With the aging population in the US increasingly in need of innovative treatments for chronic illnesses, the CMS needs to radically revise the system by which it reimburses doctors for administering these drugs. An estimated 77 million people will be eligible for Medicare in 2030, nearly double the number eligible in 2000. And with prescription drug benefits due to begin under Medicare in 2006, the CMS needs to be as cost-effective as possible to deal with the most expensive reform the program has seen in 30 years. These changes are particularly relevant to biotech companies, because in the past year or so, the CMS has slashed the amount it will reimburse for several biotech therapies, a situation that could compromise the financial viability of these products. As Martin Gold, founder and principal of reimbursement consultant firm Technology Access Partners (Monsey, NY, USA) puts it: “Somebody has to foot the bill for these treatments or doctors won't prescribe them.”
The methodology the CMS uses to reimburse 'part B' drugs (those administered in a physician setting) was amended last December in the Medicare Modernization Act (Nat. Biotechnol. 22, 13, 2004). Many protein therapeutics fall under the part B category because they have to be administered intravenously over extended periods. Previously, the CMS reimbursed part B drugs at 95% of average wholesale price (AWP)—a number that companies estimate through projections. Under the new law, beginning January 2004, the reimbursement rates have dropped to as low as 80% of AWP for some drugs; Gold says he has heard anecdotally that some firms are now losing money by selling their biologics to physicians, who then cannot pay the entire price because of the new rates.
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