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HCFA DRG MODIFICATIONS FOR NEW, HIGH-PRICED DRUGS

Executive Summary

HCFA DRG MODIFICATIONS FOR NEW, HIGH-PRICED DRUGS were urged by the American Society of Hospital Pharmacists (ASHP) in a Jan. 13 letter to Rep. Waxman (D-Calif.). "The Health Care Financing Administration (HCFA), either through administrative changes or congressional mandate, must establish a process to promptly account for the sudden surge in costs due to a new drug therapy," ASHP said. The DRG (diagnosis-related groups) reimbursement mechanism for drugs administered in hospitals under Medicare and Medicaid "has not accounted for these new products in its payment rates," ASHP said. "The health care system has benefited from the introduction of new, complex, bioengineered products, such as TPA, AZT, synthetic growth hormones, and immunosuppressive agents," the association noted. "However, many of these products are high priced and, further, involve additional expense for unique delivery devices and for specialized services to the patient." ASHP said its members reported in a "preliminary survey" that hospitals "will lose between $ 225,000-$ 655,000 per year when TPA is administered to a patient covered by the DRG mechanism. The implications of the problem -- both ethical and financial -- are frightening" ("The Pink Sheet" Jan. 18, p. 3). The cost of using the clot-dissolving agent TPA (Genetech's Activase) is $ 2,200. Annual costs are estimated at $ 17,000 for biosynthetic growth hormone, $ 12,000 for the AIDS drug AZT (Burroughs-Wellcome's Retrovir), and $ 7,000 for immunosuppressive agents used with transplant organ procedures. Noting that the decision to administer one of the new therapies is "often . . . not a matter of convenience but literally one of life and death," ASHP maintained: "Such decisions should not be subjected to the shadow of a bureaucracy moving at its own pace." At a Jan. 13 meeting, the Prospective Payment Assessment Commission, which advises HCFA on reimbursement rates, agreed to a preliminary recommendation that DRG rates be increased $ 40 mil. to account for thrombolytic drug treatment (TPA and streptokinase). An industry representative to the commission said $ 40 mil. would not cover projected TPA costs fully and would therefore discourage its use. During its first six weeks on the market, TPA averaged $ 1.5 mil. per day in sales.
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