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Medicare Part B CAPMedicare Part B CAP
Dead ?…Dead ?…
GTCbio
September 10, 2007
Or On Life Support?Or On Life Support?
CAP OverviewCAP Overview
• Medicare’s direct supply program for physician office drugs and biologicals (“drugs”)
• Alternative to physician buy and bill
• Began operating July 1, 2006
• Optional; physician annual election
• >180 drugs/biologicals
Operated by BioScripOperated by BioScrip
• Only vendor to accept CMS terms • Payment to BioScrip = ASP + 4.4%
(Testimony of Richard Friedman, Exec Chairman of BioScrip, to Subcommittee on Health of the House Committee on Ways and Means. July 13, 2006)
• Anecdotal info that CAP program is not adding much leverage to BioScrip negotiations with manufacturers
• Revenue for 2Q 2007 = $9.2 mil
Little or No Savings to Little or No Savings to CMSCMS
• Potential savings = 1.6% [ASP + 6% minus ASP + 4.4%] minus operating costs
• CAP volume in 2007 ($37 mil. est) represents ~0.4% of the total 2005 Part B drug spend ($10 bil reported)
Little or No Savings - 2Little or No Savings - 2
• The $37 mil in CAP spending would be ~$37.5 mil if reimbursed under buy and bill – actual savings of $0.5 mil before accounting for program operating costs
Incentives to EnrollIncentives to Enroll
• For some medical practices, reduction in Medicare reimbursement from 85% AWP (2004) to 106% ASP (2005) makes drugs an expense rather than a profit center
• Some practices are refocusing attention away from drug treatment to more profitable procedures
Incentives - 2Incentives - 2
• Quarterly adjustment of ASP and 6 month “lag” make drug margin hard to predict
• Anecdotal info that an increasing number of patients cannot/do not pay coinsurance, become bad debts
Why Is CAP Unattractive to Why Is CAP Unattractive to Most Physicians?Most Physicians?
• Oncologists still profit from office administered drugs
• June ‘07 OIG study found that 9/12 sampled oncology practices could purchase drugs at or below ASP+6%
Why Is CAP Unattractive? - Why Is CAP Unattractive? - 22
• Private payers typically reimburse at 80% AWP, although that is changing– Some smaller, regional payers moving
toward ASP + and requiring direct supply for non-chemotherapy drugs
• Medicare volume often needed to lower net acquisition cost
• Volume-based price reductions
Why Is CAP Unattractive? - Why Is CAP Unattractive? - 33
• As drugs become more expensive, profit increases– 2% of $500 is higher than 2% of
$300
• Physician GPOs growing in popularity
• CAP costs $ to administer but there is no payment for it
Why Is CAP Unattractive? - Why Is CAP Unattractive? - 44
• CAP vendor may refuse to supply drug to physician if patient has unpaid past due coinsurance
• Physician must cooperate with CMS post-payment review
Minimal Market Impact Minimal Market Impact
• 2,450 physicians elected CAP as of 2 Q 2007 (Aug 2 2007 BioScrip press release)
– Fewer than 10% are oncologists– Most popular specialties are allergy,
rheumatology, ophthalmology– Average size of physician practice = 3.5
(Medicare’s Competitive Acquisition Program – Stats Reveal Who’s In/Who’s Out and Why. Oncology Business Review www.oncbiz.com; no date)
• New election period began Aug 1– Final numbers not yet released– BioScrip projects 35% increase
Alternatives to CAPAlternatives to CAP
• Physicians refer patients to hospitals
• Hospitals joint venture with physicians to expand infusion services
CAP in 2008 - 2009CAP in 2008 - 2009
• BioScrip contract expires in ’08
• CMS report to Congress due July ‘08
• With 4.4% gross margin in a market of ~3,000 physicians, how much room exists for a second vendor?
CAP in 2008 – 2009 cont’dCAP in 2008 – 2009 cont’d
• If private insurance chemotherapy reimbursement holds near current level, not much incentive for oncologists to elect CAP …
• Unless payment drops to ASP+5% for 2009
CAP ExpansionCAP Expansion
• CAP for certain DME, prosthetics, orthotics and supplies – CMS to announce winning bidders in
December– Program scheduled to begin April 2008
SummarySummary
• CAP has had minimal impact on the Part B drug market and generated little or no savings for Medicare
• There are few incentives for physicians to elect CAP and several significant disincentives
Summary - 2Summary - 2
• Volume discounts coupled with private insurance reimbursement create disincentives for some physicians to choose CAP
• CAP will grow in scope only if Medicare or private insurance payments fall
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Alexandria, Virginia 22314 USAAlexandria, Virginia 22314 USA
1.703.683.53331.703.683.5333
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