Fact Sheets

COMPETITIVE ACQUISITION PROGRAM INTERIM FINAL RULE (CMS-1325-IFC)

Overview

Physicians who administer drugs in their offices to Medicare beneficiaries under Medicare’s Supplementary Medical Insurance Program (Part B) will have the option of obtaining many of these drugs under a new voluntary competitive acquisition program (CAP) starting on January 1, 2006 .  The CAP program was established through an interim final rule issued today by the Centers for Medicare & Medicaid Services (CMS).  CAP is a voluntary program that offers physicians an option to acquire drugs from vendors who are selected in a competitive bidding process.  The vendors would then be responsible for billing the program and collecting any applicable deductible and coinsurance for drugs included in the CAP.   This program could save physicians time and paperwork and, in the long term, could lower drug costs for beneficiaries and the Medicare program.

This rule deals only with drugs that are covered under Medicare Part B, and will not apply to drugs included in the Medicare prescription drug benefit that will also take effect on January 1, 2006 .

Under the interim final rule, physicians can choose to obtain physician administered Part B drugs from vendors selected by Medicare through a competitive bidding process.  The vendors would then bill Medicare directly for the drugs.  The physician would no longer purchase the drug and seek payment from Medicare.  Rather, the physician’s role would be limited to ordering and administering the drug.  Physicians could also choose to continue to purchase drugs directly in the market, as they do now, and continue to be paid by Medicare at the statutorily established rate, which, for most drugs, is 106 percent of average sales price (ASP).

Whether the physician elects to participate in the CAP or to continue purchasing drugs on the market, Medicare will continue to directly pay the physician to administer the drugs.

Background

Since the inception of the program, Medicare has paid for a limited number of prescription drugs under Part B.  For the most part, these are drugs that are generally not self-administered, but rather administered by physicians in their offices (e.g., many oncology drugs).  The physicians would purchase the drugs they needed for their patients, and bill Medicare for both the drugs and the administration services.
 

Prior to 2003, numerous studies had established that Medicare was paying for these drugs under a statutory formula that resulted in payment far in excess of the physician’s acquisition costs, but physicians said these overpayments were needed to offset inadequate payment for administration. 

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) required CMS to correct this cross subsidization, increasing payments for the administration of drugs to reflect the costs of the services, and reforming the payment methodology for these drugs in two ways.   First, effective January 2005, Medicare sets payment rates for most Part B covered drugs at 106 percent of the ASP, as determined from data supplied to Medicare by manufacturers and updated on a quarterly basis. 

The second phase of MMA payment reform of Medicare Part B drugs requires CMS to offer physicians an option, beginning in 2006, to acquire drugs from vendors who are selected in a competitive bidding process.  The vendors would then be responsible for billing the program and collecting any applicable deductible and coinsurance for drugs included in the CAP.

Program Structure

The interim final rule implements the CAP for Part B drugs and biologicals by:

• Establishing a single national distribution area effective January 1, 2006 . This area will include all 50 states, the District of Columbia , Puerto Rico, and U.S. territories.

• Establishing a single drug category consisting of 181 drugs commonly provided incident to a physician’s service.   These drugs represent almost half of the 440 drugs billed incident to physician services in our Part B billing data and more than 85 percent of the dollars Medicare spends on physician injectable drugs.

• Establishing the physician and vendor enrollment processes.

Beneficiaries – No Change in Care or Costs

The CAP program will not change how Medicare beneficiaries receive Part B drug treatments from a physician.  Moreover, we do not anticipate that any significant change in beneficiary out of pocket cost will result from the implementation of the CAP in 2006.   Long term, costs could decrease somewhat.

Physician Participation

Physician participation in the program is voluntary.   Physicians have complete freedom to choose to obtain their drugs in the marketplace and Medicare will continue to pay them for such drugs under the ASP system or otherwise applicable payment methodology. 

For physicians choosing to participate in the CAP program for Part B drugs, obtaining drugs from a vendor under the CAP is intended to be simple and efficient.   Physicians would simply enroll with one of the winning vendors.  The physician would order drugs needed for specific beneficiaries from the vendor, and administer them to the beneficiaries.  The physician would not bill Medicare for the drugs but would bill Medicare only to administer the drugs.  The vendor, rather than the physician, would bill Medicare for the drugs, and would be responsible for collecting any deductibles and coinsurance from the beneficiary. 

The CAP program does not interfere with the physician’s medical practice.  Physicians can acquire medically necessary drugs that are not included in the CAP program directly in the market, as they do now.

Physicians will elect to participate in this program on annual basis. During the election process, physicians will choose a vendor to be the physician’s sole source of Part B drugs in the particular category.   The initial physician election process is scheduled to begin October 1, 2005 .    

Vendor Selection:

A vendor wishing to provide Part B drugs to physicians under this program would submit a bid to Medicare for supplying drugs administered in a physician’s office.  To be eligible for a contract, a vendor would first have to demonstrate that it meets rigorous standards set out in the regulation for quality, program integrity, financial stability, and service.  In addition, vendors will submit an 855B form and be approved by CMS as a Medicare supplier.  After meeting those standards, winning vendors would be selected based on their bid price.