Zostavax in Part D Limbo

Just a few months after the first Part D vaccine was approved by FDA, it's clear reimbursement will be a barrier to successful adoption by physicians-at least in the near term. This is a looming problem for all new vaccines that will be covered under Part D.

Just a few months after the first Part D vaccine was approved by FDA, it’s clear reimbursement will be a barrier to successful adoption by physicians—at least in the near term.

Merck & Co. Inc. received FDA approval for its shingles vaccine Zostavax for use in elderly patients in May, but the current physician payment rules set by the Center for Medicare and Medicaid Services may hinder the vaccine from getting off the ground.

Vaccines for pneumonia, flu and other illnesses primarily targeting the elderly population were already covered under Medicare Part B, the physician payment system that covers products administered to Medicare beneficiaries in a doctor’s office. However, newer vaccines intended for the over-65 patient group will be covered under Medicare Part D, the relatively new prescription drug benefit. (See "Zostavax: The First Part D Vaccine," The RPM Report, June 2006 (Also see "Zostavax: The First Part D Vaccine " - Pink Sheet, 1 Jun, 2006.).) There’s also a small, yet significant, subset of disabled children that qualify for vaccine coverage under Part D.

Part D coverage could be a problem for Merck and other new entrants to the vaccines market. Under Part B, physicians are paid a fee for administering the vaccine, in addition to being reimbursed for the vaccine itself.

But under Part D, payment for the vaccines is the responsibility of the many private drug insurance plans, so billing is administratively complicated for physicians. On top of that, CMS says it won’t reimburse prescription drug plans for a physician administration fee. That leaves doctors with little incentive to recommend a pricey vaccination (Zostavax will cost about $150). If no one will pay for it, why should doctors administer it?

CMS put out a memorandum in May to clarify its rules regarding reimbursement for Part D-administered vaccines. The agency presented four options—two in-network and two out-of-network—to avoid forcing beneficiaries to pay the full cost of a vaccination at the time of a doctor’s visit.

For in-network cases, physicians can call in a prescription and a prescription drug plan’s specialty pharmacy can provide the vaccine directly to the doctor’s office, much like how the competitive acquisition program (CAP) is supposed to work under Part B. (See "A CAP Casualty," The RPM Report, June 2006 (Also see "A CAP Casualty " - Pink Sheet, 1 Jun, 2006.).)

Under that scenario, physicians don’t purchase or get reimbursed for the product; the specialty pharmacy maintains ownership until it is administered to the patient. That all sounds good, but the CAP program itself is struggling to get off the ground, and it is hard to imagine physicians embracing the same model in an entirely new market.

Alternatively, CMS said, doctors can write a prescription for a vaccination and beneficiaries can get the script filled at their network retail pharmacy. CMS notes that most states allow specially-trained pharmacists to actually administer some vaccines. But the pharmacists have the same problem the docs do: they aren’t paid an administration fee either.

For out-of-network situations, physicians can contact an enrollee’s PDP and receive authorization of coverage for a specific vaccine. If the plan authorizes the vaccine, the physician can bill the plan using a standard claim form.

Finally, CMS suggests, doctors can bill plans electronically for vaccines dispensed: they can either contract with the PDP to be a non-pharmacy network provider, or agree to accept PDP payment as payment in full. But for all the scenarios, the May memo leaves out the most important incentive in the plan to "improve Part D access to vaccines": paying doctors an administrative fee.

Vaccine manufactures contacted CMS for further guidance, and in July, CMS issued a clarification to its May memorandum. To get around the absence of an administration fee to doctors under Part D, companies asked whether the administrative fee could be reimbursed under Part B even though the vaccine is covered under Part D.CMS’ answer: "No." The agency cited the fact that vaccines are generally preventative and not necessary for diagnosis or treatment of a condition, and therefore, do not fall under their definition of "reasonable and necessary" treatments.

CMS did leave one opening for coverage. "Conceptually, additional time and resources related to discussions concerning Part D vaccines could be billed as part of another qualifying Part B office visit," the agency said.

For example, if a patient comes in for an office visit regarding a Part B-qualifying condition, the physician can include "counseling" of a Part D vaccine as part of billable visit. Counseling includes discussion of possible treatment interactions. Nevertheless, the physician still will not be paid an administration fee.

And that’s going to be a steep hill to climb for Merck. Moreover, CMS’ refusal to reimburse for an administrative fee is not a one-vaccine problem.

Nabi Biopharmaceuticals ’ staph infection vaccine StaphVax—which would be indicated for the elderly population—is currently in the pipeline. Nabi is also working on a smoking vaccine NicVAX that would fall under Part D. Additionally, a number of companies, including Sanofi-Aventis , are working on extending the age indications for several recently approved vaccines to well over 65.

Merck remains optimistic that it will be able to work with CMS to come up with a practical reimbursement model. The company is understood to have put out a proposal for a new Evaluation & Management (E&M) code related to vaccine counseling that would have the administrative fee rolled into reimbursement as part of the physician’s discussion with a patient. However, there are concerns over future fraud and abuse with that set-up. CMS Chief Medical Officer Jeffrey Kellman, MD, in particular has been unswayed by arguments that the lack of reimbursement for an administration fee is a broader vaccines issue. "CMS thinks this is a Merck-only problem," one individual with knowledge of the situation says.

GlaxoSmithKline PLC , Wyeth , and Sanofi have also entered the fray to lobby for the physician payment. Assuming CMS stands pat, vaccine manufacturers say they would be willing to lobby Congress heavily to get all vaccines covered under Part B, but that would be expensive and time-consuming and considered only as a last resort.

One possibility that might be discussed: a national demonstration project to help show that administrative fees improve vaccine coverage.

But one thing is clear: if CMS sticks with its current stance of no payments for vaccine administration, that would be a serious blow to manufacturers trying to work within the parameters of the new Part D benefit.