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Executive Summary

TPA (Genentech's Activase) costs will not be addressed by Medicare reimbursement rate changes until October 1989 at the earliest. The Health Care Financing Administration announced March 29 that it is not going to adjust its current reimbursement levels to take into account growing TPA use. "Given the fact that PPS [prospective payment system] already takes into account the impact of new technologies," HCFA Administrator William Roper maintained, a reimbursement rate change for heart attack treatment hinges on the "question as to whether the circumstances involving TPA are so unique as to justify some special accommodation." HCFA decided against the rate adjustment by concluding that the TPA situation is not "so unique." "DRG weights are recalibrated every year in order to reflect current resource use," HCFA pointed out in an accompanying press release. HCFA added that "TPA will appear as part of the total charges used in recalibration." Although recalibrated DRG weights will go into effect this September, TPA cost data will not be available to the agency in time to affect those recalibrations. Consequently, the costs of the drug will probably not show up in DRG rates until the weight recalibration, which will go into effect Oct. 1, 1989. The HCFA decision effectively rejects a recommendation from the Prospective Payment Advisory Committee (ProPac) in January. The advisory committee suggested that $ 40 mil. be added to the PPS hospital payment update factor to account for the cost of the drug ("The Pink Sheet," Jan. 18, p. 3). HCFA questioned the appropriateness of setting a precedent for a "special category of treatment" available through only one manufacturer. The government agency considered the price of TPA relative to streptokinase. HCFA also maintained that it took into account TPA's limited use in the elderly population. Activase carries a labeling caution under the Warnings section against use in the over-75 population. The HCFA announcement on TPA reimbursement reflects a decision by HHS Secretary Otis Bowen to go along with Roper's position on the issue, despite a strong personal lobbying effort by hospital groups. In early March, Bowen agreed to personally review the TPA reimbursement issue at the behest of the American Hospital Association ("The Pink Sheet" March 14, p. 5). On March 7, Bowen met with AHA President Jack Owen. In a March 18 options paper presented to Bowen, Roper outlined the pros and cons of the issue and recommended that HCFA "make no special provisions with respect to TPA" and that additional TPA costs "be accommodated through existing PPS procedures." Roper said that "to encourage the high cost of one manufacturer's product, especially when its price is so far above that of other similar drugs, would encourage other companies to follow suit in pricing other new drugs or therapies." In addition, he suggested that a special provision for TPA based on Genentech's price "could result in a windfall for the manufacturer, i.e., a direct subsidy of Genentech by the Medicare trust fund." In early 1987, Genentech argued openly on Capitol Hill for an open government purchase plan for AIDS vaccines as a more effective stimulus for development than research grants ("The Pink Sheet" Jan. 19, p. 10). HCFA's decision was based, in part, on two assumptions about use of TPA in the Medicare population: (1) that the drug would only have a "limited initial application" to the Medicare population; and (2) that despite the drug's high price tag, use of TPA may not necessarily add to the total costs of a hospital stay. "In view of the limited initial application of TPA to the Medicare population, and the likely offset in length of stay, we believe that the PPS system adequately addresses payment for TPA," Roper said in the memo. A study of cost shifting with TPA use may have worked against Genentech in the HCFA decision. Citing a cost of treatment study by University of Michigan professor Eric Topol's study, Roper noted that "preliminary evidence from at least one study indicates that there may be significant reduction in length of stay for patients with acute myocardial infarctions treated with TPA. Such reductions could affect the incremental cost savings. It is too early to know what the exact outcome will be." Early information on that study was disclosed at Genentech's initial kick-off teleconference for TPA ("The Pink Sheet" Dec. 7, T&G-3). In addition, Roper pointed out to Bowen that TPA "is a new drug, and the contraindications and cautions regarding its use include factors that are likely to be more prevalent in the Medicare population than in the general population." For example, Roper observed, "almost 50% of Medicare beneficiaries admitted for [acute myocardial infarction] in FY 1986 were 75 years old or older, an age cohort for which physicians are cautioned to weigh the expected benefits of TPA against the risks." One of the cons to the final decision, Roper pointed out, is that HCFA will be "vulnerable to charges of discouraging adoption of state-of-the-art technology." HCFA's response on the TPA reimbursement issue is consistent with the agency's position on earlier proposals to add specific payments to offset costs of new technologies and procedures. For example, the agency consistently bypassed a PROPAC recommendation for a payment add-on to DRGs involving the use of magnetic resonance imaging. An argument in support of a special adjustment factor, Roper noted, is that hospitals now have "an incentive to game the system by treating patients with TPA in the outpatient department where they could bill for TPA and then transfering the patient to another hospital." At an analysts meeting in March ("The Pink Sheet" March 14, p. 5), Genentech acknowledged that there is a trend toward outpatient/non-admitted use of the drug, which, under Medicare Part B, is not subject to the DRG prospective payment rates. In a March 29 press statement, HCFA said it will "continue to monitor this situation to determine if changes in our position are necessary." HCFA's current position may prove to be untenable if emerging survival studies with TPA show far superior efficacy compared to streptokinase, the other available thrombolytic. At the American College of Cardiology meeting in Atlanta on March 26, Genentech presented its first mortality data for recombinant TPA. Results on 721 patients showed a 50% reduction in mortality during the hospital stay and a 40% reduction at three months. The TPA data is comparable to recently announced survival data with Beecham's Eminase (APSAC). In addition, results of the updated ISIS mortality study using streptokinase, also presented at the cardiology scientific conference, showed a 37% reduction in mortality at five weeks when streptokinase treatment was followed with regular aspirin use.

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