Xigris Medicare “Add-On” Payments Approved; CMS Estimates 50,000 Cases

The Centers for Medicare & Medicaid Services is estimating that the Medicare market for Lilly's Xigris will be $340 mil. in fiscal year 2003.

CMS anticipates 50,000 Medicare beneficiaries will receive the sepsis therapy Xigris (drotrecogin alfa) in FY 2003. At $6,800 per patient, Xigris sales in the Medicare population would total about $340 mil.

The figure doubles the estimate Lilly included in its application to CMS. "Lilly had estimated that, initially, 25,000 Medicare patients would receive Xigris," CMS said in its Aug. 1 final rule on changes to the hospital inpatient prospective payment system.

"However, Lilly's estimate does not fully reflect severe sepsis patients who may not have multiple organ failure, but for whom Xigris is indicated nonetheless due to APACHE II scores in the third and fourth quartiles."

CMS' estimates assume a rapid acceleration in Xigris sales, though they are not far out of line with the initial estimates for the product.

When Xigris was launched in November 2001, Lilly cited estimates of $380 mil. for the product in 2002. After a slow start in the first quarter of 2003, the company revised its estimate to $250 mil. for the year, and acknowledged that sales would need to pick up quickly to meet that target (¹ (Also see "Lilly Foresees No Zyprexa Diabetes Warning In U.S.; Pfizer Sees Opening" - Pink Sheet, 22 Apr, 2002.), p. 23).

Second quarter sales came in at $22.6 mil., roughly flat compared to first quarter sales of $22 mil. Xigris sales during the fourth quarter of 2001, the drug's first quarter on the market, were $21.5 mil.

Lilly's explanation for the slow start is what the company sees as a tendency of physicians and hospitals to limit Xigris use to the "perfect severe sepsis patient" (² (Also see "Xigris Growth Tied To Patient Selection As Hospitals Wrestle With Protocols" - Pink Sheet, 28 Jan, 2002.), p. 30).

In the rule, CMS notes that Xigris generated $35 mil. in sales through February. The agency's 50,000-patient projection for FY 2003 "reflects modest growth in FY 2003 from $35 mil. in sales reported by Lilly through February 2002," CMS said. "At 6,800 per patient, $35 mil. in sales equates to just over 5,000 cases for the first four months since FDA approval."

"We note that some analysts project sales of Xigris as high as approximately 100,000 cases annually. We believe our estimate reflects the potential for growth beyond the current usage since FDA approval in November 2001, and for the use of Xigris in treating patients without multiple organ failure or for whom the drug is indicated but who were not included in Lilly's estimate."

Under the CMS rule, hospitals will be eligible for additional reimbursement in the form of "add-on" payments for Medicare in cases where the patient receives Xigris and the total cost exceeds the standard DRG payment. CMS will begin making the additional payments Oct. 1.

The Aug. 1 final rule reverses CMS' position in the May 9 proposed rule. At that time, CMS said that Xigris did not qualify for add-on payments based on a review of Phase III PROWESS data, and asked Lilly to provide additional data on all-cause mortality at the time of hospital discharge (³ (Also see "Lilly Xigris Add-On Medicare Payment Decision Awaits Further CMS Analysis" - Pink Sheet, 13 May, 2002.), p. 23).

The decision to approve add-on payments follows CMS' review of unpublished data provided by the company that the agency says shows a clear decrease in mortality associated with Xigris use.

As a result, CMS said, it is now convinced that Xigris is a "substantial clinical improvement" over currently available therapies for severe sepsis - one of the eligibility criteria for add-on payments.

"The major endpoint of the PROWESS study was a reported reduction in 28-day all cause mortality of 6.1%. At the time the study ended, many of the participants were still hospitalized and whether they would ultimately recover was unknown," CMS noted.

"We requested data about those hospitalized patients to determine if the reported advantage in mortality from Xigris use persisted for all study participants," CMS said. "These data are now available and show an overall decrease in mortality for all patients, including patients over 65 years of age."

The data came from long-term follow up of PROWESS patients, Lilly said. The results will be presented at the American College of Chest Physicians' "Chest 2002" meeting in November.

The rule notes that CMS' determination that Xigris represents a substantial clinical improvement is "limited to the indications and contraindications listed in the approved FDA labeling guidelines."

FDA approved Xigris in November 2001 for "the reduction of mortality in adult patients with severe sepsis (sepsis associated with severe organ dysfunction) who have a high risk of death (e.g., as determined by APACHE II)" (⁴ (Also see "Lilly Xigris Price Is $6,800 Per Dose; Sepsis Agent Clears FDA" - Pink Sheet, 26 Nov, 2001.), 2001, p. 34).

In the proposed rule, CMS raised the possibility that payments would be limited solely to patients covered by the approved indication; Lilly argued against that approach in its comments.

In the final rule, CMS stands by its position that the therapy only represents a clinical improvement for the indicated patient population, but noted that it lacks any method to ensure that reimbursement is limited.

"We do not have an administerable mechanism to identify patients who may receive this drug without having the FDA-listed indications," CMS said. "We will review potential options to enable us to more precisely make such distinctions in the future."

CMS said it may add other restrictions in eligibility for Xigris add-on payments for the next fiscal year. "We reserve the right to reexamine the issue of limiting the types of patients for which add-on payments are made for FY 2004."

Under the final rule, cases involving the administration of Xigris (identified by the new ICD-9 procedure code 00.11) will be eligible for additional payments of $3,400, or 50% of the estimated $6,800 average cost.

Add-on payments are provided under the Benefits Improvement Act of 2000 and are intended to cover 50% of the hospital's costs for a case that is in excess of the standard DRG payment, if the case involves a new technology.

In order to receive CMS approval for Medicare add-on payments, a medical technology must (1) be considered "new", (2) present a "substantial improvement" in the diagnosis or treatment of Medicare beneficiaries, and (3) contribute to higher than average cost per case compared to other cases in the DRG.

The final rule denied add-on coverage for Pharmacia's Zyvox on the grounds that the injectable antibiotic does not qualify as a "new" therapy under BIPA (see ⁵ (Also see "Zyvox Medicare “Add-On” Payments Denied; CMS Wary Of Precedent" - Pink Sheet, 5 Aug, 2002.)).

CMS estimates that approximately 44% of these 50,000 estimate FY 2003 Xigris cases will be eligible for the $3,400 add-on payment because their costs will exceed the standard DRG payment. The agency estimates total payments likely to be made under this provision at $74.8 mil. in FY 2003.

The add-on payments for Xigris were hailed by HHS Secretary Thompson in a press release applauding the decision to "bring the latest technology available for treating severe sepsis to Medicare beneficiaries while making sure that hospitals will be compensated for providing this product."

After the proposed rule determining that Xigris did not qualify for add-on payments, CMS received "numerous" comments recommending it change its conclusion, the final rule says.

"Many of the commenters described Xigris as a major advance in the treatment of patients with severe sepsis," CMS said.

"However, some commenters indicated that its use has substantially increased the costs of caring for these patients," the agency noted. "One commenter reported rationing of this drug at some institutions due to cost considerations."

Several comments objected to CMS' decision to require additional data and endpoints beyond those requested by FDA in approving Xigris, particularly because Xigris was a priority review drug at FDA.

In its response, CMS pointed out that FDA does not require that a product be a substantial clinical improvement over existing therapies before approval.

"Our criteria do not depend on the standard of safety and efficacy that FDA sets for general use, but on a demonstration of substantial clinical improvement in the Medicare population," the final rule says.

CMS said it also disagrees with the suggestion that an FDA priority review designation should trigger automatic approval of add-on payments. The agency pointed out that FDA's decision to grant priority status is made at the beginning of the review process, before all the clinical data is reviewed. In addition, "the criteria for priority review are not the same across product types," CMS noted.