Medicare Coverage Policy Change Opens Up Commercial Market Pathway – If Biden Likes It
Executive Summary
Modification to ‘reasonable and necessary’ definition in MCIT final rule offers new avenue for drug manufacturers to get products covered in Part B. The Biden Administration will have to decide whether it will keep the Trump regulation unchanged.
The vast majority of injectable and infused drugs are covered by Medicare for their FDA-approved indications or medically accepted off-label uses laid out in compendia. But there are always exceptions.
Dendreon Corporation’s autologous cell therapy Provenge for prostate cancer is one that comes to mind. In that case, Medicare opened a national coverage analysis for the product with a list price at the time that came in at just under $100,000. CMS posed the unusual question, should Medicare cover a novel cancer therapy that was approved by FDA?
“CMS opened this review to determine whether or not autologous cellular immunotherapy is reasonable and necessary,” the agency said when considering Provenge. “CMS is requesting public comments on the evidence regarding the effects of this treatment on health outcomes in patients with prostate cancer … CMS considers all public comments, and is particularly interested in clinical studies and other scientific information relevant to the subject under review.” (Also see "Dendreon vs. CMS:Controversy Is Bigger Than One Product" - Pink Sheet, 1 Jul, 2010.)
The agency’s head of coverage at the time likened the possibility of covering a new therapy like Provenge akin to paying for an Ivy League education many years in advance without knowing whether your child wants to go to college or could get in.
CMS would eventually cover Provenge as part of a comprehensive national decision after a year-long process that included an advisory committee review. (Also see "Medicare Will Cover Provenge Labeled Uses, CMS Proposes; Off-Label Is Up To Contractors" - Pink Sheet, 30 Mar, 2011.)
Medicare may soon face another coverage conundrum if Biogen, Inc./Eisai Co., Ltd.’s aducanumab clears FDA for Alzheimer’s disease. (See sidebar.)
The Enigmatic Threshold
At the heart of the decision was whether Provenge met the enigmatic threshold of “reasonable and necessary” for coverage.
To that end, in the waning days of the Trump Administration, CMS finalized a new definition of “reasonable and necessary” that offers another route to coverage outside of the previously established criteria that the drug is safe and effective, not experimental, and “appropriate” based on a subset of criteria.
The new definition adds formal consideration of commercial payor policies as part of the Medicare Coverage of Innovative Technology final rule released on 12 January. The proposed rule was released in August. (Also see "CMS Drug Coverage Could Be Driven By Commercial Plan Decisions Under Proposal" - Pink Sheet, 31 Aug, 2020.)
The rule focuses primarily on providing four years of Medicare coverage for “Breakthrough” designated devices upon FDA approval. But the “reasonable and necessary” definition change, which is a secondary piece of the regulation, affects all products – drug or device.
“We also proposed that an item or service would be ‘appropriate for Medicare patients’ if it is covered in the commercial insurance market,” the final rule states. “An item or service deemed appropriate for Medicare coverage based on commercial coverage would be covered on that basis without also having to satisfy” the appropriateness criteria.
Rx coverage in Part B has traditionally been straightforward, so the change in definition may not impact drugs much because they are not subject to local Medicare coverage determinations in any substantive way and are almost never subject to national coverage determinations. PhRMA submitted an only two-page comment letter on the proposed version.
If anything, the change seems to make coverage easier to get, but the modification could foreshadow regulatory modifications aimed at creating more pricing pressure, if the Biden team or a future administration wanted to pursue that issue.
Thawing The Reg
The Biden Administration could still delay or modify the rule, given that it stemmed from a Trump Administration executive order to expedite coverage for devices. The Biden Administration has already issued a 60-day freeze on rules and administrative policies issued by the Trump Administration but have yet to take effect. (Also see "340B Dispute Resolution Process On Ice As Feuds Between Pharma, Providers, HHS Heat Up" - Pink Sheet, 22 Jan, 2021.)
Assuming the rule eventually takes effect, the important questions that remain are which commercial insurers and how CMS will weigh the private market data compared to the longstanding criteria.
CMS plans to issue sub-regulatory guidance to further clarify the methodology by which private payer decisions will be “relevant” to the “reasonable and necessary” coverage policy. The guidance – due by 15 March 2022 – would address how commercial insurance coverage would factor into the measurement of lives covered.
“To ensure there is adequate public input, CMS has committed not later than 12 months after the effective date of this rule, CMS will publish for public comment draft methodology by which commercial insurer’s policies are determined to be relevant based on the measurement of majority of covered lives.”
“We are including regulatory language that will give CMS clear authority to review the majority of commercial insurers in the event that an item or service does not meet the appropriateness criteria that is long established policy. As part of CMS’ consideration, if Medicare coverage is different than the majority of commercial insurers, CMS will include in the national or local coverage determination its reasoning for different coverage,” the rule states.
Commenters suggested that if CMS were to finalize the reasonable and necessary definition that includes consideration of commercial insurer policies, the agency should consider the compendia model to determine which commercial insurers to include. CMS said it would consider it as it develops subregulatory guidance.