted bids could not 
exceed a threshold that was based on ``point in time'' ASP data 
combined with historical utilization data. The submitted bids fed into 
the composite bid analysis and vendor selection process. These time 
consuming, imprecise mechanisms, along with other features of the CAP, 
limited the appeal of the program for vendors. There was no guarantee 
for the CAP vendors that the CAP payments would cover their drug 
acquisition and operating costs. Participating physicians reported that 
CAP requirements were challenging to integrate into efficient practice 
patterns and treatment regimes, especially for oncologists who 
prescribe dosages that may change on the day of treatment, and 
physicians who need to administer antibiotics urgently.
---------------------------------------------------------------------------

    \11\ Evaluation of the Competitive Acquisition Program for Part 
B Drugs: Final Report, December 2009, accessed via: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/CAPPartB_Final_2010.pdf.
---------------------------------------------------------------------------

    Recently, we have heard from stakeholders, including physician and 
hospital groups, and beneficiary advocates, that a CAP-like approach 
with improvements, particularly in regards to onsite availability of 
drugs, could potentially address concerns about the financial burdens 
associated with furnishing Part B drugs and their rising costs, and 
address challenges experienced in the CAP. Stakeholder feedback on the 
CAP has been considered in the development of the potential IPI Model 
described in this ANPRM. In addition, comments received on a Request 
for Information on a potential model to leverage the authority under 
the CAP for Part B drugs and biologicals that was included in the 
Calendar Year 2019 Hospital Outpatient Prospective Payment System 
(OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed 
rule (83 FR 37046) and comments received on the HHS Blueprint to Lower 
Drug Prices and Reduce Out-of-Pocket Costs (83 FR 22692) were 
considered.

B. Rising Cost of Prescription Drugs

1. Medicare Spending
    Medicare Part B drug expenditures have increased significantly over 
time. From 2011 to 2016, Medicare FFS drug spending increased from 
$17.6 billion to $28 billion under Medicare Part B, representing a 
compound annual growth rate (CAGR) of 9.8 percent, with per capita 
spending increasing 54 percent, from $532 to $818.\12\ The number of 
Medicare Part B FFS beneficiaries and the number of these beneficiaries 
who received a Part B drug increased over the 5-year period (2011 
through 2016). However, the increase in total Medicare drug spending 
during this period is more fully explained by increases in the prices 
of drugs and mix of drugs for those beneficiaries who received them 
than by increases in Medicare enrollment and drug utilization. The

[[Page 54550]]

CAGR in number of Medicare Part B FFS beneficiaries is less than 1 
percent between 2011 and 2016.
---------------------------------------------------------------------------

    \12\ Spending and Enrollment Data from Centers for Medicare and 
Medicaid Services Office of Enterprise Data and Analytics.
---------------------------------------------------------------------------

2. International Prices Relative to U.S. Prices
    Drug acquisition costs in the United States exceed those in Europe, 
Canada, and Japan, according to a Department of Health and Human 
Services (HHS) analysis \13\ of drug acquisition costs for Medicare 
Part B physician-administered drugs. The HHS analysis compared United 
States drug acquisition costs for a set of Medicare Part B physician-
administered drugs to acquisition costs in 16 other developed 
economies--Austria, Belgium, Canada, Czech Republic, Finland, France, 
Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, 
Sweden, and the United Kingdom (UK).
---------------------------------------------------------------------------

    \13\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
---------------------------------------------------------------------------

    Among the 27 products included in the analysis, acquisition costs 
in the U.S. were 1.8 times higher than in comparator countries.\14\ 
Acquisition cost ratios ranged from U.S. prices being on par with 
international prices for one drug, to U.S. prices being up to 7 times 
higher than the international prices. There is variability across the 
16 countries in the study as well, with no one country consistently 
acquiring drugs at the lowest prices. The U.S. has the highest ex-
manufacturer prices for 19 of the 27 products.
---------------------------------------------------------------------------

    \14\ Acquisition cost ratios ranged from U.S. prices being on 
par with international prices for one drug, to U.S. prices being up 
to 7 times higher than the international prices. There is 
variability across the 16 countries in the study as well, with no 
one country consistently acquiring drugs at the lowest prices. The 
U.S. has the highest acquisition costs for the vast majority of the 
27 products.
---------------------------------------------------------------------------

    As a result, Medicare beneficiaries and the Medicare program are 
bearing unnecessary, potentially avoidable costs for Part B drugs.

III. Model Concept Design

    The potential IPI Model would leverage and improve upon the CAP 
approach by paying physicians and hospitals for drug-related costs, 
providing more flexibility for drug ordering and distribution, and by 
having model vendors compete for business from physicians and 
hospitals. Through the potential IPI Model, we seek to test ways to 
remove physicians and hospitals outpatient departments from the buy and 
bill process, without creating undue disruption to the distribution 
system.
    CMS is considering contracting with a number of private-sector 
vendors that would supply physicians, hospital outpatient departments, 
and other included providers and suppliers with the drugs and 
biologicals that CMS would include in the model in all of the model's 
selected geographic areas. Similar to the CAP, the model vendors, 
rather than the health care providers, would take on the financial risk 
of acquiring the drugs and billing Medicare. Instead of paying the 
model vendors based on bid amounts, as section 1847B of the Act 
prescribes for the CAP, under the IPI Model Medicare would pay the 
vendor for the included drugs based on international prices discussed 
in section III.D. of this ANPRM, which would be intended to lower the 
amount Medicare pays for included drugs and beneficiary cost-sharing. 
The model vendors would have flexibility to offer innovative delivery 
mechanisms to encourage physicians and hospitals to obtain drugs 
through the vendor's distribution arrangements, such as electronic 
ordering, frequent delivery, onsite stock replacement programs, and 
other technologies. Physicians and hospitals in the model test would 
select the vendors that best provide customer service and support 
beneficiary choice of treatments, and would be able to engage with 
multiple vendors for different drugs and to change vendors. In addition 
to the Medicare drug administration payment that would still be made to 
physicians and hospitals, the model would pay physicians and hospitals 
a ``drug add-on amount'' that would be different from the current drug 
add-on amount.
    Outside of the designated model test areas and for drugs not 
included in the model, health care providers would continue to use the 
buy and bill approach and the current Medicare FFS payment policies 
would apply.
    This ANPRM describes features of a potential model in more detail, 
such as how an international pricing index could be developed and 
tested. We intend to waive program requirements to the extent necessary 
to test the model design that we would implement through notice and 
comment rulemaking. We seek feedback on a number of potential model 
elements described in the following sections of this ANPRM. These 
include:
     What limitations would be in place on the entities that 
could participate as vendors (e.g. pharmacies, manufacturers, providers 
themselves)?
     Which countries should be included in calculating an 
international pricing index? How frequently should international data 
be updated?
     What should be the schedule for phasing in the spending 
target?
     Should we introduce health care provider bonuses to 
incentivize reductions in cost or utilization relative to a benchmark?

A. Model Vendors

1. Testing Alternative to CAP Requirements
    As CMS develops the IPI Model, we seek to minimize disruption 
within the drug distribution system while increasing competition, 
lowering U.S. drug prices, and removing the incentive for higher list 
prices. Under the CAP, the CAP vendor had to acquire the CAP drug and 
ship the drug to the ordering physician after receiving a beneficiary-
specific order. Under the IPI Model we are considering, vendors would 
have the flexibility to offer a variety of delivery options, including 
beneficiary-specific prescriptions, pre-ordering approaches such as 
onsite inventory management solutions, and other arrangements that 
would not require physicians and hospitals to purchase the drugs or 
face greater buying costs. Physicians and hospitals would select the 
vendors that offer delivery mechanisms that best meet their patient 
care needs, practice size and location(s), and support needs. 
Agreements between the vendors and physicians/hospitals would establish 
the terms of their arrangements and would include appropriate 
guardrails to protect all parties, including beneficiaries and the 
Medicare program. CMS seeks feedback on whether CMS should be a party 
to and/or regulate these agreements, and whether the agreements should 
specify obligations to ensure the physical safety and integrity of the 
included drugs until they are administered to an included beneficiary, 
how drug disposition would be handled, and data sharing methods, 
confidentiality requirements, and potentially other requirements.
2. Eligible Vendors
    Under the potential IPI Model, we would intend to allow greater 
flexibility than under the CAP in the types of entities that could be 
selected as a model vendor (in accordance with applicable laws), and to 
minimize the impacts on drug distribution processes. Under the CAP, 
specialty pharmacies were the only entities that met the CAP vendor 
criteria, and only one such vendor participated in the program. To 
increase competition, the IPI Model would potentially allow entities 
such as GPOs, wholesalers, distributors, specialty pharmacies, 
individual or groups of physicians and hospitals, manufacturers, Part D 
sponsors, and/or other entities to perform the role of

[[Page 54551]]

model vendor as long as they could satisfy the vendor qualification 
requirements. We are interested in ways to minimize any potential 
concerns that could arise by allowing a broader set of entities to be 
vendors, and how health care providers operating as vendors might be 
able to operate in all geographic areas included in the model. We seek 
input on the types of entities that would be allowed to be model 
vendors, the potential for perverse incentives that could be introduced 
by potentially allowing health care providers to be model vendors and/
or allowing model vendors to charge health care providers for 
distribution-related activities, and whether there should be guardrails 
in place to prevent perverse incentives.
    We would require that model vendors purchase and take title to the 
included drugs, but to allow for innovative distribution approaches, 
model vendors would not be required to take physical possession of the 
drugs. For example, if a manufacturer establishes a limited 
distribution program, model vendors could negotiate with the 
manufacturer ways to purchase the drug while the established limited 
distribution entity would continue to ship the drug to the physician or 
hospital for administration.
    We would expect that all model vendors would operate on a national 
basis; that is, model vendors potentially would be required to serve 
all of the selected model geographic areas and supply all included 
drugs to the physicians and hospitals that enroll with the vendor. The 
model would promote competition among multiple national vendors; 
vendors would compete for agreements with physicians and hospitals and 
other health care providers that would be included in the model. 
Physicians and hospitals would not be required to use only one vendor; 
we would encourage model participants to obtain drugs from the most 
cost effective model vendors. Enrolling with more than one vendor would 
allow physicians and hospitals more options for obtaining drugs timely, 
although the minimum requirement would be that model participants 
maintain enrollment with at least one vendor in order to furnish 
included drugs to the beneficiaries they serve timely.
    Model vendors would operate enrollment for physicians and hospitals 
and would send periodic enrollment reports and other documentation to 
CMS to support model operations. In addition, model vendors would be 
prohibited from paying rebates or volume-based incentive payments to 
physicians and hospitals.
3. Model Vendor Responsibilities
    The model vendors' responsibilities would be based on the 
responsibilities of the CAP contractor under section 1847B of the Act 
and would be specified in a model vendor agreement. The model vendors 
would be responsible for such activities as--
     Negotiating with manufacturers for the vendor's drug 
acquisition prices for included drugs;
     Establishing mechanisms for the model vendor to take title 
to, but not necessarily physical possession of, included drugs, and 
arranging for the distribution of included drugs to participant health 
care providers for administration to included beneficiaries;
     Establishing mechanisms within the vendor's arrangements 
with manufacturers, physicians, hospitals, and other included providers 
and suppliers to receive compensation for vendor services;
     Implementing processes for participant health care 
providers to enroll with the vendor and to obtain included drugs;
     Meeting applicable licensure requirements in each State in 
which the vendor would supply included drugs and be enrolled in 
Medicare as a participating supplier, unless the model vendor 
distributes included drugs under contract with one or more entities, in 
which case the vendor must require that such entities meet applicable 
licensure requirements and be enrolled in Medicare as a participating 
supplier;
     Establishing mechanisms for physicians and hospitals to 
notify the vendor of the disposition of an included drug;
     Submitting claims for included drugs in accordance to 
model billing instructions established by CMS;
     Paying manufacturers for included drugs that were 
administered;
     Operating vendor-administered payment arrangements, such 
as indication based pricing, or outcomes-based agreements;
     Developing and implementing program integrity safeguards 
to ensure that all model requirements and applicable Medicare 
requirements are followed;
     Participating in model activities, including monitoring 
and evaluation activities;
     Providing support and technical assistance to participant 
health care providers; and
     Performing other functions and requirements as specified 
in the model vendor agreement, such as administrative requirements.
4. Model Vendor Payment
    Physicians and hospitals would pay the model vendor for 
distribution costs and would collect beneficiary cost-sharing, 
including billing supplemental insurers.\15\ Informational drug claims 
would be submitted to the Medicare Administrative Contractor (MAC) 
along with claims for drug administration.
---------------------------------------------------------------------------

    \15\ We envision that existing Medicare crossover claims 
processing steps could be leveraged to support billing supplemental 
insurers.
---------------------------------------------------------------------------

    In addition, similar to how the CAP operated, under the model, 
vendors would submit claims to Medicare and would be paid an applicable 
amount for the Part B drug that was administered to an included 
beneficiary. The model payment amounts to vendors for included drugs 
would be updated quarterly. The payment amount is described in section 
III.D. of this ANPRM. Unlike the CAP, under the potential model CMS 
would not solicit bid amounts for drugs. To the extent it would be 
legally allowable, vendors' agreements with physicians and hospitals 
could include provisions for delivery fees and other vendor costs.\16\
---------------------------------------------------------------------------

    \16\ We envision that model vendors would compete, in part, for 
physicians and hospitals based on low fees.
---------------------------------------------------------------------------

    On a periodic basis, for example quarterly, CMS would ensure that 
payment to the model vendors for administered drugs is substantiated by 
the physician and hospital submitted claims.
    We seek feedback on other options for model vendor payment, 
including whether payment should include an administration fee from CMS 
and whether vendors' agreements with physicians and hospitals could 
include provisions for delivery fees and other vendor costs.
    We are considering whether, given the flexibilities that model 
vendors and physicians and hospitals would have under the model, the 
model should include dispute resolution support, and if so, what such 
support should include.
5. Model Vendor Selection
    We intend to operate a competitive selection process to identify 
the model vendors that would participate in the IPI Model. As we 
solicit applications for potential model vendors, we would encourage a 
variety of qualified entities to apply, including new business 
arrangements that could fulfill the vendor role on a national basis. We 
intend to select three or more model vendors so that physicians and 
hospitals have a number of vendors from which to obtain drugs and so 
that model vendors compete on the basis of

[[Page 54552]]

customer service and cost, but solicit comment as to whether three 
vendors is an appropriate floor. The solicitation for model vendors 
would specify in more detail the model vendor requirements.
    The model vendor solicitation would also specify the selection 
factors, which may include: The ability to negotiate with 
manufacturers; the ability to ensure product integrity; The ability to 
establish a customer service/grievance process; financial performance 
and solvency; record of integrity and the implementation of internal 
integrity measures; internal financial controls; maintenance of 
appropriate licensure to purchase drugs and biologicals; and ability to 
meet the model vendor agreement requirements within 6 months.
    We would refuse to establish a model vendor agreement with an 
entity for reasons including--
     Exclusion of the entity under section 1128 of the Act from 
participation in Medicare or other Federal health care programs; or
     Past or present violations or misconduct related to the 
pricing, marketing, distribution, or handling of drugs covered under 
the Medicare program.
    We would similarly include reasons to terminate a model vendor in 
the model vendor agreement. In addition, to ensure that selected model 
vendors would be able to perform their responsibilities under the model 
vendor agreement without influence from parties that have a financial 
interest related to included drugs or participating health care 
providers, we are considering including conflict of interest 
requirements similar to those established for the CAP in 42 CFR 
414.912.
6. Requests for Feedback and Information
    We are inviting public comment on the factors that would be 
necessary to allow CMS to identify entities that would most likely 
perform the responsibilities of a model vendor efficiently and 
effectively with minimal start up time.
     We seek information about the types of entities that could 
serve as national vendors for the model. Should CMS require model 
vendors to enroll any included health care provider? If included 
physicians and hospitals could be model vendors, should they be 
required to be a vendor for other health care providers, and should 
they have to operate on a national basis? Should any vendor be required 
to provide services on a national basis?
     We are also interested in public comment on the potential 
guardrails that would be appropriate if manufacturers and/or health 
care providers could serve as model vendors. Also should CMS receive 
shared savings based on the difference between a model vendor's 
negotiated price and CMS' payment amount? If so, how would CMS 
operationalize this shared savings approach?
     What should be the potential responsibilities of model 
vendors and model participants (included physicians, hospitals, and 
potentially other providers and suppliers) under the model. 
Specifically, are there ways that vendors and model participants could 
collaborate to enhance quality and reduce costs?
     What would be the ability of the potential types of 
entities that could be model vendors to negotiate for drug prices that 
would be at or below the IPI Model payment? Would certain types of 
entities have advantages or face additional challenges?
     Are there processes that model vendors could use to 
increase their price negotiation leverage with manufacturers and lower 
their potential loss exposure without increasing burdens on 
beneficiaries, physicians, and hospitals?
     Are there unsurmountable challenges related to physicians 
and hospitals paying for distribution costs and to continue to collect 
beneficiary cost-sharing, including billing supplemental insurers?
     Should physicians and hospitals receive bad debt payments 
if beneficiaries fail to satisfy cost-sharing obligations?
     Is there a need for the model to include billing and 
dispute resolution support, and if so, what should such support 
include?
     Should CMS pay the model vendors or should providers pay 
the model vendors for the responsibilities associated with taking title 
to drugs and distributing drugs? What incentives are established if CMS 
pays the model vendors?
     What should be the reasons for excluding entities from 
serving as a model vendor or terminating a model vendor agreement, as 
well as appropriate conflict of interest requirements?
     Should the role for the model vendors include entering 
into value-based payment arrangements (for example, indication-based 
pricing or outcomes-based agreements)? And if so, should there be 
requirements around these arrangements?

B. Model Participants, Compensation and Selected Geographic Areas

1. Model Participants
    IPI Model participants would include all physician practices and 
hospital outpatient departments (HOPDs) that furnish the model's 
included drugs in the selected model geographic areas. CMS is 
considering whether to also include durable medical equipment (DME) 
suppliers, Ambulatory Surgical Centers (ASCs), or other Part B 
providers and suppliers that furnish the included drugs. Model 
participation would be mandatory for the physician practices, HOPDs, 
and potentially other providers and suppliers, in each of the selected 
geographic areas.
    We intend to provide a more comprehensive list of health care 
providers included under the model if a proposed rulemaking moves 
forward.
    For purposes of the potential IPI Model, beneficiaries would be 
included in the model if they are furnished any of the included drugs 
by a model participant in one of the selected geographic areas. More 
specifically, the following beneficiary eligibility criteria would be 
used based on the date that the included drug was furnished--
     The beneficiary is enrolled in Medicare Part B;
     The beneficiary is not enrolled in any group health plan 
or United Mine Workers of America health plan; \17\ and
---------------------------------------------------------------------------

    \17\ The United Mine Workers of America Health and Retirement 
Funds (``The Funds'') is a Medicare Health Care Prepayment Plan 
(HCPP) and is the Medicare payer for non-facility Part B services. 
As such, providers bill the Funds for Medicare Part B services. The 
Funds' payment to the provider includes the Medicare amount plus the 
Medicare coinsurance and deductible amount, making it unnecessary 
for the provider to submit claims to two payers.
---------------------------------------------------------------------------

     Medicare FFS is the primary payer.
    Medicare FFS beneficiaries who are not eligible for inclusion in 
the model would continue to receive drugs that were obtained by their 
health care provider using the buy and bill approach.
    Under the IPI Model, model participants in the selected geographic 
areas would have to enroll with at least one model vendor and obtain 
included drugs from a model vendor for administration to included 
Medicare FFS beneficiaries. Model participants would have to follow 
model-specific billing instructions to submit informational drug claims 
and the model add-on payment. To reduce beneficiary impact, model 
participants would continue to collect beneficiary cost-sharing. We are 
considering ways to ensure the reconciling of beneficiary cost-sharing 
that model participants

[[Page 54553]]

would be collecting. An administrative approach that deducts the cost-
sharing amounts from Medicare payments made for other services to the 
model participants could be feasible and would be less disruptive for 
beneficiaries.
2. Model Geographic Areas
    The model would require the participation of physician practices 
and HOPDs (and potentially other providers and suppliers) in selected 
geographic areas across the U.S. and its territories, which would allow 
the Innovation Center to gain experience and insight into using an 
alternative payment methodology for drugs included in the model. We 
anticipate the selected geographic areas would include 50 percent of 
Medicare Part B spending on separately payable Part B drugs. The 
mandatory participation of physician practices and HOPDs (and 
potentially other health care providers that furnish included drugs) in 
the selected geographic areas would avoid having expected financial 
performance in the model influence the physician practice/HOPD's 
decision to participate or not. It also would ensure we capture the 
experiences of various types of physician practices and HOPDs in 
different geographic areas with varying characteristics and historic 
utilization patterns.
    For the IPI Model, we are considering a randomized design with the 
randomization to intervention and comparison groups occurring at the 
geographic unit of analysis. There are two main factors that need to be 
considered when selecting geographies for the model: (1) The most 
appropriate geographic unit (ZIP code, county, core based statistical 
area, state, etc.) that reflects how care is delivered in markets, and 
(2) the geographic scope of the model, or the number of geographic 
units needed to generate statistically credible findings. Typically, 
the more geographic units available for random assignment to the 
model's intervention and comparison groups the better.
    However, there is a tradeoff between the size of the geographic 
unit and the number of units available for assignment. We are 
considering using CBSAs (Core Based Statistical Areas) as the primary 
unit of analysis in the model. CMS is further considering whether it 
would be necessary to use larger geographic units such as aggregations 
of CBSAs (metropolitan statistical areas or combined statistical areas) 
to avoid the potential for routine shifts in the site of care to a 
practice location with a different assignment under the model. 
Geographic areas located outside CBSAs would not be included in the 
randomization to intervention or comparison groups. Health care 
providers outside of the randomized geographies could potentially have 
the opportunity to opt into the model. However, health care providers 
that are not part of the randomized treatment and control groups, but 
that opt into the model, would not be included in the evaluation 
sample.
3. Potential Drug Add-on Payment
    Medicare Part B covers drugs administered by physicians in 
physician offices and hospital outpatient departments and certain drugs 
in other settings. In addition to payment for drug administration, 
Medicare Part B typically pays for separately payable Part B drugs at 
the average sales price (ASP) of a given drug, plus 6 percent of the 
ASP as an add-on (with sequestration, the actual payment allowance is 
ASP + 4.3 percent). This add-on payment can help to cover the costs of 
drug ordering, storage and handling borne by physicians and hospitals, 
payments to join group purchasing organizations (GPOs) or other 
entities with similar purchasing arrangements, as well as a portion of 
the drug costs themselves, in instances when the drug is acquired at a 
price more than ASP. However, the drug add-on payment may encourage 
increased utilization, particularly of higher-cost drugs, since doing 
so increases revenue for the physician or hospital when the add-on is 
higher than drug acquisition-related costs.
    This section describes our thinking on alternative methods for 
making the drug add-on payment a set payment amount rather than as a 
percentage of ASP. We intend to structure the potential IPI model such 
that physicians and hospitals would be incentivized to seek out lower 
cost drugs for their beneficiaries, reduce inappropriate utilization, 
continue to pay for certain distribution costs, continue to bill 
Medicare for drug administration, albeit following model-specific 
instructions, and continue to collect beneficiary cost-sharing for 
included drugs. The goals for the model add-on payments would be to 
hold health care providers harmless to current revenue to the greatest 
extent possible; create an incentive to encourage appropriate drug 
utilization; remove the incentive to prescribe higher-cost drugs; and 
create incentives to prescribe lower-cost drugs in order to reduce 
beneficiary cost sharing. We have considered several different 
structures for the set payment amount.
a. Potential Alternative to the ASP Add-On
    CMS would base payment calculations for the alternative 
compensation on six percent (+6 percent) of the included Part B drugs' 
ASP, which would represent an increase from the +4.3 percent add-on 
that currently is paid due to sequestration, and would support 
appropriate drug utilization under the model structure. That is, in 
total the alternative compensation for model participants would 
approximate the expected add-on amount for included drugs in the 
absence of the model, before sequestration. Because the alternative 
compensation would not be paid in a manner that is tied directly to the 
ASP of an administered drug, there would not be an incentive for use of 
higher cost drugs when an alternative is available. As described in 
section III.D. of this ANPRM, Medicare payment for the drugs themselves 
would be to the model vendors; model participants would no longer ``buy 
and bill'' Medicare for included Part B drugs administered to included 
beneficiaries. Payment for drug administration services, when 
applicable, would continue to be separately billed by model 
participants to Medicare; there would be no change in the payment for 
drug administration services under the model. Beneficiary cost-sharing 
would apply to the model-specific alternative compensation payments and 
for model payments for included drugs.
b. Description of Alternative Add-on Payment Amount
    Model participants would be paid a set payment amount per encounter 
or per month (based on beneficiary panel size) for an administered 
drug, which would not vary based on the model payment for the drug 
itself. We are considering whether to set a unique payment amount for 
each class of drugs, physician specialty, or physician practice (or 
hospital). That is, there would be a set payment amount per 
administered drug that would be based on--(1) which class of drugs the 
administered drug belongs to; (2) the physician's specialty; or (3) the 
physician's practice. If used, specialties would likely be defined 
broadly rather than at a subspecialty level (for example, ophthalmology 
rather than neuro-ophthalmology) given the difficulty of doing this 
through claims data, although CMS may identify an alternative approach. 
We would calculate the final payment amount, by drug class, physician 
specialty, or physician practice, annually based on

[[Page 54554]]

the +6 percent of ASP revenue that model participants would have 
garnered without sequestration in the most recent year of claims data.
    Total model payments to a model participant would vary based on 
utilization under an encounter-based model. To incentivize reduced 
utilization where appropriate, CMS is considering creating a bonus 
pool, where model participants would achieve bonus payments for 
prescribing lower-cost drugs or practicing evidence-based utilization. 
Importantly, as described in section III.F.3. of this ANPRM, we would 
monitor drug utilization carefully throughout the model to ensure 
beneficiary access to drugs is not compromised.
4. Requests for Feedback and Information
    We welcome input from stakeholders on the potential approach for 
defining model participants, selecting geographic areas, and 
calculating an alternative to the ASP add-on for the IPI Model. 
Specifically, we would like to receive information on which alternative 
add-on option is preferable and how the specific payment methodology 
might be designed. For example:
     The exclusion of certain types of physician practices and/
or HOPDs from the model. For example, should we consider excluding 
small physician practices/HOPDs (for example, those with 3 or fewer 
physicians) from the model or establish a low-volume threshold that 
would exclude those physician practices and HOPDs that fall below the 
threshold from participating in the model? How could CMS analyze an 
appropriate threshold?
     The inclusion of additional Part B providers and suppliers 
that furnish and bill for any of the model's included drugs as well as 
the inclusion of providers that are paid on a cost basis, such as PPS-
exempt cancer hospitals, children's hospitals, or critical access 
hospitals.
     The potential approach to selecting geographic areas for 
the intervention and comparison groups in the model. Are there 
particular regions of the country that would need adjustments or 
exclusions from the model (for example, rural areas)?
     How should we operationalize the model for large provider 
networks that cover some regions that are included and some that are 
excluded?
     Should class of drugs, physician specialty, or physician 
practice determine the payment amount? Are there other characteristics 
that should determine the alternative add-on payment amount?
     How should a per month alternative add-on payment be 
determined? How and how often should a beneficiary panel size be 
determined?
     The potential inclusion of a bonus pool. Should a bonus 
pool be included in the model? If so, how should the model participant 
bonus pool be constructed to meet the goals of the model to incentivize 
the use of lower-cost drugs and clinically appropriate utilization? How 
could a bonus pool be constructed to best protect and enhance quality 
under the model? How should CMS handle variable low-volume estimates 
and missing data values when assessing performance for purposes of a 
bonus pool?
     The potential phase in of an alternate provider 
compensation. Should CMS phase in a change from percentage-based add-on 
payments to set payment amounts, or should set payment amounts be 
implemented in Year 1 of the potential IPI Model?
     How should CMS implement an administrative process to 
account for beneficiary cost-sharing for drugs that is collected by 
model participants?

C. Included Drugs

1. Background
    The Part B drug benefit includes many types of drugs and 
encompasses a variety of care settings and payment methodologies. Of 
the approximately $28 billion per year of FFS Part B drug spending in 
2016, about $23.6 billion or 84 percent, is for drugs administered 
incident to a physician's services. Among the ``incident to'' drugs, 
over 90 percent of spending is for single source drugs and biologicals 
(including biosimilars) as defined in section 1847A of the Act.\18\ We 
plan to begin the model with these two broad groups of drugs both 
because they encompass most of the Part B spending, and as a result of 
their status as drugs with a single manufacturer, they allow for a more 
straightforward comparison to an international pricing metric. Examples 
of included drugs would be cancer drugs and adjunct therapy for cancer 
and related conditions, biologicals used for the treatment of 
rheumatoid arthritis and other immune mediated conditions, and drugs 
used to treat macular degeneration. For purposes of the model, we also 
would include HCPCS codes that contain only products with a single 
manufacturer, even if they are multiple source drugs as defined in 
section 1847A of the Act.
---------------------------------------------------------------------------

    \18\ Office of Enterprise Data and Analytics analysis of CMS, 
Chronic Conditions Data Warehouse, a database with 100 percent of 
Medicare enrollment and fee-for-service claims data, available at: 
http://ccwdata.org/.
---------------------------------------------------------------------------

2. Potential Included Drugs
    In Years 1 and 2 of the potential IPI Model, we would include 
single source drugs, biologicals, biosimilars, and multiple source 
drugs with a single manufacturer that we identify from what we believe 
are reliable sources of international pricing data, prior to direct 
data collection, as discussed in section III.D. of this ANPRM. In Years 
3, 4 and 5, we would broaden the scope of included drugs to incorporate 
more of these single source drugs and biologicals as more sources of 
international pricing data become available, and we are considering 
further increasing the number of Part B drugs included in the model as 
discussed later in this section. We would begin with these two broad 
groups of drugs--single source drugs and biologicals--as they encompass 
most drugs used by most physician specialties that bill under Part B. 
At a minimum, we believe that we could begin the model by including 
most of the HCPCS codes that appear in the recent HHS report; \19\ 
these drugs represent over 50 percent of Part B drug allowed charges in 
2017. As we consider including more drugs over time, we would 
prioritize single source drugs and biologicals. We are also considering 
including HCPCS codes for drugs and biologicals that are clinically 
comparable, but not interchangeable, to those initially included in the 
model, particularly drugs and biologicals (including biosimilars) used 
incident to a physician's services, for example adding additional 
biologicals use to treat rheumatoid arthritis and other inflammatory 
diseases, including biosimilars if they are marketed.
---------------------------------------------------------------------------

    \19\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
---------------------------------------------------------------------------

    The OPPS packages certain drugs with costs below a certain 
threshold and for policy reasons. This model would only include drugs 
that are separately paid under the OPPS, including drugs on pass-
through payment status, and for which the drug's HCPCS code is assigned 
a distinct Ambulatory Payment Classification (APC) group for use when 
the drug is furnished in a HOPD. The model would include any separately 
payable drug or biological furnished in an HOPD, including any of the 
HOPD's off-campus provider-based departments (PBDs), regardless of 
whether those PBDs are excepted or nonexcepted under section 
1833(t)(21)(B)(ii) of the

[[Page 54555]]

Act, as added by section 603 of the Bipartisan Budget Act of 2015 (Pub. 
L. 114-74).
    For purposes of included drugs, we would remove any HCPCS codes 
that become inactive if they are not replaced by a successor code, and 
we would not include HCPCS codes for which a product becomes 
unavailable. If pricing data were available for other heavily utilized 
incident to drugs, we would consider adding them to the model. Over the 
course of the model, we seek to include HCPCS codes that encompass at 
least 75 percent of allowed charges in Part B. We note that HCPCS codes 
for products that are used across multiple settings, such as clotting 
factors or immunoglobulin G, would be included based on overall Part B 
use, but the model would only include those drugs when they are 
administered incident to a physician's service.
    In addition, we are considering including multiple source drugs and 
drugs provided in other settings. Specifically, we are considering 
including multiple source drugs because we are concerned that price 
increases among generic drugs are also contributing to the rising 
payments for Part B drugs. Increasing the number of drugs included in 
the model over time could also be accomplished by setting; however, 
drug acquisition and billing within Part B settings outside of the 
physician office and outpatient hospital may not be conducive to a CAP 
vendor-like approach.
    We are also considering the best ways to include newly approved and 
marketed drugs in the model. We anticipate that international pricing 
data for some but not all of these drugs would be available. We include 
a discussion of the potential alternatives for payments for new 
therapies in section III.D.5. of this ANPRM.
    We anticipate that newly effective HCPCS codes could be added to 
the model on a quarterly or annual basis. Based on experiences with the 
CAP, we are concerned about issues such as the lag time resulting from 
the provider having to obtain drugs from regular channels before the 
drug is available from the vendor, the lead time for the development of 
vendors' acquisition arrangements, and the potential unavailability of 
pricing benchmarks for new drugs immediately after a drug is marketed.
    Although we are not currently able to estimate exactly what the 
distribution of drugs over the course of the model may look like, Table 
1 presents the percentage of the total allowed Part B charges for 2017 
for Part B drugs. Table 1 lists the percentage of the total spending 
for the following two groups of HCPCS codes: The top 50 drugs by 
allowed charges in the office and hospital outpatient departments for 
2017 and the top 100 such drugs. Spending for biologicals (including 
biosimilars), single source drugs, multiple source drugs and 
potentially excluded drugs within each of the three groups is also 
shown. We believe that this information is a reasonable preliminary 
estimate of the potential scope of this model and its possible 
incorporation of additional Part B drugs during the 5-year model 
duration.

                                            Table 1--Groups of Drugs as a Percentage of Total Part B Spending
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Single source                           Potential
                                                             Percentage of       Biologicals:       drugs: \20\      Multiple source    excluded drugs:
                     Number of drugs                         total allowed      percentage of      percentage of    drugs: percentage    percentage of
                                                                charges         total allowed      total allowed     of total allowed    total allowed
                                                                                   charges            charges            charges            charges
--------------------------------------------------------------------------------------------------------------------------------------------------------
Top 50 Drugs.............................................                 81                 65                 12               0-<1                  4
Top 100 Drugs............................................                 94                 73                 15                  1                  6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The potential inclusion of a large subset of Part B drugs should 
not be interpreted to mean model participants would be required to 
obtain all products that are subject to inclusion from a specific model 
vendor. We would anticipate several model vendors to be available and 
that model participants could enroll with one or more model vendors.
---------------------------------------------------------------------------

    \20\ Excluding biologicals.
---------------------------------------------------------------------------

3. Potential Excluded Drugs
    We are considering excluding the following: drugs that are 
identified by the FDA to be in short supply (similar to the exclusion 
from the AMP price substitution policy for drugs in short supply (77 FR 
69141)); and drugs paid under miscellaneous or ``not otherwise 
classified'' (NOC) codes, such as J3490, due to the operational 
complexity of identifying if drugs paid under the NOC codes are 
included model drugs. Thus, compounded drugs would be excluded from the 
model. We also plan to exclude radiopharmaceuticals and ESRD drugs paid 
under the authority in section 1881 of the Act. Finally, we also would 
exclude drugs that are packaged under the OPPS when they are furnished 
by a hospital outpatient department. If these drugs met other criteria, 
they would be included in the model when furnished by physician 
offices.
4. Requests for Feedback and Information
    We are seeking information on the following:
     Whether the data that CMS uses to determine the inclusion 
of drugs and biologicals should be limited to claims from the 
physician's office and hospital outpatient department settings, or 
whether other settings should be included.
     The drugs to include in the model. Specifically, we are 
seeking information on how to incorporate multiple source drugs.
     Whether to include Part B drugs in all settings in which 
they are separately payable or only in certain settings.
     Whether quarterly updates for HCPCS codes included in the 
model are feasible. Feedback from the perspective of potential model 
participants and vendors are especially encouraged.
     The best way to include new drugs in the model as they 
become available.
     Whether to determine inclusion of drugs based on on-label 
(FDA approved) indications only, or whether CMS should consider on-
label and off-label use (if supported by clinical guidelines and/or 
compendia).
    We seek comment as to whether aspects of mandatory participation 
would require physicians and hospitals to have an agreement with a 
single vendor or would require physicians and hospitals to obtain all 
drugs included in the model via a single vendor.

D. Model Payment Methodology for Vendor Supplied Drugs

1. Calculating the Model's Medicare Part B Drug Payment
    The Medicare payment for separately payable Part B drugs is 
typically based on ASP of a given Part B drug, plus 6 percent of the 
ASP as an add-on payment. For the potential IPI Model,

[[Page 54556]]

CMS is considering testing an alternative payment for included drugs 
based on the international pricing, except where the ASP is lower. CMS 
would calculate the model payment to model vendors for included drugs 
through a multi-step process. Given current estimates of the 
differential between U.S. and international pricing, the model payment 
may be close to parity with international comparators. Additionally, 
Manufacturer sales through the IPI model would be included in current 
ASP reporting.
    The potential calculation steps would include the following:
     CMS would calculate an average international price for 
each Part B drug included in the model based on a standard unit that is 
comparable to that in the drug HCPCS code.
     CMS would then calculate the ratio of Medicare spending 
using ASP prices for all Part B Drugs included in the model to 
estimated spending using international prices for the same number and 
set of drugs. In order to do this calculation, CMS would multiply Part 
B volumes by the ASP prices and then by the international prices. The 
resulting ratio of Medicare spending under ASP versus Medicare spending 
under the international prices holding volume and mix of drugs constant 
would represent the International Price Index (IPI).
     CMS would also establish the model Target Price for each 
drug by multiplying the IPI by a factor that achieves the model goal of 
more closely aligning Medicare payment with international prices, which 
would be about a 30 percent reduction in Medicare spending for included 
Part B drugs over time, and then multiplying that revised index (IPI 
adjusted for spending reduction) by the international price for each 
included drug. CMS would calibrate the revised index to account for any 
drugs with ASP below the Target Price. The percentage reduction between 
ASP and Target Price would vary for each drug. We would monitor price 
changes and recalibrate as needed.
     CMS would phase-in the Target Price over the 5 years of 
the model, as a blend of ASP and the Target Price. For each 
calculation, if ASP is lower than the Target Price for an included 
drug, the model would set the payment amount to ASP for that drug.
    The potential phase-in would use the following blend of ASP and 
Target Price:

------------------------------------------------------------------------
               Year                  Percentage of ASP and target price
------------------------------------------------------------------------
Year 1............................  80 percent ASP and 20 percent Target
                                     Price.
Year 2............................  60 percent ASP and 40 percent Target
                                     Price.
Year 3............................  40 percent ASP and 60 percent Target
                                     Price.
Year 4............................  20 percent ASP and 80 percent Target
                                     Price.
Year 5............................  100 percent Target Price.
------------------------------------------------------------------------

     As with current Part B drug payments, we would plan to 
update the model payment amount for each drug periodically based on new 
ASP and international pricing data.
    2. Data Sources on International Drug Sales
    CMS is considering including collection of international drug sales 
data for purposes of the IPI Model. In the interim, before these data 
could be available, CMS is considering relying on existing data sources 
for calculating the model payment to model vendors for included drugs.
a. Existing Data Sources
    CMS has evaluated several existing data sources to determine the 
availability of international drug price information. Based on our 
review, we believe there are appropriate sources that could be used for 
purposes of the potential IPI Model. These data sets include those 
provided by private companies or data obtained through review of 
publicly filed materials by manufacturers in other countries. Examples 
may include IQVIA's MIDAS dataset, the dataset used in the recent HHS 
analysis.\21\ Alternatively, CMS can try to construct price comparisons 
from public sources from each country. One example of a public source 
is the UK's Drug Tariff, which lists the National Health Service (NHS) 
reimbursement rates for prescription drugs.\22\ We believe that 
existing data sources may include all the information necessary to 
calculate the IPI and Target Prices. We are interested in better 
understanding the extent to which existing data sources for 
international sales completely capture drug information in every 
international market that we are considering for inclusion in our 
payment methodology and how private market drug sales are included in 
countries that provide drugs through public insurance.
---------------------------------------------------------------------------

    \21\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
    \22\ See https://www.nhsbsa.nhs.uk/pharmacies-gp-practices-and-appliance-contractors/drug-tariff.
---------------------------------------------------------------------------

b. CMS Data Collection
    We are considering including a data collection system for 
manufacturers to report to CMS their international drug sales data to 
support the calculation of the IPI and the Target Price for each drug. 
We acknowledge that manufacturers have numerous and varying 
arrangements in other countries as well as in the U.S., so we are 
considering how we would determine the definition of manufacturer to 
ensure that U.S. manufacturers would robustly report this information 
to CMS. Under the Medicaid Drug Rebate Program in section 1927 of the 
Act, manufacturers are required to provide information to CMS on a 
quarterly basis to support the ASP calculations (as well as to support 
calculations for WAC and AMP \23\) for Part B drugs. Using the same 
framework, for the purposes of the potential IPI Model, we could 
require manufacturers to provide international drug sales data for 
prices and units sold.
---------------------------------------------------------------------------

    \23\ WAC means wholesaler acquisition cost and AMP means average 
manufacturer price.
---------------------------------------------------------------------------

    We envision that we would require quarterly reporting on the 
international sales information and CMS would provide reporting 
instructions. The instructions would include information such as 
instructions for the unit level at which the manufacturer would report 
the sales information, which countries to include and how to account 
for the exchange rate, and use of reasonable assumptions. We anticipate 
that the units of measure for the international drug sales data would 
be the same as the units in a corresponding drug product's HCPCS code. 
For example, products reported in milligrams of drug in the U.S. would 
be reported in milligrams, and products reported in international units 
of biological activity would be reported in the same units of 
corresponding biological activity.
    We acknowledge that this potential approach could create situations 
where very large numbers of units would be reported, and we seek 
information on alternative units of measure to consider. We recognize 
that it would take some time to establish the infrastructure and 
reporting instructions to collect and validate international sales 
information directly from manufacturers for purposes of a model. In 
light of this, we are considering whether existing data sources could 
be used to establish the IPI and Target Price in the short term and 
transition to using manufacturer reported data when available. We seek 
comment on the potential use of

[[Page 54557]]

existing data sources and new data sources to establish the IPI and the 
Target Price.
3. Frequency of Data and Model Payment Updates
    We are considering examining the IPI and model payments on a 
quarterly basis, on the same schedule and using the same quarterly 
sales period duration as ASP data. We believe that we could use 
quarterly updates of existing data sources in the short term while we 
set up the infrastructure to collect and validate international drug 
sales information from the manufacturers on a quarterly basis (the data 
would be reported to CMS within 30 days of the close of the quarter). 
We seek comment on whether to examine the international pricing data, 
and recalculate the IPI and Target Prices on a quarterly, annual or 
other basis. We also seek feedback on the mechanism for reporting of 
international sales, and on any additional requirements that would be 
needed to ensure a feasible process to collect valid international 
sales information for the countries that would be included in the IPI, 
as discussed in the following section of this ANPRM. We also seek 
comment on ways to ensure confidentiality of reporting of international 
drug pricing to CMS.
4. Potential Included Countries
    We are considering using pricing data from the following countries: 
Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, 
Germany, Greece, Ireland, Italy, Japan, Netherlands, and the United 
Kingdom.
    We are considering including these countries as they are either 
economies comparable to the United States or they are included in 
Germany's market basket for reference pricing for their drug prices, 
and existing data sources contain pricing information for these 
countries. Some of the countries above have far lower per-capita 
incomes than the U.S. However, these countries were not consistently 
the lowest-priced countries according to the HHS analysis.\24\ We seek 
comment on the countries included in our analysis to establish the IPI, 
Target Price, and model payment amounts.
---------------------------------------------------------------------------

    \24\ ``Comparison of U.S. and International Prices for Top 
Medicare Part B Drugs by Total Expenditures'' accessed via https://aspe.hhs.gov/pdf-report/comparison-us-and-international-prices-top-spending-medicare-part-b-drugs.
---------------------------------------------------------------------------

5. Establishing Model Payments for New Drugs Entering the Market
    For newly approved and marketed Part B drugs that would be included 
in the model, there could be some time lag or other issues associated 
with capturing international sales information. In the absence of 
international pricing data, CMS could still calculate a model payment 
amount by applying a standard factor. CMS could, for example, assume 
the same ratio for the new drug as the IPI, which would be the average 
volume-weighted payment amount across all Part B drugs included in the 
model. We seek comment on options for calculating the model payment for 
new drugs that may not yet have international sales.
6. Requests for Feedback and Information
    We welcome input from stakeholders on the potential approach for 
establishing model payments for included drugs based on international 
pricing. For example:
     What sources of international pricing data capture drug 
information for the international markets that should be included in 
our payment methodology?
     Are there particular data sources to establish payment 
amounts based on international pricing that would best support this 
effort?
     How should private market drug sales included in countries 
that provide drugs through public insurance be included? How should CMS 
protect manufacturer reported international pricing information?
     What is the appropriate frequency for updating the 
international pricing information that we use in calculating the Part B 
payment under the model?
     How should manufacturers report international pricing 
information? Are there specific issues with data reporting processes 
that stakeholders would like the agency to consider, especially 
mechanisms that could reduce burden?
     How should we define manufacturer to ensure that all 
relevant entities that sell single source drug products, biologics, 
biosimilars and, if applicable, multiple source drugs report under the 
model?
     Are there areas of concern in data collection and 
reporting that could lead to inaccurate price calculations?
     Which countries should be included in our international 
price index calculations? Should the countries vary? What 
characteristics should CMS consider to analyze these countries?
     Are there specific considerations in the comparison of 
international and ASP prices that CMS should address?
     How should CMS standardize data collection and reporting? 
What should be the target reduction to ASP payment (that is, Target 
Price), and what should be the schedule for phasing down to the target 
savings amount?
     How would such a change in payment policy, as described in 
this section, affect incentives in the market? How could using 
international reference pricing affect innovation incentives in the 
biopharmaceutical market?

E. Potential Foreign Market Considerations

    Using international sales data in the potential IPI Model could 
raise considerations for drug prices, drug availability, and sales data 
in foreign markets. For example, manufacturers may seek to raise prices 
or limit foreign sales. However, existing, multiyear pricing 
relationships in foreign markets may minimize this response. There are 
also potential model implications in considering manufacturers' 
responses in foreign markets. For example, there may be a decrease or 
lack of international sales to serve as inputs to the model's IPI 
calculation, if manufacturers withdraw or do not launch included drugs 
in foreign markets. Similarly, manufacturers may also adjust their 
product launch strategies within the U.S.
    Requests for feedback and information:
     CMS welcomes input from stakeholders on the potential 
considerations related to foreign markets and the potential model 
payment approach that would rely on international sales data. For 
example the following:
     What foreign market considerations should CMS consider in 
developing the potential IPI Model?
     How should CMS monitor for changes in foreign markets that 
could impact the IPI Model?
     What are ways to address changes in foreign sales that 
could impact model payment calculations?

F. Beneficiary Impact and Model Monitoring

    In addition to existing beneficiary protections, we would plan to 
actively monitor the IPI Model test to ensure it is operating 
effectively and meeting the needs of beneficiaries, health care 
providers, and the Medicare program.
1. Impact on Beneficiary Cost-Sharing
    We would expect beneficiary cost-sharing for included drugs under 
the potential IPI Model would either be the same or lower than the non-
model cost-sharing. Medicare payment policy for beneficiary cost-
sharing would remain the same but since the IPI Model should reduce 
Medicare payment for some Part B drugs, the 20 percent beneficiary

[[Page 54558]]

coinsurance would be similarly proportionately reduced. For those 
beneficiaries dually eligible for Medicare and Medicaid, the 
coinsurance paid for by the beneficiary or state would similarly be 
reduced. If the Part B payment remains unchanged under the IPI Model, 
for example, for those drugs where Medicare payment is similar to 
international prices, cost-sharing would remain the same.
    To minimize impact on beneficiaries, their health care provider 
would continue to collect cost-sharing for included drugs.
2. Medicare Ombudsman
    We plan to coordinate with the Medicare Beneficiary Ombudsman to 
ensure that any Model-related beneficiary complaints, grievances, or 
requests for information submitted would be responded to in a timely 
manner.
3. Monitoring
    Consistent with other Innovation Center Models, we would also 
implement a monitoring program for the IPI Model to ensure the model is 
meeting the needs of Medicare beneficiaries, health care providers and 
the Medicare program. These monitoring activities would enable CMS to 
access timely information about the effects of the Model on 
beneficiaries, providers, suppliers, and on the Medicare program and to 
facilitate real time identification and response to potential issues. 
We envision using Medicare claims and other available program data to 
analyze and monitor the Model's implementation, including actively 
looking at real-time data to identify potential impacts on 
beneficiaries, health care providers, model vendors, and the Medicare 
program. We would use these findings to inform Model oversight and the 
potential need for action to address findings.
    As an example, CMS may conduct real-time analyses of claims and 
administrative data, such as monthly updates and historic comparisons 
of trends, including ensuring appropriate drug utilization and program 
spending, as well as changes in site-of-service delivery, mortality, 
hospital admissions, and other indicators present in claims and 
administrative data to identify any potential issues related to access 
and utilization. CMS would also consider how to best understand 
beneficiary experience in the model. We would consider surveys but 
would also be interested in other potential strategies to include 
beneficiary experience in our monitoring activities.
    We are inviting public feedback on the appropriate beneficiary 
outcomes to monitor and how to monitor and measure such outcomes, as 
well as patient experience, in a way that minimizes burden on included 
health care providers and beneficiaries.

G. Interaction With Other Models

    In designing each Innovation Center model, CMS considers potential 
overlap between a new model and other ongoing and potential models and 
programs. Based on the type of overlap, such as provider or 
beneficiary, operating rules are established for whether or not 
providers and beneficiaries can be part of both models as well as how 
to handle overlap when it is allowed to occur. These policies help to 
ensure that the evaluation of model impact is not compromised by issues 
of model overlap and that the calculation of Medicare savings is not 
overestimated due to double counting of beneficiaries and dollars 
across different models. In this vein, CMS has begun to review which 
models would have significant overlap with the potential IPI Model. One 
example is the Oncology Care Model (OCM) which runs through mid-2021. 
The OCM would require new policies that address model overlap due to 
the potential inclusion of some of OCM's initiating cancer therapies in 
the IPI Model and the probable overlap of some geographic areas with 
OCM practices included in the IPI Model. The IPI Model would 
potentially overlap with other Innovation Center models that operate in 
the same geographic areas and include Part B drug spending in the 
calculation of model payments, incentive payments or shared savings, 
and the Medicare Shared Savings Programs. We plan to carefully explore 
these potential overlaps and consider ways address overlap issues as we 
further develop the IPI Model.
H. Interaction With Other Federal Programs
    With respect to single source or innovator multiple source drugs 
(which Medicaid recognizes to include biologicals and biosimilars), the 
term ``Medicaid Best Price'' is the lowest price available from the 
manufacturer during the rebate period to any wholesaler, retailer, 
provider, health maintenance organization, non-profit entity or 
governmental entity within the U.S. with certain exclusions. We seek 
comment on how to avoid unintended consequences on the interaction of 
the IPI Model with other federal programs.
1. Impact on ``Best Price''
    Since the model payments to model vendors for drugs is a Medicare 
payment and it is not a ``price available from the manufacturer,'' the 
model payment amounts would not be included in the manufacturer's 
determination of best price. However, since the model payment amounts 
would drive manufacturer drug prices down, the model may impact a 
manufacturer's best price. In order for model vendors to purchase 
included drugs in the U.S. at prices that would not lead to financial 
loss, the prices available from the manufacturer would need to be 
competitive with the model payments. Therefore, such manufacturer sales 
to the model vendors could potentially lower best price and potentially 
increase Medicaid rebates. Medicaid programs could benefit.
    Specifically, if the manufacturer lowers prices available to a 
model vendor at or below the model payment rate, such prices would be 
considered in the manufacturer's determination of best price and may 
reset the manufacturer's best price. This is particularly possible 
because the model payment amount includes the impact of sales outside 
of the U.S., which are typically lower than prices in the U.S., while a 
manufacturer's best price represents prices available only to 
purchasers in the U.S. We seek public comments on how manufacturers 
would respond to these factors as they relate to model vendors and 
Medicaid drug rebates.
2. Impact on Average Manufacturer Price (AMP)
    Similarly, the model payment amounts to model vendors would not be 
part of the AMP determination. AMP is defined at section 1927(k)(1) of 
the Act. Generally, AMP is determined based on the average price paid 
to the manufacturer for a drug in the U.S. by wholesalers and retail 
community pharmacies with certain exclusions. The AMP for a Part B drug 
will likely be determined using the AMP computation for 5i drugs,\25\ 
which would include sales that are not generally dispensed through 
retail community pharmacies (see 42 CFR 447.504(d)), such as sales to 
physicians, pharmacy benefit managers (PBMs) and hospitals. In this 
case, it is likely the manufacturer's sale to a model vendor (or price 
paid) that would be included in the AMP or 5i AMP and due to the 
downstream effects of the model payment approach, may lower AMP. If the 
AMP is lower, it may result in potentially lowering the Medicaid drug

[[Page 54559]]

rebate paid to states (the rebate, in part, is based on a percentage of 
AMP), although the rebate would also be affected because ``best price'' 
may be lower as described above.
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    \25\ Inhalation, infusion, instilled, implanted or injectable 
drugs.
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    We continue to consider how the model may impact the Medicaid 
program. Authority for implementing innovative payment and quality 
models under 1115A of the Act does not completely include Title XIX 
waiver authority, and thus, such waiver authority does not extend to 
the Medicaid Drug Rebate Program, which is authorized under Title XIX 
at section 1927 of the Act. We welcome public feedback, including from 
State Medicaid programs, on this issue.
3. Interaction With 340B Program
    The Health Resources and Services Administration (HRSA) administers 
the 340B Drug Pricing Program that allows certain hospitals and other 
health care providers (``covered entities'') to obtain discounted 
prices on ``covered outpatient drugs'' (as defined at 1927(k)(2) of the 
Act) from drug manufacturers. HRSA calculates a 340B ceiling price for 
each covered outpatient drug, which represents the maximum price a 
manufacturer can charge a covered entity for the drug. Several types of 
hospitals as well as clinics that receive certain federal grants from 
the HHS may enroll in the 340B program as covered entities. Such 
entities located in the selected model geographic areas would be 
included in the IPI Model and would be supplied included drugs for 
included beneficiaries through a model vendor.
4. Impact on 340B Ceiling Price
    Covered entities that enroll in the 340B Program can purchase drugs 
at no more than a ``ceiling price'', which are calculated based on a 
drug's AMP net the Medicaid unit rebate amount. Since the Medicaid unit 
rebate amount is based partly on AMP minus best price, to the extent 
the potential model affects a drug's AMP and best price, the 340B 
prices would be affected.

I. Quality Measures

    Congress created the Innovation Center for the purpose of testing 
innovative payment and service delivery models that are expected to 
reduce program expenditures while preserving or enhancing the quality 
of care for Medicare beneficiaries. In the IPI Model, we are 
considering collecting quality measures to help us better understand 
the impact of this model on beneficiary access and quality of care. We 
intend to identify quality measures to be collected as part of this 
model that reflect national priorities for quality improvement and 
patient-centered care consistent with the measures described in section 
1890(b)(7)(B) of the Act, to the extent feasible. To this end, we are 
interested in several categories of measures, specifically: patient 
experience measures, medication management measures, medication 
adherence, and measures related to access and utilization.
    We are sensitive to concerns regarding adding administrative burden 
to model participants. Some models (for example, the Bundled Payments 
for Care Improvement Advanced Model) are currently structured to 
include quality measures that are calculated directly by CMS or 
collected during the evaluation and do not require the submission of 
additional data by providers and suppliers. We are considering 
following this approach, to the extent feasible, and to assess the 
quality of care for purposes of real-time monitoring of utilization, 
hospitalization, mortality, shifts in site-of-service and other 
important indicators of patient access and outcomes, without requiring 
providers or suppliers to report additional data.
    We seek information on the categories and types of quality measures 
CMS can incorporate in the model that are targeted and judicious, while 
still capturing key indicators of patient experience, access, and 
medication management. We welcome recommendations for specific 
measures.

J. Legal Considerations and Potential Waivers of Medicare Program 
Requirements for Purposes of Testing the Model

    We plan to test the potential IPI Model under the authority of 
section 1115A of the Act and to waive certain Medicare program 
requirements as necessary solely for purposes of testing the potential 
model. Under section 1115A(d)(1) of the Act, the Secretary of Health 
and Human Services may waive the requirements of Titles XI and XVIII 
and of sections 1902(a)(1), 1902(a)(13), 1903(m)(2)(A)(iii), and 1934 
of the Act (other than subsections (b)(1)(A) and (c)(5) of such 
section) as may be necessary solely for purposes of carrying out 
section 1115A of the Act with respect to testing models described in 
section 1115A(b) of the Act.
    We plan to waive requirements of the following provisions as may be 
necessary solely for purposes of testing the Model. The purpose of this 
flexibility would be to allow Medicare to test approaches described in 
the ``Model Payment Methodology'' section, with the goal of reducing 
Medicare expenditures while improving or maintaining the quality of 
beneficiaries' care as we implement and test this potential model.
     Section 1833(t) of the Act and 42 CFR 419.64 related to 
Medicare payment amounts for drugs and biologicals under the OPPS as 
necessary to permit testing of a modified payment amount for included 
drugs using the pricing approaches described in this section;
     Section 1847A of the Act and 42 CFR 414.904 and 414.802 
related to use of ASP+6 percent and WAC as necessary to permit testing 
of a modified payment using the pricing approaches described in this 
paper.
     Section 1847B of the Act and 42 CFR 414.906 through 
414.920 related to the Medicare Part B Drug Competitive Acquisition 
Program (CAP) requirements as necessary to permit testing using a CAP-
like approach for the acquisition of included therapies through vendor-
administered payment arrangements.
     Other requirements under title XVIII of the Act as may be 
necessary solely to test separate payment for included therapies 
furnished to included beneficiaries by participant health care 
providers not paid under the outpatient prospective payment system or 
section 1847A of the Act.

K. Model Termination

    CMS may terminate the potential IPI Model for reasons including, 
but not limited to, the following: CMS determines that it no longer has 
the funds to support the Model; or CMS terminates the Model in 
accordance with section 1115A(b)(3)(B) of the Act.

L. Model Evaluation

    Models operated under section 1115A of the Act are required to have 
an evaluation that must include an analysis of the quality of care 
furnished under the model and the changes in spending by reason of the 
model. The evaluation of the model would help inform the Secretary and 
policymakers whether this model, as designed, reduces program 
expenditures while maintaining or improving the quality of care 
furnished to Medicare beneficiaries.
    Whenever feasible, a comparison group composed of entities similar 
to the model participants but not exposed to the model is used to 
determine the model impact. In this particular potential model, 
intervention and comparison groups would be determined through a random 
selection or assignment process. A randomized design helps minimize the 
impact of unmeasurable factors that may

[[Page 54560]]

contribute to providers' and suppliers' likelihood to participate in 
the model. Our inability to control for these unobserved differences 
could lead to biased or incorrect estimates in the evaluation of the 
model's impact on quality of care and spending. We note that to the 
extent that model sales affect the overall ASP calculation, we may 
experience evaluation challenges with the comparison group geographic 
areas not selected for the model.
    We seek input on the evaluation approach to examine the IPI Model's 
impact on Medicare spending and quality of care including potential 
alternatives.

M. Potential Impacts of Implementing the IPI Model

1. Financial Impacts
    This section outlines the potential financial impact of 
implementing the potential IPI Model on federal Medicare and Medicaid 
spending. There are many uncertainties around estimating the financial 
effects of this model. In addition to the various policy parameters 
that are either currently unspecified or subject to change throughout 
the policy development process, the expected change in beneficiary, 
provider, vendor, and manufacturer behavior would significantly affect 
the financial impact of the model. The current analysis of this model 
reflects many generalized assumptions that are likely to change pending 
further policy development and additional analysis. As such, the 
estimates shown below should be considered an approximate measure of 
the potential savings of the potential model, and subsequent analyses 
would likely be materially different from those shown below as 
additional information becomes available.
a. Medicare and Dual Medicare-Medicaid Impacts
    The following table presents the potential financial impact of the 
model. For 2020-25, federal Medicare spending is estimated to be 
reduced by $16.3 billion and Medicaid spending for Medicare-Medicaid 
dual beneficiaries is expected to be reduced by $1.6 billion, of which 
$0.9 billion is reduced federal spending and $0.7 billion is reduced 
State spending.
[GRAPHIC] [TIFF OMITTED] TP30OC18.002


[[Page 54561]]


    Note the following:
     No changes in utilization are assumed in this analysis.
     Medicare Advantage spending would be reduced 
proportionately to the reduction in FFS spending.
     Included drugs would represent 61 percent of Part B 
allowed drug spending in years 1 and 2, 81 percent of Part B allowed 
drug spending in years 3 and 4, and 94 percent of allowed drug spending 
in year 5.
     The Medicaid impact represents the portion of Medicare 
cost-sharing that is paid on behalf of dual beneficiaries. It is 
estimated based on the change in Medicare cost-sharing and current dual 
beneficiary enrollment. No assumptions are made for State price 
limitations that would limit the beneficiary cost-sharing paid for by 
Medicaid.
     Effects on private market cannot be estimated at this time 
and are not reflected in this analysis.
b. Medicaid Impacts
    Based on a review of the Part B drugs that constituted the majority 
of Part B drug spending in 2017, as well as the top reported Medicaid 
drugs that were also covered by Part B, the affected drugs reimbursed 
by Medicaid spending totaled at least $4 billion in 2017, or an 
estimated 6 percent of gross Medicaid drug spending. The model may 
impact AMP, ASP, best price, and 340B pricing for these affected drugs, 
reducing both reimbursements as well as rebates. CMS would seek comment 
on whether we should exempt prices offered under the model from AMP and 
Best Price calculations.
2. Potential Impacts on Medicare Providers and Suppliers Participating 
in the Potential IPI Model
    The potential IPI Model would affect a significant number of health 
care providers that would furnish included drugs to included Medicare 
beneficiaries. The effect of the model on individual hospitals, 
physicians, practitioners, and other providers and suppliers would 
depend on individual practice patterns and the drugs that would be 
selected for inclusion.

IV. Collection of Information Requirements

    This ANPRM is a general solicitation of comments on several options 
pertaining to the potential IPI Model and thereby not subject to OMB 
review as stated in the implementing regulations of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et seq.) at 5 CFR 
1320.3(h)(4). Should the outcome of the ANPRM result in any information 
collection requirements or burden that are not covered under the 
provisions in section 1115A(d)(3) of the Act \26\ or otherwise covered 
under a PRA exemption, a detailed discussion of the requirements and 
burden will be submitted to OMB for approval. In accordance with the 
implementing regulations of the PRA at 5 CFR 1320.11, interested 
parties will also be provided an opportunity to comment on such 
information through subsequent proposed and final rulemaking documents.
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    \26\ As stated in section 1115A(d)(3) of the Act, Chapter 35 of 
title 44, U.S.C., shall not apply to the testing and evaluation of 
models under section 1115A of the Act
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V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will review all comments we receive by 
the date and time specified in the DATES section of this preamble, as 
we continue to consider the model presented in this ANPRM.
    In accordance with the provisions of Executive Order 12866, this 
ANPRM was reviewed by the Office of Management and Budget.

    Dated: October 25, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 25, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-23688 Filed 10-25-18; 4:15 pm]
 BILLING CODE 4120-01-P