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Epoetin Payment: Focus On Clinical Benefit



September 23rd, 2008
by Dennis Cotter

Editor’s Note: The post by Dennis Cotter below addresses the way in which Medicare should incorporate erythropoiesis-stimulating agents (epoetin) into its composite-rate payment for end-stage renal disease treatment. Watch for subsequent posts on this topic from Amgen and others. 

Statement of the problem. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) mandates that the Department of Health and Human Services (HHS) recommend a strategy to incorporate separately billable drugs — the most expensive being erythropoiesis-stimulating agents (ESAs) to treat dialysis-related anemia — into the composite rate for end-stage renal disease (ESRD). Congress has directed the Centers for Medicare and Medicaid Services (CMS) to use historical archived data to assess an equitable payment for ESAs. Given its documented overuse and recent allegations of “gaming” in preparation for future ESA bundling, we feel that the CMS approach is problematic. We encourage Health Affairs readers to enter into a discussion regarding alternative evidence-based approaches, especially those that incorporate clinical criteria, to determining a fair and equitable method of bundling ESAs.

Background. The Preserving Access to Medicare Act of 2008 calls for rewarding clinically effective health care and reforming Medicare. Given that the Congressional Budget Office (CBO) cites that as much as one-third of the nation’s $2.1 trillion 2006 health care expenditure was wasteful, this legislation comes at a critical time, as more costly diagnostic and therapeutic technologies enter into the U.S. health care system. To adopt a more rational approach, the U.S. Congress’ Medicare Payment Advisory Commission (MedPAC) recommends that the “Secretary [of HHS] should introduce clinical criteria for eligibility of drugs and biologicals . . . (arguing that clinical benefit be a criterion),” for newly approved drugs and biologicals. Recently, the Institute of Medicine (IOM) echoed similar recommendations: “Solutions to some of the nation’s most pressing health policy problems hinge on the ability to identify which diagnostic, treatment, and prevention services work best for various patients and circumstances.”

In setting fixed payments — resulting in a shift in provider incentives from a profit to a cost center — Medicare’s prospective payment system (PPS) encourages providers to select an appropriate amount, type, and intensity of service for its beneficiaries. Medicare’s ESRD program is the country’s first national health care program and employs a composite-rate (fixed) payment scheme similar to PPS for the care of ESRD patients — a scheme employed to achieve this prudent use PPS goal.

Until now, ESAs used to treat dialysis-related anemia have not been included in the ESRD composite-rate payment. However, Section 623(f) of MMA requires HHS to make recommendations on the design of a bundled PPS for ESRD services that includes separately billed drugs and other services. An important example of the challenge that lies ahead is the CMS proposal to use historical drug use charges as the basis for calculating the future fixed payment adjustment for ESAs (or epoetin) for dialysis patients — a conundrum that pits the interests of a single supplier (Amgen) against those of essentially a single payer (Medicare).

Unlike traditional market forces made up of competing health care technologies used to treat similar conditions that set prices based on demand, critics maintain that the single-source ESA product and corresponding Medicare policy rewards overuse, accounting for approximately 25% (approximately $2 billion in 2005) of Medicare ESRD costs. In implementing Congress’ directive, CMS proposes to use utilization data (patient claims and Medicare cost report information during 2007-09) as the baseline for calculating the adjustment to the ESRD composite-rate amount. However, since 1991, the congressional Office of Technology Assessment (OTA), U.S. Government Accountability Office (GAO), CBO, MedPAC, and others have reported that the Medicare payment for separately billed services has created perverse incentives that have led to overuse of ESAs. The proposal to use archived Medicare claims data containing arguably historical overuse of this product appears to be a flawed approach.

Current use patterns and clinical benefit. ESA use among Medicare dialysis patients requires that caregivers submit both a monthly dose and achieved hematocrit on their claims for payment — a unique Medicare billing requirement. Analyzing this information, Thamer et al (2007) found that dialysis facilities’ organizational status and ownership were associated with variation in epoetin dosing in the United States. Large for-profit chain facilities used larger dose adjustments and targeted higher hematocrit levels compared to smaller nonprofit units. In terms of clinical benefit, recent clinical trials have shown that patients targeted to higher hematocrit levels with higher epoetin doses might have an increased mortality.

As a result of these concerns, a recent Food and Drug Administration (FDA) black-box warning advises health care providers to use “the lowest [epoetin] dose possible to gradually increase the hemoglobin concentration” and to maintain the hematocrit level below 36%. Based on our analysis of Medicare claims data, a dose-response study (KI 2008) indicates that, on average, a starting dose of 2,500-5,000 units per treatment can maintain the hematocrit level in the desired target range of 33-36%. However, Lazarus et al. (2007) reported that the largest U.S. for-profit dialysis facility chain used a mean epoetin dose of approximately 8,100 units per treatment in 2006.

Cost impact. Compared to the CMS’ stated method proposing to use historical data, which might further ensconce excessive payment amounts in the adjustment, if epoetin were to be bundled into the ESRD composite rate based on our dose-response research (KI 2008), current Medicare epoetin payments (around $2.5 billion per year) would be reduced by approximately 53%. In addition to the widely documented historical overuse of ESAs discussed earlier, there have been concerns regarding “gaming” of billing and cost information, as alleged in cited sworn testimony.(1) Legislation directing the CMS to fold ESA costs into the ESRD composite-rate payment adjustment might overstate a fair and equitable adjustment amount, resulting in a windfall payment opportunity to dialysis providers should they cut back on ESA dose levels once the new system is implemented.

The challenge. We encourage Congress to implement the advice of their agencies and the IOM to use documented clinical benefit as the foundation for bundling ESAs. Because of this rare opportunity to study both drug dose and hematocrit response, we have an ability to look at the clinical effectiveness of a costly therapeutic intervention in a “real-world” setting. This is the place that we must start!

Footnote (1):  “He said we, meaning Fresenius, have a tacit agreement with Amgen to allow them to increase price of EPO in the time period before bundling, and we, Fresenius, will take less profit in the interim because that will keep the price and the reimbursement rates that go into the bundle higher.” Hoffmann-La Roche Inc. against an infringement suit brought by Amgen Inc. over Amgen’s erythropoietin anemia drug, testimony of Barbara Senich, Vice President of Marketing and Sales for Roche Testimony, pp. 556-609, Part IV, United States District Court for the District of Massachusetts, Civil Action no. 05-12237-WGY, AMGEN, INC., Plaintiff, v. F. HOFFMANN-LA ROCHE LTD, ROCHE DIAGNOSTICS GmbH, and HOFFMANN-LA ROCHE, INC., Defendants. Daily Transcript of Evidentiary Hearing in re Remedy Phase (Volume 4), BEFORE: The Honorable William G. Young, District Judge, 1 Courthouse Way, Boston, Massachusetts, December 7, 2007.

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2 Trackbacks for “Epoetin Payment: Focus On Clinical Benefit”

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25 Responses to “Epoetin Payment: Focus On Clinical Benefit”

  1. Dennis Cotter Says:

    Dr. Hirth makes excellent points regarding the factors that might or might not, in his opinion, be sufficient to ensure that the new ESRD PPS bundle does not overpay for the utilization of ESAs and other items. Although most researchers anticipate a reduction in ESA use due to implementation of the ESRD PPS, CMS will continue to employ a target Hgb target (10-12 g/dL) as a quality-of-care measure. In the future, if providers do not meet this measure, significant reimbursement penalties will be enacted, thus putting pressure on providers to treat ESA-hyporesponsive patients with large ESA doses. Furthermore, patients not subjected to ESRD PPS include the millions of anemic CKD pre-dialysis patients, who could be subjected once again to erstwhile gaming of the reimbursement system and who are at risk for both increased mortality and cardiovascular risks as a result of high ESA doses. I am also concerned about the approximately one-third of all dialysis patients with a current or prior history of cancer since these patients are treated with epoetin therapy on a continuous basis despite FDA dire warnings regarding risks of serious adverse outcomes, tumor progression, and earlier death associated with epoetin treatment of anemia among cancer patients. We will be discussing ways to monitor and report on the impact of these policies at MTPPI’s Technical Advisory Committee Meeting in June.

  2. Dennis Cotter Says:

    Dr. Hirth makes excellent points regarding the factors that might or might not, in his opinion, be sufficient to ensure that the new ESRD PPS bundle does not overpay for the utilization of ESAs and other items.
    Although most researchers anticipate a reduction in ESA use due to implementation of the ESRD PPS, CMS will continue to employ a target Hgb target (10-12 g/dL) as a quality-of-care measure. In the future, if providers do not meet this measure, significant reimbursement penalties will be enacted, thus putting pressure on providers to treat ESA-hyporesponsive patients with large ESA doses. Furthermore, patients not subjected to ESRD PPS include the millions of anemic CKD pre-dialysis patients, who could be subjected once again to erstwhile gaming of the reimbursement system and who are at risk for both increased mortality and cardiovascular risks as a result of high ESA doses. I am also concerned about the approximately one-third of all dialysis patients with a current or prior history of cancer since these patients are treated with epoetin therapy on a continuous basis despite FDA dire warnings regarding risks of serious adverse outcomes, tumor progression, and earlier death associated with epoetin treatment of anemia among cancer patients. We will be discussing ways to monitor and report on the impact of these policies at MTPPI’s Technical Advisory Committee Meeting in June.

  3. Dennis Cotter Says:

    Several commentators have written interesting perspectives on this complex issue. Historically, our approach to assess risk for new and established technologies has been to apply the following criteria: (1) the likely importance of a technology for patient care and public health; (2) the likelihood and severity of unintended patient outcomes; and (3) the timeliness of a doing such an assessment given new information in the peer-reviewed literature and/or events of public interest including congressional hearings, new policies or larger health care reform efforts. To this end, we will be conducting our biannual Technical Advisory Committee (TAC) meeting on June 23, 2009 to assess the safety and appropriateness of epoetin therapy among renal failure patients. The TAC is comprised of leading nephrologists, health care researchers, government officials and policymakers, renal provider and patient associations and provider groups. For over a decade, the TAC has provided us with clinical and methodological advice on these important issues. It also provides a forum for the most recent advances and developments for renal failure patients.

  4. chrishna Says:

    I am encouraged to see a discussion about the efficacy of epo. My mother has been on dialysis for nine years and suffers terrible side-effects from epo. She only takes abbreviated doses, if anything at all. She, instead, takes sub lingual B12 to treat her anemia which is quite effective for her. Despite, her normal blood count she faces constant pressure from “anemia managers” to take more epo. They take it quite personally if she refuses to take the drug and can be incredibly rude as a consequence. Obviously, huge profits are at stake for these companies and patients’ health comes second. That may seem like a bias opinion, but if you saw first hand you would think it a mild and objective statement. I would like to thank Dennis Cotter for paying this issue some much need attention.

  5. Dennis Cotter Says:

    Mr. Peckman raises valid concerns related to the “whole of CKD care.” His speculations on how elements within the ESRD composite rate package would shift if our epoetin adjustment
    recommendations were adopted are interesting, but hopefully incoming administration policy-makers, learning from a multitude of past mistakes, will not view speculation as a sound basis for healthcare policy formation.

    With regard to his call for sticking with the engine #HR6331 directive, I think we should give serious consideration to changing to the science track, since the evidence shows that the “bridge-is-out” on the non-science track and the engine is about to fall into the financial abyss. Staying in lock-step with a severely flawed remedy lacking sound judgement, does not result in improved quality-of-care.

    The incoming administration has called for the creation of a Federal Health Board that would promote “high value medical care…backed by solid evidence.” We whole-heartedly support their effort. Epoetin as a case study (and cautionary tale) is offered to the proposed Federal Health Board as an example of data needed to monitor quality of care as well as the an example of the conduct of a comprehensive technology assessment in support of sound public policy backed by solid evidence.

  6. Bill Peckham Says:

    Based on our analysis of Medicare claims data, a dose-response study (KI 2008) indicates that, on average, a starting dose of 2,500-5,000 units per treatment can maintain the hematocrit level in the desired target range of 33-36%. However, Lazarus et al. (2007) reported that the largest U.S. for-profit dialysis facility chain used a mean epoetin dose of approximately 8,100 units per treatment in 2006.” 9/23 post

    On rereading your initial post this section raised a question in my mind – is your contention that a 53% reduction is possible based on assuming that 8,100 units is the average dose across all providers rather than the average dose at one provider that dialyzes 30% of Medicare beneficiaries?

    I have my doubts that a 50% reduction in usage could be achieved. I don’t think single payer health systems – from abroad or Kaiser – have seen those reductions.

    Our contention is that Medicare policy-makers should base their decisions on future payment for this service on a reasonable demonstration of “real-world” clinical effectiveness. We have reported such a study (Cotter D, et al Kidney Int. 2008) and application of these findings to policy formation could reduce current Medicare epoetin payments (~ $2.5 billion per year) by approximately 53%.” 12/26 comment

    I think an assumption that units would use 50% less epo under an expanded bundle would mean a 14% reduction to the expanded composite rate instead of the 2% reduction currently required by HR6331 – the MMA, the legislation that created the expanded bundle. HR 6331 has a number of provisions – setting the reimbursement framework is a complicated business.

    HR6331 includes provisions to withhold 2% of reimbursement from providers that do not achieve certain clinical performance measures (CPMs). Anemia management is one of those CPMs – providers face reimbursement penalties if Medicare beneficiaries in their care do not achieve hematocrits within a certain range.

    This framework sets up a dangerous dynamic if a 14% reduction to the expanded composite rate was instituted. Anemia has an easily measured CPM so I think it is fair to assume that anemia management would be achieved. In this framework anemia management will be among the first to be paid as it were. If rather than a 50% decline, usage declines by 20% the imagined ESA savings will be taken from composite rate expenses without clear CPMs. Staff ratios will increase – patients will still have hematocrits in the 33 to 36 range but they will see their care team less often, have shorter runs and all the rest. Hematocrits will be achieved but a greater burden will be placed on the dialyzed.

    I appreciate that you intended to limit the scope of discussion to ESA usage and the problems with creating future payments based on past, suspect, usage but I think the expanded bundle entwines ESAs with the whole of outpatient stage 5 CKD care. The egg is about to be wisked, under the circumstances I don’t think it makes sense to talk only about the yolk.

    Anyone who follows my blog knows that I have always had a great concern about the wisdom of an expanded dialsyis payment bundle but I think it is too late to change the framework. I believe the HR6331 makes ESA reimbursement and dialysis reimbursement for all intents one and the same.

    The implication of HR6331 is that going forward we have to look at the whole of CKD care, rather than any one element.

    Bill Peckham
    Dialysis from the Sharp End of the Needle

  7. Dennis Cotter Says:

    Mr. Peckman and Mr. Brehaut have raised excellent and thought provoking concerns, some of which are beyond the scope of the original posting and our own research; but are nonetheless very important as the country moves toward health care reform. Íve taken the liberty
    of responding to points that are pertinent to our research. To reiterate, our research topic addresses the translation of epoetin research into practice (today, over 95% of dialysis patients receive this drug continuously) and the role of government in requiring and applying scientific evidence to policy formation. Prior to availability of epoetin, the need for treatment of severe anemia constituted approximately 10% of the ESRD patients (another 20% were treated for mild anemia). Small elements of the remaining 65% of patients appeared in FDA post-approval clinical trials designed to expand epoetin indications (expand the epoetin market). Unfortunately these clinical trials were terminated due to higher mortality in the higher target hematocrit treatment arms, the results of which raised questions of whether higher exposure to dose or higher achieved hematocrit was the main contributing factor. Unfortunately, there is no other clinical trails to guide policy-makers on how the cover/reimburse for this costly treatment (~ $20 billion in Medicare payments and ~$4 billion in patient co-payments incurred since 1989). Our
    contention is that Medicare policy-makers should base their decisions on future payment for this service on a reasonable demonstration of “real-world” clinical effectiveness. We have reported such a study (Cotter D, et al Kidney Int. 2008) and application of these findings to policy formation could reduce current Medicare epoetin payments (~ $2.5 billion per year) by approximately 53%. The merits of how to redistribute these savings to improve/expand other ESRD treatment services has been the focus of several blog comments. It is curious why policy-makers are wedded to ensconcing historical epoetin overpayments into the future ESRD composite rate adjustment; a lockstep that is certainly not prudent public policy, particularly in light of the current U.S. economic downturn. We contend that the evidence has been presented – let’s make epoetin a case study on how to prudently and cost-effectively and safely take care of our renal failure patients.

  8. Jon D Brehaut Says:

    Dennis Cotter raises some interesting points. My interest however lies solely in how health care organizations, mainly funders, make coverage decisions. I can not comment on the decisions or issues surrounding epoetin directly, nor would I want to single out an particular organization or decision process for criticism. All coverage decisions are difficult, no matter how they appear. Some decisions are more complex than others and require more effort to get right. For these more complex decisions, clinical benefit, while an important criterion for coverage, is but one among several important criteria. In Canada, I and a few colleagues have developed a model for decision-making, with alternative mnemonics of STEEPLE or STEP, the latter being a collapse of the STEEPLE elements into fewer categories. This work developed from the efforts of the Government of Alberta to increase the use of evidence in their health care coverage decisions involving new technologies.

    In “Bridging the Gap: The Use of Research Evidence in Policy Development,” Don Juzwishin and I argue that decisions should be based on research evidence, with particular attention to the most recent (in fact, one of the problems that Alberta identified early on in their health care reform efforts was using historical usage alone as a foundation for regional funding decisions tended to lead to inefficiencies in resource allocation). For decisions of the adoption of new technologies or the expansion of existing technologies to new conditions, we identified several categories of evidence that decision makers need or want: Social and System Demographics, Technology Effects and Effectiveness, Environment, Economics, Politics, Legislation and Ethics. In “Linking Evidence from Health Technology Assessments to Policy and Decision Making: The Alberta Model,” Henry Borowski, David Hailey and I collapse these categories into STEP, which collapses the Environment category into Technology, and collapses the last three into Public Policy. This latter paper also presents an eight-step decision process for health funders to go through, of which step 4 is a comprehensive search for and review of the evidence in all categories. Other steps include significant consultation efforts with key interest groups, including physicians and other providers.

    Regardless of which mnemonic is used, the key elements are identifying the patterns of illness and the current patterns of care, as well as the ability of the health care system to make appropriate use of the new technology (S); the clinical effects of the technology being reviewed and its effectiveness in achieving these effects (TE/T); some form of economic evaluation or at a minimum a detailed costing of the provision of the technology (E); and some form of a political, legislative and ethical analysis of the decision to provide or fund the technology (PLE/P). Of course, such extensive decision processes are not without their challenges and every organization needs to find ways to adapt the model to its own organizational culture. Even in Alberta, the decision process based on this model is evolving and finding ways to become more proficient at using evidence effectively.

    This comprehensive approach provides decision makers with an explicit approach to disease conditions and clinical indicators for which a specific technology is most effective. As such, it helps to guard against inappropriate indication creep, while allowing for a planned expansion of the use of the technology to other conditions, something that might be important in the case of epoetin, as it is for many new technologies, including drugs. This comprehensive approach also provides organizations with assistance in defining their evidentiary standards, and when these standards may be relaxed, in a systematic, meaningful and transparent way.

  9. Bill Peckham Says:

    I’m happy to continue this discussion, hopefully others on the sharp encd of the needle will share their views too.

    1) You are correct that CMS is explicitly forbidden by law to negotiate prices on Part D drugs, however EPO is administered under Part B. I believe the administration could negotiate epo directly without Congressional action. Indeed, reading incoming DHHS Secretary Daschel’s writings I think he is very supportive of using CMS’s purchasing power.

    2 While I have great confidence in my dialysis provider to always do the right thing I do not assume all dialysis providers are as virtuous as the Northwest Kidney Centers. What I am calling for are process adjusters to payments that would pay providers for routinely increasing the available dose of dialysis. Providers and patients may decide that 3 hour runs 3 days a week are just fine but I believe they are deadly and I believe CMS has a moral obligation to allow access to more dialysis. Right now the expanded bundle is on track to entrench a one size fits all treatment regime and access to more dialysis is wholly dependent on ones zip code.

    Keeping the thirteen treatment reimbursements a month framework (it is not clear what the payment frequency will be under the expanded bundle, I am assuming it will be kept the same) would be acceptable if process adjustments to payment made customized dialysis doses possible. For instance if a unit provided 4 treatments a week they could have the three paid treatments adjusted by 1.2 – at the end of the week they would have collected .6 of the expanded composite rate which would be the approximate cost of providing a forth treatment incenter sans the separately billable chagges that will soon be a part of the expanded composite rate.

    I suggest other potential process reasons to adjust payment – process adjusters in addition to case mix adjusters. Adjusters for each home hemo training session (currently training is five days a week while payment is three times a week – this adjuster would be about 1.4), each PD training session (five traing sessions a week should garner the equivalent of five payments), for more frequent home dialysis (each treatment over three would increase an adjustment) and adjusters to maintain provider diversity i.e. adjusters that compensate for provider purchasing power disparities (for instance providers with fewer than 30 units would have all treatments adjusted by 1.1). Additional reimbursement would only reward those providers who provide additional services. No need to rely on provider’s beneficence.

    3 Therefore, increasing dialysis dose might not effect patient mortality – researchers that have studied this issue are urged to weigh in on this topic. I disagree with this statement in the strongest terms. There is a lot of data to support my contention that more dialysis is healthier. Most striking are reports that nephrologists and renal nurses would choose high dose home hemodialysis for themselves. For studies look to Overnight Hemodialysis Dramatically Improves Survival; from Agar Flexible’ or ‘lifestyle’ dialysis: Is this the way forward?; and the important Kjellstrand et al paperwhich compared daily short hemodialysis to incenter hemodialysis and cadaveric transplant. There are many more.

    4 I didn’t mean to advocate for phosphorus as the basis for Medicare premium discounts so much as point out that the person most in control of outcomes is the person receiving dialysis. However, I think phosphorus control has been shown to be important in maintaining the health of the dialyzed. The KDOQI targets are supported by evidence but units and docs are hard pressed to compel phosphorus control, which is why a patient focused incentive plan would be the only plan that could work. One can imagine other behaviors to reward – dialysis attendance, albumin measures – my point is … pay less for performance makes more sense then pay for performance when talking about a chronic disease.

    5 I did not explain myself very well. I have great doubts about the relevance to people on dialysis of studies that showed a negative impact of high epo induced hematocrits in pre dialysis patients. I doubt the relevance of both the CREATE or the CHOIR studies and do not fear epo induced hematocrits between 36 and 38. The issue of safety in my eyes is entirely due to the low dose of dialysis provided incenter. Three hours of dialysis three days a week is very dangerous because it is not an adequate dose. Too little dialysis is dangerous. In my view epo doses have an inconsequential impact on dialysis survival compared to the impact of one size fits all dialysis doses.

    Lastly, QoL seems to be secondary to the discussion you have initiated, a discussion I believe is of great importance. The critical issue is that we can use savings from CMS purchasing epo directly to provide customized dialysis doses. Ultimately I believe a three pronged approach – immunosuppressant coverage, increasing the routinely available dose of dialysis and CKD public health efforts – will achieve the critical goal of reducing the mortality rate of people with severe kidney disease.

  10. Dennis Cotter Says:

    Mr. Peckham has raised several interesting points as a patient who is on the sharp end of the needle. I offer my perspectives as a researcher on his comments shown below in italics:

    1.) The simplest solution to this whole mess is for CMS to retain its buying power and negotiate the price of epo directly….If CMS were to act as a group purchaser for health care items/services, it would save the Medicare program billions! Previous efforts in this area have been squashed by a wide variety of stake-holders. This is an intriguing idea that Congress and CMS should pickup on now that the economy has taken a serious downturn. (Recall that Congress specifically stipulated that there were to be no negotiations on drug prices in Medicare Part D. This might change during the Obama administration.)

    2.) Redirecting reimbursement from anemia management to dialysis …There is a presumption of beneficence among providers if you give them a generous epoetin adjustment to the ESRD composite rate. One of Ronald Reagan’s signature phrases was “Trust, but Verify”. As noted in my response to other blog participants, history (court rulings and testimony cited in the original posting and other responses) does not support the beneficence argument among at least two large for-profit chains. I’d like to think that this argument could be sustained among other providers, however. Public policy should not be based on presumption of goodness, although this is a common characteristic of the broad community of care-givers.

    3.) Immunosuppressant support for the life of the graft, public health efforts (efforts independent of insurance coverage) to identify and treat early stages of chronic kidney disease, both go hand in hand with increasing the available dose of dialysis to reduce the mortality rate. … Unfortunately, studies have shown that U.S. providers appear to have reached a plateau with regard to URR (urea reduction ratio), which reflects dialysis adequacy. Therefore, increasing dialysis dose might not effect patient mortality – researchers that have studied this issue are urged to weigh in on this topic.

    4.) Reward phosphorus control with premium discounts … We advocate evidence-based medicine; Mr. Peckman argues from a perspective of patient-centered care. Similar to documenting the clinical usefulness of epoetin, one would first have to determine an optimal target level for phosphorus control for the patient population. Based on such an analysis, one should first assign value to this service and second, determine how reimbursement policy could incentivize the practice. We have taken the first two steps to demonstrate an optimal level for epoetin therapy (i.e., dose-response and dose-survival work cited above) and now have embarked on testing anemia management strategies.

    5.) safety will be improved if we spend less on medications and more on dialysis… The presumption is that current anemia-therapy practices carry a safety risk, a point that we have argued to Congress, GAO, MedPAC, FDA and of course CMS, unfortunately to no avail. If other drug treatments also have attendant risks, it would be prudent to assess such risks prior to including them in the ESRD bundle.

    Finally, although not directly addressed in his HA comment, Mr. Peckham, as a patient, has raised quality of life (QoL) concerns in his “Sharp End of the Needle” blog. There is a presumption of QoL improvements among those who achieve higher hematocrit levels. The QoL claim was contained in the original FDA approved product label and recently removed from the current product label based on FDA’s review of existing evidence. The only allowed claim is the avoidance of the administration of a blood unit. (Although we have not studied QoL, I have been told anecdotally that patients who experience severe anemia and respond well to epoetin therapy experience less fatigue.) However, after almost twenty years of use, a well designed study to test QoL among epoetin responders and non-responders has not been reported.

  11. Bill Peckham Says:

    I’ve found your post and the comments that have followed very interesting.

    You write: “… a conundrum that pits the interests of a single supplier(Amgen) against those of essentially a single payer (Medicare).” I don’t think that is quite right. Medicare subcontracts it’s purchasing power to dialysis providers. Under the current system CMS basically splits and dilutes its inherent buying power between two large dialysis providers, while they reimburse at a rate based on the purchasing power of smaller providers. The simplest solution to this whole mess is for CMS to retain its buying power and negotiate the price of epo directly.

    Purchasing epo directly, removing financial incentives would mean spending less on epo but that is not an end in itself. The only meaningful end result would be to improve the provision of renal replacement. Redirecting reimbursement from anemia management to dialysis would allow providers to focus on dialysis rather than medication. Savings on anemia management would allow reimbursement adjusters for forth treatments incenter, reimbursement adjusters for each home hemo training session, each PD training session, for more frequent home dialysis and adjusters to maintain provider diversity i.e. adjusters that compensate for provider purchasing power disparities.

    The job is not just to redirect money from anemia management, the real job is to reduce the number of people needing dialysis and to improve the care of those who, despite our best efforts, need renal replacement. Immunosuppressant support for the life of the graft, public health efforts (efforts independent of insurance coverage) to identify and treat early stages of chronic kidney disease, both go hand in hand with increasing the available dose of dialysis to reduce the mortality rate of those with severe CKD. Right now the number of new people requiring dialysis slightly exceeds the number of people dying and getting transplanted. Slowing this inflow of new patients would increase the value of existing patients, motivating providers to increase the dialysis dose.

    The final way for anemia treatment resources to be redirected to good effect would be to create a pay less for performance scheme. Currently about 50% of all people on dialysis pay Medicare Part B premiums. Creating incentives to receive discounts on these premiums would finally direct financial incentives at the person with the most influence – the patient. Reward phosphorus control with premium discounts and you will see much better control of phosphorus. Patients are on their own over 90% of the time, it would be good policy to direct incentives towards those with the most influence on outcomes.

    Being on dialysis for ten years should not be more dangerous than taking a ride on the Titanic; currently it is. We have the ability to make living with chronic kidney disease far safer. Stage 5 CKD safety will be improved if we spend less on medications and more on dialysis. This will be possible when Medicare reclaims its inherent purchasing power. Redirect, don’t cut.

    Bill Peckham

  12. Dennis Cotter Says:

    Dr. Nguyen raises several interesting comments that I will embellish below regarding what should be done going forward:

    (1) a system of continuous quality indicator for improvement – There is a profound distinction to be made between improvement in a quality indicator (e.g. surrogate endpoints such as hematocrit level or other lab values) and an improvement in a clinical outcome (i.e. reduced: mortality, myocardial infarcts, stokes, congestive heart failure events, etc.). Regrettably, based on CMS response to our previous inquiries, CMS is content to only monitoring changes in hematocrit levels as their measure of quality assessment and performance improvement (QAPI ) in anemia management of dialysis patients receiving epoetin. The clinical usefulness of this QAPI meaure is open to debate.

    (2) a system of rewarding – Scholars and other pundits have raised ethical concerns with pay-for-performance schemes. I invite those that have thought about this dilemma to comment on the implications of such a program. Also, the reward would depend on what we agree with as a useful outcome described above (#1); i.e., what are we striving for?

    (3) some sorts of oversight in order to protect public health – Epoetin therapy will continue to remain controversial until proponents of the therapy conduct and report on studies that demonstrate clinical benefit. With the current dearth of such information continuous monitoring of this practice will undoubtedly prevail. In fact, it still remains unclear what the optimal goal of therapy should be? What is the target hematocrit level that CKD patient should be targeted to? It appears that attaining a normal hematocrit level is not advisable? But what is the best target?

    The ESRD program is the only U.S. national health care system. What is needed is a defensible rationale that supports a fair and equitable epoetin adjustment to the composite ESRD payment. This test will serve as a good barometer of success; as the country strives to remedy many other daunting challenges in the health care sector .

  13. tnguyen Says:

    As a front line practitioner and educator with direct patient care for end stage renal disease (ESRD) patients, no doubt, ESA is the most significant therapy for managing anemia associated with chronic kidney disease (CKD). There must be a viable reimbursement option so that CKD/ESRD patients continue to benefit from ESA therapy. Bundling into composite payment structure will not work unless there is significant increased in composite payment system. While the renal community recognizes significant benefits from ESA therapy, however, along with the progress, we (the renal community) have not done all that we can to encourage effective dosing of ESA and proper utilization. This has been side-tracked due to various reasons, including profit margins. I agree that new policy must be introduced in order to protect patients and public health. We can not remain idle but the question is how to best address the policy? One must considers incorporating: (1) a system of continuous quality indicator for improvement, (2) perhaps, a system of rewarding, and (3) lastly, some sorts of oversight in order to protect public health. The renal community must not end up where “Wall Street” and the car industries (Ford/Chrysler/GM) are now in.
    Timothy V. Nguyen, PharmD, CCP, FASCP

  14. Dennis Cotter Says:

    Dr. Hacer raises an interesting concern regarding the retention of “providers in this market.” From the perspective of risk groups, there are two markets to consider: 1.) Those anemic patients who would otherwise be exposed to a significant infusion of blood (6 or more units per year) [and possibly high accumulated iron stores] and 2.) those that are mildly anemic. The former group was the subject of the FDA requisite clinical trials. Prior to epoetin availability, they constituted approximately 10% of the ESRD market (parenthetically, another 20% of patients required one blood unit per year). Small elements of the later group have appeared in FDA post-approval clinical trials. Unfortunately these clinical trials were terminated do to higher mortality in the higher target hematocrit treatment arms that has raised the question of whether higher exposure to dose or higher achieved hematocrit was the main contributing factor. Unfortunately, what we are left with is a dearth of science that demonstrates a clinical benefit for the 70% of ESRD patients that receive epoetin therapy (group 2). To return to Dr. Hacer point, if the epoetin composite rate adjustment does not reflect current use and providers choose to reduce or eliminate epoetin treatment that it will occur among the mildly anemic patient pool, it is anyone’s guess whether such a practice pattern change will result in diminished quality of care, let alone survival.

  15. hacer Says:

    Addressing whether a bundled payment policy for EPO into the composite rate will change the provider behaviour of prescribing overdoses of this previously separately-billable drug and thus leading higher costs is complicated. This is because it has to be addressed by looking at the issue from the perspectives of the three important groups: patients, payers and providers. And, of course, coming up with a solution without comprimising any of these is a real challenge. Commentators highlighted several sound points from these three perspectives.

    I aggree with Cotter that the underlying point is whether relying on historical data to bundle EPO will change provider behaviour towards overuse of EPO, thereby leading to a lower risk of patient mortality. And I also expect that this way of reimbursement will not change provider behaviour, given that they would not want to put themselves further under pressure by CMS’s future cuts in reimbursement. Indeed, a tendency of reporting higher costs among especially large dialysis chains was cited by previous studies on efficiency in the US dialysis sector (see Dor et al. 1992; Hirth et al. 1999; Ozgen, Ozcan 2002).

    Therefore, a sound reimbursement policy would be to use evidence-based data to improve patient safety and reduce CMS costs. Of course, without providers, it would be impossible to improve patient safety and health status of the population as one of the main goals of a health system. A carefully designed adjustment of the composite rate payment would help keep the providers in this market.

  16. Dennis Cotter Says:

    Both Dr. Kevin Fiscella and Bruce Boissonnault raise legitimate concerns regarding the possibility of underdosing when epoetin is included in the ESRD composite rate. There is a long well documented legacy of epoetin use influenced by reimbursement incentives. Historically, the Congressional Office of Technology Assessment reported that HCFA (now CMS) determined that it would pay both hospital-based and independent dialysis facilities $40 for any recombinant erythropoietin dose of 10,000 units or fewer, and an additional $30 for any dose over that amount. This policy gave providers the incentive to underdose epoetin and, consequently, the achieved hematocrit was lower than expected based on RCT results. The manufacturer lobbied Congress to change reimbursement policy and, in 1991, HCFA established a new payment rate of $11/1000 units. Predictably, between 1991 and 2003, the average dose of epoetin increased more than 300 percent. Concern about rising costs caused Congress to implement a payment reduction of $1 per 1,000 units in 1994 and to consider yet another reduction in 1999, with little impact. Investment research analysts who follow epoetin market developments noted, “A similar 10% cut in 1994 did not affect Amgen’s pricing on Epogen. In fact, the dialysis centers compensated for the lower reimbursement by using more Epogen.” Consequently, the higher the amount of epoetin administered, the higher the Medicare payment was, resulting in a rapid increase in dosage levels (Cotter, et al HEALTH AFFAIRS Vol 25, Num 5, 2006). Notably, during this time period two major dialysis chains (National Medical Care and Gambro were cited and fined ($486 and $350 million, respectively) for overcharging Medicare for ESRD services; over use/charging for epoetin was a major component of each settlement.

    With regard to Mr. Boissonnault’s Option 3, we think he raises many excellent suggestions, but we feel compelled to raise two important concerns that have arisen from the work we’ve done in the past years. One, careful monitoring of the data will certainly be neccessary, but hematocrit – the only measure available to indicate the effectiveness of epoetin – is a surrogate measure. In a paper we published in the Journal of Clinical Epidemiology (2004) we concluded that …“Our results support earlier clinical trial and epidemiological data suggesting that hematocrit may not be a valid surrogate for survival among the epoetin-treated renal failure population. We hypothesize that epoetin may have important mechanisms of action apart from increasing hematocrit and that effective treatment may not simply be a matter of increasing hematocrit…..” Caution must be exercised when inferring clinical improvements in relation to hematocrit levels. A second more technical issue that must be addressed is one of confounding. Any analyses using administrative data, as proposed by Mr. Boissonnault, must address this complicated issue to tease out any real patient benefits. We and others have found that patients who receive the highest epoetin doses tend to have low hematocrits. This inverse association reflects the fact that practitioners are targeting a certain hematocrit level and patients who do not achieve this level will be given higher doses. Hyporesponsive patients, who receive the highest doses, might have underlying inflammatory disorders that blunt the hematocrit response to epoetin. To estimate the true pharmacologic relationship between epoetin dose and patient outcomes, one needs to appropriately adjust for this ‘confounding-by-indication’. Because epoetin dose is partly determined by measured hematocrits, which are themselves affected by prior dosing decisions, special statistical techniques called inverse probability weighting of marginal structural models are needed. These techniques have been previously applied to studies of vitamin D and parenteral iron use in dialysis patients as well as to other clinical scenarios and we have published in several medical journals using them as well.

  17. kfiscella Says:

    Bruce Boissonnault outlines three policy options to the dilemma posed by Cotter. I agree that the third option merits serious consideration by CMS in the context of adequate reimbursement for dialysis services.

    Simply bundling ESAs into capitated payment (whatever the historical basis for the payment) without adequate safeguards might yield disparities in underuse for ESAs by patient race, ethnicity, or SES – from either facility- or patient-level differences in clinical practice or differences in patient need. Disparities in quality of care among dialysis patients have been documented (see papers by Sehgal et al, Powe et al and Lea et al for details).

    Quality measures for ESA dosing based on Hct could be readily incorporated into pay-for-performance (P4P) – with financial incentives sufficient to optimize appropriate dosing and quality measures stratified by patient race, ethnicity and SES to assess potential disparities.

    Doing so would allow CMS to gain valuable experience in implementing a hybrid capitated payment-P4P model potentially able to help contain costs, improve quality and address – disparities in ESRD care. Over time, CMS could potentially expand the program to include other ESRD quality measures such as use of AV fistulas, and ultimately risk-adjusted outcomes such as infections, hospitalizations, and mortality.

    Kevin Fiscella, MD, MPH
    Associate Professor
    Family Medicine, Community & Preventive Medicine, and Oncology
    University of Rochester School of Medicine & Dentistry

  18. Dennis Cotter Says:

    Bruce Boissonnault offers several interesting future ESRD payment options. However, the extant and seemingly intractable problem is how to move to a bundled and capitated system. As stated in the original blog posting above, we contends that CMS’ approach to factor in historical epoetin treatment practice patterns provides a perverse reimbursement incentive to continue overuse and its consequent risks in the base years (2007-09) and a potential windfall for providers upon implementation. We have previously reported (KI 2008 dose-response paper) the physiological (hematocrit) response to epoetin. Based on this clinically meaningful relationship, one can obtain the ‘average’ dose requirement to achieve a particular hematocrit level for the overall patient population. We contend that this approach will produce a fair and equitable payment to providers and save the Medicare program approximately 50% of current epoetin costs. Why CMS’ has not seen the wisdom of adopting this method is anyone’s guess.

  19. Dennis Cotter Says:

    In a compassionate response to its therapeutic benefits, Congress, in 1972, directed the Federal Government to establish a national health care program by providing dialysis treatment and kidney transplants to those suffering from end-stage renal disease (ESRD). No one can argue with the achievement of this humanitarian goal. Dr. Richard Amerling echoes Dr. Wish’s concern regarding the Federal Government pays for these life-sustaining services, particularly how drugs are used and paid for in an attempt to make up for the financial short-fall incurred by providing other services. At the risk of sounding trite – Should we being robing Peter to pay Paul? If Drs. Amerling and Wish are correct in describing CMS’ motivations to compensate for ESRD payment deficiencies, then one is compelled to understand the risk associated with such practices. Most researchers and FDA agree that there is increased mortality risk related to both high epoetin exposures as well as high achieved hematocrits, as witnessed by recent testimony before Congress and regulatory agency actions to restrict the use of epoetin (see referenced links in the original posting above). Since the guiding ethical principle in establishing the ESRD program is to sustain life, we are compelled to fully understand both secular and clinical influences that would impede this goal, to learn by these mistakes and not to repeat such misadventures.

  20. Bruce Boissonnault, CEO and President of the Niagara Health Quality Coalition Says:

    In this debate, I am reminded of the old workplace joke, “They pretend to pay us, and we pretend to work.” Some commentators are warning CMS that providers may react negatively to the proposed capitated and bundled pricing model by doing only the minumum required, for example, by undertreating or leaving epo out altogether for some patients that would benefit from it. The implication is that physicians’ profit motive could crowd out proper epo treatment in a capitated model, a risk that could be associated with many services delivered in a capitated model. Some commentators also opine that the bundled reimbursement rate being considered may be too high because of past excesses in treatment that systematically racheted up costs while harming patient outcomes as a result of overuse. Still other commentators opine that it would be equally or perhaps more irrational to maintain the status quo because the existing fee-for-service model rewards overtreatment, and it appears to some that “deals” could emerge between providers and suppliers that maximize profitability for both at the expense of the taxpayer.

    This conundrum is ironic because the U.S. claims to have the most effective health care pricing system in the world because it is market based. Yet in this instance, we know the market is not functioning to the benefit of either patients or the taxpayer. The providers and pharmaceutical manufacturers in the epo marketplace have immense power. CMS has the potential to exercise significant buying power, but CMS has been fearful or unable to use that power to negotiate better quality and lower prices on behalf of patients and the taxpayer — in many instances out of fear that they might offend powerful industry insider special interests. And of course, the patients have neither the clinical expertise nor the purchasing clout required to negotiate better quality or pricing deals for their own care. Either way, the patient must take what they get; and the taxpayer systematically pays more than she/he should for the level of quality provided.

    So what are the options?
    One: CMS could carry on in a fee-for-service model for epo reimbursement and thereby continue to reward overtreatment and unchecked monopoly pricing power by the supplier.
    Two: CMS could move to a bundled and capitated system of payment leading to a risk of undertreatment or inappropriate treatment by doctors, many of whom feel underpaid already for their core services.
    Or three, CMS could move to a bundled and capitated system of payment as proposed, but one with 1) automated datagathering and measurement as a byproduct of care, 2) extensive transparency enhancements, and 3) a sizeable pay-for-results component. It should be stressed that the overall reimbursement level to providers must be adequate under either system to ensure provider participation in the U.S. market-based system.

    At least one component of any ESRD pay-for-results payment system should reward “episodes of care” that are cross-cutting.* Moreover, CMS would need to create some real consequences when guidelines are not followed by providers. Penalties should be especially harsh when failure to follow guidelines is found to be systematic with the intent to game the payment system.

    Option three — a pay-for-results system — is not yet on the table, but it deserves a look. ESRD is the ideal place to start down such a path. To do this, payment mechanisms must begin to incorporate real rewards for those provider communities that offer real episodes of care improvement results. In ESRD, effective epo therapy is one of numerous problems that are suggested by the existing data. Another example is infection rates for ESRD clinics which are all over the map. For example, at some ESRD clinics, infection related to dialysis is the number one reason for hospital admissions, and too often, procedures like fistula are underutilized during eposodes of care because there are perverse rewards.

    Fortunately in ESRD patient care, the beginnings of a US Health Care Data Highway exist in electronic form. Due to longstanding inaction by the federal government, such a comprehensive US Health Care Data Highway is virtually non-existent for most other types of care in the US. In fact, atomized privatization of the very health care data infrastructure we need to unify is moving this nation away from a workable US data strategy. Thus, an opportunity exists to use ESRD as a manageable test case to implement an automated performance reward system based on results. (Note: the VA is the exception and has utilized integrated care measurement tools effectively to reward integration and coordination of care for some time.) We need only recognize the uniqueness of this opportunity and use it to drive needed improvements into the the quality and efficiency of care.
    ——————————————————
    *Cross-cutting measures reward results, results that are measured over a period of time across the continuum of care, including primary, specialty, emergency, inpatient care, ESRD care, etc. Such measures typically measure care for a specific chronic disease population. Cross-cutting measures are intended to reward groups of providers in a way that is patient-centered, seamless and intentionally blind to the existing silos and corporate boundaries. Pay-for-performance based on such measures — it is opined by the NPP for example — reward providers for ensuring that coordination of care across silos and corporate boundaries emerges and is functioning properly.

  21. ramerling Says:

    I was going to leave comments very similar to those of my colleague and friend, Dr. Jay Wish. Yes, there has clearly been profit-driven overuse of both ESAs and vitamin D analogues, due largely to the diminishing real dollar value of the payment for dialysis treatment. But trying to create a bundled payment based on historical ESA use or other more recent data misses this point entirely. CMS should acknowledge their original error of not indexing the composite rate for inflation and simply reinflate it to the equivalent of $140 in 1972 dollars. They should then completely get out of the micromanagement of ESA dosing that has plagued dialysis providers for years (of course, data will continue to be collected by USRDS). Most doctors will prescribe the lowest possible ESA dose to achieve the currently recommended target of Hb 10-12.
    DaVita, FMC and smaller dialysis providers will make more profit, but I don’t have a problem with this. Very likely patient care and outcomes will improve and hospital costs will go down. This should result in a net saving for the payers.

    Richard Amerling, MD
    Beth Israel Medical Center, NY

  22. Dennis Cotter Says:

    If we are to accept this remedy – what Dr. Jay Wish is saying is that two wrongs can make a right. I do not argue that the composite rate is adequate. However, the financial gains made (and, for that matter, executive bonuses in the ten of millions) by the two major for-profit chains does not help sustain Dr. Wish’s call for a more equitable payment rate, but he has my sympathy. What is more troubling, if Dr.Wish’s description of CMS reimbursement motivations are correct, what we are witnessing is a moral challenge to balance patient safety with provider financial soundness. FDA has issued a Black Box warning on both high hematocrit targets and high epoetin dosing. Without scientific evidence and in contrast to FDA recommendations, CMS reimbursement policy supports an unbounded hematocrit target and a epoetin dose limit far in excess of the FDA approved indication. CMS’ primary responsibility is to maintain patient safety and effective treatments and a secondary fiduciary responsibility to establish payment policy that reflect prudent expenditures of the public treasure. Has CMS missed the mark on both counts and engaged in risky business?

    Dr. Wish also describes the scenario where providers would lower hematocrit target under a epoetin payment bundled into the composite rate. We do not argue his prediction, but point out if
    providers “target lower Hgb levels” then what is the point of currently targeting higher Hgb levels, expect to make money.

    With regard to Dr. Wish’s comment on the Fresenius-Amgen agreement, what we have cited is sworn testimony that carries severe penalties if perjured. If this is the case, others might like to weight in.

  23. jaywish Says:

    Although Dennis Cotter’s argument makes sense from a clinical benefit standpoint, it ignores the reality of dialysis reimbursement which is the fact that the current composite rate (for the dialysis procedure itself) is a money loser for most providers and will become even more so with the numerous unfunded mandates in the new conditions of coverage. As many are aware, this composite rate payment has changed minimally in the past 20 years despite increases in labor and overhead costs that have not been balanced by more inexpensive technology. The dialysis composite rate is the only Medicare payment that does not have an annual update based on the health care market basket. Medicare has acknowledged this problem for dialysis providers and has allowed the margins on separately billable drugs such as EPO, vitamin D and IV iron to subsidize the financial losses on the dialysis composite rate. I agree that EPO is being overused (and have written about it myself) by facilities not using the subcutaneous route, not giving adequate iron supplementation and targeting Hgb levels too high. I have also estimated that Medicare could save about 25% of EPO costs in ESRD if EPO were more effectively managed. The purpose of bundling dialysis reimbursement is to change this perverse system. However, you can’t have it both ways. If you’re going to bundle EPO reimbursement into the composite rate based on “clinical benefit” costs rather than actual costs, then you have to increase the dialysis portion of the composite rate to cover the procedure costs as well, which Medicare has no intention of doing. So as EPO changes from a profit center to a cost center under bundling, providers will switch to subcutaneous administration, use more IV iron and target lower Hgb levels within the FDA recommended range of 10-12 g/dL. As predicted, this will save about 25% in EPO costs. Will that result in windfall profits for dialysis providers? No way. That 25% will go to pay for the shortfall in the dialysis composite rate that has accumulated over the past 20 years as well as payment for the unfunded mandates. As far as any agreement that Fresenius might have with Amgen to raise EPO prices is concerned, I must express some skepticism if the source was Roche which was involved in bitter litigation against Amgen. That would be like automatically believing anything my ex-wife says about me.

    Jay Wish, MD
    Case Western Reserve University

  24. Dennis Cotter Says:

    Dr. Richard Hirth raises several possible mitigating factors that might permit a more equitable payment for epoetin bundled into the composite rate. Dr. Hirth dutifully points out that it is however “impossible” to predict if even these mitigating factors are sufficient to avoid over-payment. I’m not as confident as Dr. Hirth when he suggests that “utilization data from 2007-09 will reflect any changes in clinical practice arising from the well-publicized research demonstrating the risks of treating to achieve a high hematocrit level.” Due to CMS’ recalcitrance – CMS has not changed its policies to align itself with FDA recommendations – I do not expect a lowering of dose since it would undercut the price CMS will ultimately peg in the future composite rate adjustment.

    To return to the main point of the blog, I feel that CMS’ perverse incentives leading to overuse of epoetin have made historical data overstate the appropriate amount of epoetin needed to achieve a reasonable hematocrit. In lieu of using this type of information, evidence-based empirical studies – based on carefully conducted peer-reviewed methodologies – should form a rational basis for the design of a bundled epoetin payment. Specifically, real world dose-response and dose-survival relationships should be used as the basis for determining appropriate dosing ranges and reimbursement. As I pointed out in the original ‘Focus on Clinical Benefit’ thesis, we have conducted such a study that suggests a plateauing of hematocrit above a threshold dose. We are also in the process of publishing an article suggesting no survival benefits at higher epoetin doses. These findings demonstrate the clinical effectiveness (and limits) of epoetin therapy; are easily reproducible by other researchers; and are therefore transparent (not proprietary). Only after such rigorous studies, should important and expensive health care policy decisions be made and implemented at patients’ and taxpayers’ expense.

  25. Richard Hirth Says:

    Dennis Cotter raises a number of important and perplexing issues. ESAs for dialysis patients are provided under a system of tri-lateral market power. Medicare is a near single payer (monopsonist), covering about three quarters of US dialysis sessions. Amgen is a monopolist in the ESA market whose patent protection has been extended (and given the lack of a clear regulatory path for developments of generic biologics, it is unclear that their monopoly power would even be eroded by patent expiration). Following a series of mergers, the Fresenius and Davita chains have nearly obtained a duopoly position in the dialysis clinic market. Clearly, the complexity facing CMS as they try to develop a bundled payment policy for ESAs is great.
    Dr. Cotter’s main point is that using historical utilization data to guide policy development in a non-competitive market-place that is also undergoing substantial change with respect to clinical practices is fraught with danger. As the principal investigator on the contract from CMS to perform the research underlying the bundling of ESAs, I am acutely aware of these issues. However, there are several reasons to expect the problems to be mitigated. First, CMS has already undertaken and number of drug re-pricings to better reflect acquisition costs, and curb the incentives for over-utilization. Nonetheless, those acquisition costs are bargained between a monopoly seller and two dominant buyers, so any assumption that they reflect marginal cost of production (plus a reasonable return to the innovator) is necessarily questionable. Second, utilization data from 2007-09 will reflect any changes in clinical practice arising from the well-publicized research demonstrating the risks of treating to achieve a high hematocrit level. Third, the legislation provides for a bundled payment equal to 98% of the fee-for-service average. Given that about two-thirds of the new bundle was already in the prior composite rate bundle, this amounts to assuming about a 6% reduction in the utilization of the drugs, biologics, and lab tests that are being brought into the bundle.
    Will these factors be sufficient to ensure that the new bundle does not over-pay for the utilization of ESAs and other items that will be paid prospectively in 2011? Unfortunately, that is impossible to predict. Having only historical data generated under a different incentive regime is endemic to building any prospective payment system. As Cotter notes, the dialysis payment system is in the unique position of collecting data on the primary clinical outcome (anemia status) being treated biologics in question. It is crucial to continue to collect and monitor those data (and related issues such as shifts from intravenous to subcutaneous administration, which decreases the required ESA dose), and to have the flexibility to adjust the payment rates in accordance with the data.

    Richard Hirth
    Department of Health Management and Policy
    University of Michigan

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