Pricing & Reimbursement
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Pricing & Reimbursement 2018 First Edition Contributing Editor: Edward J. Dougherty CONTENTS Preface Edward J. Dougherty, Dentons US LLP General chapter Reimbursement of Specialty Drugs in the Hospital Inpatient Setting: Are current pathways in the USA and Europe sufficient? Stephen Hull & Claire Bezdek Gochal, Hull Associates LLC 1 Country chapters Angola Paulo Pinheiro, Francisca Paulouro & Pedro Fontes, Vieira de Almeida 16 Australia Greg Williams, Colin Loveday & Sheena McKie, Clayton Utz 23 Austria Francine Brogyányi & Bernhard Müller, DORDA Rechtsanwälte GmbH 36 Belgium Pieter Wyckmans & Julie De Keukeleire, Quinz 48 Brazil Rodrigo Augusto Oliveira Rocci, Dannemann Siemsen Advogados 61 Canada Sara Zborovski, Christopher A. Guerreiro & Ian Trimble, Norton Rose Fulbright Canada LLP 73 China Nicolas Zhu, CMS China 80 France Catherine Mateu, Armengaud Guerlain 87 Germany Dr. Ulrich Reese & Carolin Kemmner, Clifford Chance LLP 100 India Archana Sahadeva, Deepshikha Malhotra & Bitika Sharma, Singh and Singh Law Firm LLP 112 Ireland Marie Doyle-Rossi & Maree Gallagher, Covington & Burling LLP 122 Japan Chie Kasahara, Yuji Tomioka & Kirika Morita, Atsumi & Sakai 131 Mozambique Paulo Pinheiro, Francisca Paulouro & Pedro Fontes, Vieira de Almeida 138 Norway Sigrid Toft Fløystad & Per Thomas Thomassen, Advokatfirmaet Grette AS 144 Poland Agata Zalewska-Gawrych & Marta Skomorowska, Food & Pharma Legal Wawrzyniak Zalewska Radcy Prawni sp.j. 154 Portugal Paulo Pinheiro, Francisca Paulouro & Pedro Fontes, Vieira de Almeida 159 Romania Silvia Sandu, Bohâlțeanu și Asociații 170 Spain Jordi Faus & Mercè Maresma, Faus & Moliner 180 Sweden Odd Swarting & Camilla Appelgren, Calissendorff Swarting Advokatbyrå KB 192 Switzerland Dr. Oliver Künzler, Dr. Carlo Conti & Dr. Martina Braun, Wenger Plattner 202 United Kingdom Grant Castle & Brian Kelly, Covington & Burling LLP 210 USA Edward J. Dougherty, Dentons US LLP 220 Reimbursement of Specialty Drugs in the Hospital Inpatient Setting: Are Current Pathways in the USA and Europe Sufficient? Stephen Hull & Claire Bezdek Gochal Hull Associates LLC Abstract/Synopsis It has been well established that the growth of specialty pharmaceuticals, which today represent approximately 40% of the United States pharmaceutical market, has been accompanied by greater spending by hospitals on inpatient drugs. (Alliance, 2017) (NORC, 2016). In part, this shift may coincide with greater numbers of hospital and physician- administered therapies for rare and difficult-to-treat diseases. Analyses of US drug spending on inpatient drugs have found that annual spending has increased at up to twice the rate of prescription drugs in some recent years. (NORC, 2016.) But are the systems of reimbursement for inpatient care designed to address these costs? Because many hospital environments are reimbursed via bundled payment methods, innovator companies selling to hospitals must address a completely different set of challenges from prescription pharmaceuticals – in particular, previously determined, fixed payments for hospital stays, and in some international markets, capped annual budgets that limit overall spending on such products. The most common scenario of payment in hospitals, globally, is the use of Diagnosis Related Groups (DRG) to pay a predetermined amount for an entire patient discharge, which reflects the primary diagnoses and procedures provided to the patient. But DRG systems create obvious disincentives for adoption of promising new therapies and diagnostics, since hospitals often cannot cover their additional costs. Starting with the US in 2000, special pathways to address the high additive costs of new innovative drugs were developed in a number of DRG payment systems. (106th Congress, 2000.) England, Germany and France all subsequently implemented systems of add-on payment for certain inpatient innovations as part of their DRG-type systems. Drugs that achieve supplemental payment are often indicated for rare or severe diseases. Other sources have noted the variation and lack of transparency in health technology assessments (HTAs) by country, which can lead to delays in reimbursement and patient access for new drugs. (Akehurst, 2017.) Variability may even be greater for hospital-based therapies. This chapter describes the special pathways established for high-cost, specialty drug products in the United States, Germany, France, and England along with recent developments that directly impact the evidence portfolios that manufacturers need to anticipate to succeed in today’s markets. GLI – Pricing & Reimbursement 2018, First Edition 1 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Hull Associates LLC Reimbursement of Specialty Drugs in the Hospital Inpatient Setting Country Inpatient Reimbursement Mechanism for New System Innovations Germany Inpatient: G-DRG System “NUB” Innovation Clause, ZE Supplements France Inpatient: GHS System Liste en Sus, add-on payment for drugs England Inpatient/Outpatient: HRGs High Cost Drugs List, Cancer Drugs Fund United States Medicare: DRGs Medicare: New Technology Commercial: DRGs, Per Diem, DRG Payment Discounted Charges Commercial: Negotiated rates USA Reimbursement schemes in the hospital setting Medicare In the United States, the cost of Medicare inpatient care is covered by a patient’s DRG payment for each admission, in approximately 80% of hospitals. Because DRGs pay for admissions with a pre-determined, bundled payment that is calculated from prior year data, there is a time lag in the update to payments for new innovations. Hence, new innovations may struggle to gain adoption until DRG payment rates for admissions reflect the added costs of the drug. For small volume therapies used in selected patients, it is quite possible the DRG rates for large volume conditions will never adjust upward sufficiently to compensate their costs. Section 533 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) mandated that Medicare implement an add-on payment to adequately cover the costs of new innovations introduced in the hospital setting. (106th Congress, 2000.) The core concept of the US legislation was to create a bridge for promising innovations to receive add-on payment to the DRG payment, while Medicare collected data on the overall costs of admissions so it could then make a permanent assignment to an appropriately- paying DRG. While the original statute simply requires Medicare to pay additionally for qualified new drugs, it does not specify the exact criteria for eligibility. This was refined in 2001 when CMS used its authority under the statute to provide the process and criteria for new technology add-on payments (NTAP). (CMS, 2001.) CMS deliberately established a high bar for eligibility. Additional modifications to the statute were implemented under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) which amended the NTAP criteria to include the threshold described below. (Medicare Modernization Act, 2003.) The current eligibility criteria are: (1) the technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies for Medicare beneficiaries. (Centers for Medicare & Medicaid Sevices, 2018.) “New” under the CMS rules means within two to three years following market introduction, (Centers for Medicare and Medicaid Services, 2001) and a specific code has been assigned GLI – Pricing & Reimbursement 2018, First Edition 2 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Hull Associates LLC Reimbursement of Specialty Drugs in the Hospital Inpatient Setting to identify the service. (Centers for Medicare & Medicaid Sevices, 2018.) (Centers for Medicare and Medicaid Services, 2001.) Technologies that are substantially similar to older technologies are not considered new. Demonstrating inadequate payment involves a formula for the applicable DRG payment groups, based on the lesser of 75% of the standardised amount increased to reflect the difference between costs and charges, or 75% of one standard deviation beyond the geometric mean standardised charge for all cases to which the new technology is assigned. (Centers for Medicare & Medicaid Sevices, 2018.) Cost thresholds for each MS-DRG are published annually in Table 10 of each year’s IPPS (inpatient payment prospective payment system) final rule. Determining substantial clinical improvement under the Medicare definition can be somewhat challenging. Technologies are considered eligible if: • The drug offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments. • Use of the drug significantly improves clinical outcomes for a patient population as compared to currently available treatments. (Centers for Medicare and Medicaid Services, 2001.) Applicants must submit data to CMS verifying that the average charge per case exceeds the MS-DRG cost threshold. CMS makes add-on payments only for individual cases that are more costly: • The additional payment is capped at 50% of the additional cost of the technology. • Cases receive less add-on payment if the case costs less than MS-DRG payment amount plus 50% of the cost