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IMMUNOSUPPRESSIVE DRUG SPENDING BY MEDICARE TOTALS $ 20-$ 30 MIL. PER YEAR, ACCOUNTING FOR ABOUT 10% OF TOTAL U.S. SPENDING ON IMMUNOSUPPRESSIVES

Executive Summary

Medicare expenditures for outpatient immunosuppressive drugs for organ transplant patients are reaching $ 20-$ 30 mil. annually, according to a study conducted by the congressional Office of Technology Assessment. The Medicare figures exclude insurance copayments by patients. Entitled "Outpatient Immunosuppressive Drugs Under Medicare," the report was requested by Sen. Bentsen's (D-Tex.) Senate Finance Committee in March 1990. The $ 20-$ 30 mil. annual Medicare expenditures come to about 10% of annual U.S. spending on immunosuppressives, which OTA estimates total $ 185-$ 280 mil. per year. A recent market study on the immunosuppressive field by Bolling, McCool & Twist estimates 1991 sales at $ 185 mil., growing to approximately $ 270 mil. by 1995. The OTA report notes that nearly 90% of transplant patients are using cyclosporine (Sandimmune from Sandoz) at an estimated current average annual cost per patient of $ 4,000-$ 6,000, of which Medicare beneficiaries must pay a Part B deductible of $ 100 and a coinsurance amount of 20%, or a total of $ 570 -$ 800 per year. Future costs per patient "may increase or decrease" as new immunosuppressive drugs are approved, the report observes, adding that costs may also change when the patent for cyclosporine expires in 1995. According to OTA, the new immunosuppressive therapies under development include Fujisawa's FK-506, antilymphocyte globulin (ALG), now being studied at the University of Minnesota, 15- deoxyspergualin (NKT-01), being developed at the National Cancer Institute, and rapamycin, under development at Wyeth-Ayerst. FK-506 is in Phase III clinical trials in the U.S. for liver transplant patients and Phase II in Japan for kidney transplants. OTA says "further investigation" of FK-506 "is necessary to determine the toxicity, potential benefits, and most appropriate clinical application when compared to cyclosporine." ALG, a relative of the approved immunosuppressive drug azathioprine, is "not yet approved for general use," OTA notes. Like azathioprine (ATG), ALG is "used primarily to reverse particularly severe rejection episodes," OTA reports, "but it has also been administered routinely as part of a standard immunosuppressive protocol." NKT-01, a relative of the antitumor antibiotic spergualin, is in Phase I trials and has been shown to "prolong the graft survival of organ and tissue transplants in rodents," OTA says. The fungal macrolide metabolite rapamycin is a follow-up compound to FK-506 that has shown "encouraging potential" in the lab but is not yet being tested in humans, the report notes. Ten preclinical reports on rapamycin, three of which compared the drug to FK-506, were presented at the XIII International Congress of the Transplantation Society last summer ("The Pink Sheet" Aug. 27, 1990, T&G-9). The relatively small government outlay for immunosuppressive drugs is explainable by the fact that Medicare "does not currently play a major role in financing post-transplant immunosuppressive therapy," OTA observes. The outpatient drug program covers the cost of such drugs for just 19% of all Medicare transplant recipients and only 13% of all U.S. transplant recipients. There were nearly 15,000 organ transplants performed in the U.S. in 1988, the most recent year for which OTA has comprehensive data, the report states. Medicare currently covers heart, kidney, liver and bone marrow transplants, but does not reimburse for heart/lung, lung or pancreas transplants. Nevertheless, the report notes, Medicare covered 57% of the approximately 15,000 organ transplants performed in 1988. OTA explains that this high figure is the result of Medicare's coverage under the End-Stage Renal Disease (ESRD) program of nearly 90% of kidney transplants, which accounted for 62% of all transplants performed. OTA attributes Medicare's limited role in drug coverage to its one-year limit on coverage. While almost all transplant recipients must take immunosuppressive drugs for the rest of their lives to prevent organ rejection, Medicare now covers only the first year of outpatient immunosuppressive drug use with the exception of ESRD patients, who receive three years of coverage. With most transplants covered by Medicare and most organ recipients covered by some kind of insurance, the report concludes that "even without any changes in Medicare policy, it appears that overall coverage through private and public insurers is sufficient to ensure that many Medicare beneficiaries receive outpatient immunosuppressive drug therapy for the first few years." Nonetheless, "a substantial minority" of organ transplant recipients "are at risk of inadequate financial access, because they have only Medicare insurance and may suffer financial hardship in obtaining drugs after Medicare's one-year drug coverage period ends," the report cautions. OTA estimates that 57%-87% of Medicare transplant recipients have additional coverage from private insurance or Medicaid that will cover the continuing use of immunosuppressive drugs. However, 13%-43% of Medicare transplant recipients, or 1,000 to 3,600 beneficiaries, do not have additional insurance and are at high risk of being unable to buy immunosuppressive drugs after the first year of Medicare coverage. Congressional options considered by OTA include extending or limiting the current Medicare limits on coverage. "Expanding Medicare coverage for immunosuppressive drugs would ease the financial burden for those beneficiaries with inadequate insurance coverage and might improve patient adherence to therapy," the report states. "A secondary effect might be that of enhancing equitable access to transplants, by reducing the chance that a patient will forgo the opportunity for a transplant (or not be referred for one) due to financial concerns." According to OTA, "expanding immunosuppressive coverage will not have much effect on the actual number of transplants performed, because the number of transplants is constrained by the number of suitable organs available." This conclusion should assuage some concerns that have been raised that the approval of a new transplant anti-rejection drug, such as FK-506, would lead to a vastly expanded number of transplants being performed yearly in the U.S. The Bolling, McCool & Twist study projects total solid organ transplants rising from about 13,000 to 17,000 in 1995. The private study says "it is projected that the total number of solid organ transplants will only increase at annual average compound growth rate of less than 5% between now and 1995." While expanded coverage may not lead to increased numbers of transplants performed, however, OTA warns that "coverage expansions will almost certainly raise Medicare expenditures, although there will be some small offsetting savings from averted hospitalizations and return to dialysis." A shift "in financing from other sources to Medicare that would occur if coverage were expanded is a substantial and legitimate concern," OTA notes. In addition to eliminating coverage limits, extending coverage to pre-existing transplant recipients on top of the approximately 6,000 first-year transplant patients already covered annually would give Medicare "a leading role in financing post-transplant immunosuppressive therapy," the report states. "If a grandfather clause were combined with elimination of the current one-year limit on coverage, Medicare would cover and pay for immunosuppressive drugs for approximately 67% of all U.S. transplant recipients with a functioning graft, compared with the current estimate of 13%," the report estimates. Other options considered by OTA include: extending coverage to Medicare beneficiaries whose transplants were not covered by Medicare; applying Medicare secondary payer requirements to outpatient immunosuppressive drug benefits; requiring nonhospital pharmacies and other suppliers to accept assignment for such drugs; reducing or eliminating the coinsurance requirement; and changing the method of paying for such drugs to either a global fee or fee schedule.

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