July 2005 | Vol. 23, No 7

CMS Offers New Option for Physicians Who Administer Drugs in Their Offices

(In keeping with the SVU policy of trying to get useful information to our members, we provide the following CMS news release for our physician members and those in physician offices where potential impact of this new CMS policy may be felt. While SVU realizes this new policy will not affect the majority of our members, there are a significant number of new Medicare initiatives on which we will attempt to inform you. Please direct any comments on this to SVU Government Relations Committee Chair Bill Schroedter at bschroedter@qualityvascular.com.)

Physicians who administer drugs in their offices to Medicare beneficiaries will have the option of participating in a new competitive acquisition program (CAP) beginning January 1, 2006, according to a recent CMS news release. Under an interim final rule with opportunity for comment issued on 6/27/05 by the Centers for Medicare & Medicaid Services (CMS), these physicians will be able to choose to obtain many physician-administered drugs from vendors selected by Medicare through competitive contracting. 

“This new competitive approach for Part B drugs aims to give physicians a new and less burdensome option for acquiring the treatments their patients need,” said CMS Administrator Mark McClellan, M.D., Ph.D.  “The program frees physicians from the administrative work of purchasing and procuring drugs in their offices, so that they can focus more time and resources on providing the best treatments for their patients.”

The new program will apply to physician-injectable drugs covered under Medicare’s Supplemental Medical Insurance (or Part B) program that are commonly provided incident to the physician’s service.  It will not apply to drugs included in the new Prescription Drug Benefit under Medicare Part D, which also goes into effect January 1, 2006, nor will it apply to drugs that are self-administered by the patient through a device such as a nebulizer, or to certain other drugs, such as intravenous immune globulin (IVIG), immunosuppressive drugs and hemophilia blood clotting factor.  Of approximately 440 drugs that are billed incident to a physician service and paid under Part B, 181 will be included in the CAP, accounting for 85 percent of all Medicare spending on physician injectable drugs.  CMS will evaluate CAP’s implementation and use that information to decide if and how the program will be modified in the future.

Under the interim final rule, physicians can decide to order the drugs they need to administer to their patients from the vendors, who in turn will bill Medicare for the drugs and bill the patients for any coinsurance or deductibles.  Physicians who do not wish to participate in the competitive acquisition program can continue to purchase drugs directly from drug suppliers, as they do now, and be paid directly by Medicare at the statutorily-set rate of 106 percent of the manufacturers’ average sales price.

Physicians will be given an opportunity once a year to elect to participate in the program and to choose a vendor to be the physician’s primary source for the Part B drugs included in the CAP.

Currently, a physician purchases drugs for a beneficiary from a distributor or manufacturer.  The physician then bills Medicare for the drug, which, in most cases, has a statutorily mandated payment rate of 106 percent of the manufacturer’s average sales price (ASP). Medicare pays 80 percent of this rate, and the physician collects a 20 percent coinsurance from the beneficiary.  Medicare will pay the physician the same amount for administering the drugs, whether the physician obtains the drugs directly from a distributor or through the CAP vendor.

For physicians choosing to participate in the program, obtaining drugs for their patients will be straightforward: they no longer have to buy the drugs, collect the co-payments, or bill Medicare for the drugs.  After electing to participate in CAP and selecting one of the available vendors, physicians will order the drugs needed for specific beneficiaries from the vendor and administer them to the beneficiaries.  Physicians will bill Medicare only for the service of administering the drugs.  The vendors, rather than the physicians, will bill Medicare for the drugs and will be responsible for collecting any deductibles and coinsurance on the drugs from the beneficiary or a third party insurer such as Medigap after the drugs have been administered. 

“This is an innovative approach to using competition to reduce the burden on physicians related to using drugs in their offices, and we intend to work with all key stakeholders to assure that the program provides the greatest benefits at the lowest cost,” Dr. McClellan said. 

Note: More information about the CAP may be found on the CMS website at: www.cms.hhs.gov/providers/drugs/compbid.