Medicare policy change led to higher drug spending

Medicare could save about $33 million a year on certain prostate cancer drugs if it reinstated policies that pay only the price of the least costly treatment among a group of clinically comparable drugs.

Limiting the payments for clinically comparable luteinizing hormone-releasing hormone (LHRH) agonists would bring down the cost of these prostate cancer treatments from $264.6 million to $231.3 million a year, or about 13%, according to a report from the Health and Human Services department’s Office of Inspector General (OIG). About 20% of the savings would go to patients, who would save $6.7 million in reduced coinsurance.

From 1995 until April 2010, the Centers for Medicare and Medicaid Services (CMS) imposed "least costly alternative" policies for many physician-administered drugs covered under Medicare Part B. If the patient or physician wanted to use a more expensive drug, one of them would have to pay the difference.

CMS rescinded the policies in April 2010 after a court ruled that the agency did not have the legal authority to set payments in this way.

The OIG began investigating the impact of the least costly alternative policies at the request of Rep. Ken Calvert (R-Calif.), who wanted to know if eliminating the policy had created an incentive for physicians to administer higher-priced treatments.

Based on the OIG report, that appears to have happened.

Looking at the use of triptorelin pamoate (Trelstar), goserelin acetate implant (Zoladex), and leuprolide acetate suspension (Lupron, Eligard), the OIG found that physicians favored use of the more expensive drugs while the least costly alternative policies were in place but that their use was slowly declining. At the same time, the use of the least expensive drug was slowing rising.

After the payment policies were rescinded, use of the more expensive treatments increased significantly.

In 2010, Lupron and Eligard, the most expensive drugs, were administered about twice as often as the least expensive drug, Trelstar. In the year after payment restrictions were removed, the use of Lupron and Eligard rose 31% while Trelstar use fell 74%, according to the OIG report.

Dr. Walter Stadler, professor of medicine and surgery at the University of Chicago, said that the spike in utilization of the more expensive agents is probably the result of marketing, not any clinical differences in the medications. "They are completely and totally equivalent in terms of their efficacy and how they work," he said.

Physicians may be basing their choice on which manufacturers offer them the best deal on the bulk purchase of the drugs, he said, even if that’s not the best deal for Medicare or the insurer.

The OIG report also noted another trend in the utilization of the LHRH agonists: their overall use in prostate cancer is declining. The decrease in utilization began more a year before the least costly alternative policies were rescinded and has continued, according to the OIG, making it likely that it is unrelated to the policy.

Dr. Stadler said that the overall decline is probably caused by a combination of decreasing payments to physicians for the drugs and increasing medical evidence that the LHRH agonists are not always the best treatment option.

Medicare could save about $33 million a year on certain prostate cancer drugs if it reinstated policies that pay only the price of the least costly treatment among a group of clinically comparable drugs.

Limiting the payments for clinically comparable luteinizing hormone-releasing hormone (LHRH) agonists would bring down the cost of these prostate cancer treatments from $264.6 million to $231.3 million a year, or about 13%, according to a report from the Health and Human Services department’s Office of Inspector General (OIG). About 20% of the savings would go to patients, who would save $6.7 million in reduced coinsurance.

From 1995 until April 2010, the Centers for Medicare and Medicaid Services (CMS) imposed "least costly alternative" policies for many physician-administered drugs covered under Medicare Part B. If the patient or physician wanted to use a more expensive drug, one of them would have to pay the difference.

CMS rescinded the policies in April 2010 after a court ruled that the agency did not have the legal authority to set payments in this way.

The OIG began investigating the impact of the least costly alternative policies at the request of Rep. Ken Calvert (R-Calif.), who wanted to know if eliminating the policy had created an incentive for physicians to administer higher-priced treatments.

Based on the OIG report, that appears to have happened.

Looking at the use of triptorelin pamoate (Trelstar), goserelin acetate implant (Zoladex), and leuprolide acetate suspension (Lupron, Eligard), the OIG found that physicians favored use of the more expensive drugs while the least costly alternative policies were in place but that their use was slowly declining. At the same time, the use of the least expensive drug was slowing rising.

After the payment policies were rescinded, use of the more expensive treatments increased significantly.

In 2010, Lupron and Eligard, the most expensive drugs, were administered about twice as often as the least expensive drug, Trelstar. In the year after payment restrictions were removed, the use of Lupron and Eligard rose 31% while Trelstar use fell 74%, according to the OIG report.

Dr. Walter Stadler, professor of medicine and surgery at the University of Chicago, said that the spike in utilization of the more expensive agents is probably the result of marketing, not any clinical differences in the medications. "They are completely and totally equivalent in terms of their efficacy and how they work," he said.

Physicians may be basing their choice on which manufacturers offer them the best deal on the bulk purchase of the drugs, he said, even if that’s not the best deal for Medicare or the insurer.

The OIG report also noted another trend in the utilization of the LHRH agonists: their overall use in prostate cancer is declining. The decrease in utilization began more a year before the least costly alternative policies were rescinded and has continued, according to the OIG, making it likely that it is unrelated to the policy.

Dr. Stadler said that the overall decline is probably caused by a combination of decreasing payments to physicians for the drugs and increasing medical evidence that the LHRH agonists are not always the best treatment option.

Medicare could save about $33 million a year on certain prostate cancer drugs if it reinstated policies that pay only the price of the least costly treatment among a group of clinically comparable drugs.

Limiting the payments for clinically comparable luteinizing hormone-releasing hormone (LHRH) agonists would bring down the cost of these prostate cancer treatments from $264.6 million to $231.3 million a year, or about 13%, according to a report from the Health and Human Services department’s Office of Inspector General (OIG). About 20% of the savings would go to patients, who would save $6.7 million in reduced coinsurance.

From 1995 until April 2010, the Centers for Medicare and Medicaid Services (CMS) imposed "least costly alternative" policies for many physician-administered drugs covered under Medicare Part B. If the patient or physician wanted to use a more expensive drug, one of them would have to pay the difference.

CMS rescinded the policies in April 2010 after a court ruled that the agency did not have the legal authority to set payments in this way.

The OIG began investigating the impact of the least costly alternative policies at the request of Rep. Ken Calvert (R-Calif.), who wanted to know if eliminating the policy had created an incentive for physicians to administer higher-priced treatments.

Based on the OIG report, that appears to have happened.

Looking at the use of triptorelin pamoate (Trelstar), goserelin acetate implant (Zoladex), and leuprolide acetate suspension (Lupron, Eligard), the OIG found that physicians favored use of the more expensive drugs while the least costly alternative policies were in place but that their use was slowly declining. At the same time, the use of the least expensive drug was slowing rising.

After the payment policies were rescinded, use of the more expensive treatments increased significantly.

In 2010, Lupron and Eligard, the most expensive drugs, were administered about twice as often as the least expensive drug, Trelstar. In the year after payment restrictions were removed, the use of Lupron and Eligard rose 31% while Trelstar use fell 74%, according to the OIG report.

Dr. Walter Stadler, professor of medicine and surgery at the University of Chicago, said that the spike in utilization of the more expensive agents is probably the result of marketing, not any clinical differences in the medications. "They are completely and totally equivalent in terms of their efficacy and how they work," he said.

Physicians may be basing their choice on which manufacturers offer them the best deal on the bulk purchase of the drugs, he said, even if that’s not the best deal for Medicare or the insurer.

The OIG report also noted another trend in the utilization of the LHRH agonists: their overall use in prostate cancer is declining. The decrease in utilization began more a year before the least costly alternative policies were rescinded and has continued, according to the OIG, making it likely that it is unrelated to the policy.

Dr. Stadler said that the overall decline is probably caused by a combination of decreasing payments to physicians for the drugs and increasing medical evidence that the LHRH agonists are not always the best treatment option.