Medicare Changes Policy On New Med Procedures

CMS Director McClellan intends to revamp how new medical technology is accepted

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CEO SUMMARY: Faced with a literal tidal wave of new medical procedures, new therapeutic drugs, and new diagnostic tests, Medicare is crafting a unique strategy. As a new clinical option reaches the market, Medicare will reimburse—but only if the patient participates in a clinical study and these studies are paid for by either vendors or research institutes. PET scan manufacturers are organizing the first such effort.

NEW MEDICAL TREATMENTS and diagnostic tests will be covered by Medicare under an innovative, but still evolving, policy.

In recent months, the Centers for Medicare and Medicaid Services (CMS) has announced that it would cover expensive clinical procedures and diagnostic tests, so long as two conditions were met. First, companies and organizations providing such healthcare services pay for research studies to determine whether or not these procedures indeed provide clinical benefit. Second, that patients receiving these treatments and tests agree to participate in the research studies.

New Philosophy At CMS

This new policy is directly linked to the arrival of Mark McClellan, M.D., Ph.D. as Director of the Centers for Medicare and Medicaid Services (CMS). McClellan was sworn in as the agency chief in March 2004, following the departure of Thomas Scully in December 2003. Prior to this position, McClellan, a board-certified internal medicine physician, was former Commissioner of the Food and Drug Administration (FDA). He also served on the President’s Council of Economic Advisers. He was Deputy Assistant Secretary of the Treasury for Economic Policy during the Clinton Administration. He is currently on leave from Stanford University and Stanford Medical School, where he is Associate Professor of Economics and Associate Professor of Medicine, respectively.

This background is what makes McClellan unique as a Director of the Medicare and Medicaid programs. His public comments reveal a fundamental shift in attitude and philosophy. Whereas CMS (formerly HCFA—Healthcare Financing Administration), has relied on “command and control” types of edicts, McClellan’s vision is significantly different. He wants to better utilize market forces to stimulate innovation, improve healthcare quality, control spending, and meet the service expectations of Medicare and Medicaid beneficiaries.

Faced with a tidal wave of new procedures, expensive therapeutic drugs, and diagnostic tests, Medicare is crafting a unique strategic response. “Instead of having 10% to 20% effective success rates over a broad population, we want to get to 80% or 90% who benefit, and with fewer side effects,” declared McClellan.

Not Enough Knowledge

One academic expert who praises the new Medicare policy is Robert Califf, Director of the Clinical Research Institute at Duke University. “Almost regardless of your political philosophy, this makes sense,” he said. “We have an increasingly powerful array of drugs and devices and a bewildering array of choices. And there is broad agreement among people who make these choices that we don’t have the information we need.”

One trigger behind Medicare’s policy is the growing number of cancer drugs which are approved by the FDA for one use, but prescribed by physicians for many off-label uses. When Zevalin (Ibritumomab tiuxetan), manufactured by Biogen Idec entered the market, it was approved for non-Hodgkin’s lymphoma and cost $25,000 per dose. Medicare officials were concerned that it would be prescribed for off-label uses, without adequate clinical knowledge to confirm the clinical effectiveness of the drug in those applications.

Paying For Off-Label Uses

As a result of this experience, Medicare recently announced that it would pay for off-label uses of four new colorectal cancer drugs for patients enrolled in any of nine clinical trials now getting under way at the National Cancer Institute (NCI). These studies are designed to evaluate off-label uses of the drugs.

In another example, on September 15, Medicare announced that it would pay for PET scans performed on people undergoing evaluation for Alzheimer’s Disease—but only if the patients are enrolled in a clinical trial that includes a blind “placebo scan” cohort. Manufacturers of PET scanners agreed to fund these clinical trials.

Could Benefit Labs

The potential benefits for the laboratory industry are substantial. Currently Medicare is slow to cover many new diagnostic assays. It places restrictions on when and how the test is covered and often reimburses less than the cost of the basic test kit.

However, this new policy would make it feasible for manufacturers to finance clinical studies even as Medicare reimburses for those new diagnostic tests. During the period of the clinical study, laboratories would be paid for testing. At the end of the study, there would be clinical evidence to indicate whether or not the diagnostic assay has worthwhile clinical benefits.

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