$510M overspent on dialysis drugs: OIG

The CMS and Medicare beneficiaries could have saved an estimated $510 million on drugs used to treat end-stage renal disease in 2011 if the reimbursement rate more accurately reflected current usage of these drugs, according to a report from HHS' inspector general's office (PDF).

The report estimates about $510 million was overspent on Epogen and Aranesp, both drugs that are manufactured by Amgen. There may have been additional $19 million in savings for two iron supplements, Venofer and Ferrlecit.

The four drugs, the most commonly prescribed anemia management drugs in 2011, make up about 25% of the base rate payment made to dialysis centers for each dialysis treatment provided to each Medicare beneficiary. The CMS and Medicare beneficiaries spent about $10 billion on dialysis services that year.

The CMS used to reimburse healthcare providers with separate payments for anemia-management drugs and for dialysis treatments. A law passed in 2008 changed the payment model to a single bundled rate that included both drugs and dialysis treatments.

That prospective payment system went into effect in 2011. It was expected to reduce provider incentives that may have encouraged overuse of the drugs.

“We recognize that CMS faced numerous challenges when developing the bundled (end-stage renal disease prospective payment system),” the inspector general's office stated in the report. “CMS was required to balance the needs of highly vulnerable beneficiaries with those of the dialysis industry, in which a small number of for-profit companies own the majority of facilities.”

The base payment was established with utilization data on those drugs from 2007. However, usage of the anemia management drugs has dropped since then. Along with the changes to the payment model in 2011, the Food and Drug Administration also that year recommended more conservative dosing of Epogen and Aranesp due to concerns about increased risks of cardiovascular events.

Utilization of Epogen fell 22% from 2007 to 2011, while Aranesp usage dropped by 62%.

“During (calendar year) 2011, the average per-treatment utilization of these anemia management drugs was generally significantly less than the quantities of these drugs reflected in the base rate,” the inspector general's office said.

The report recommended the CMS adjust the bundled base rate in order to address decreased utilization of the four drugs, remind dialysis providers to ensure the accuracy of the claims, and develop new policies that track drug waste and overfill on end-stage renal disease claims.

The CMS said it agreed with the recommendations and would issue a proposed rule reducing the base rate payment for end-stage renal disease services in 2014.

Legislation passed in December requires the CMS to amend the base rate to better reflect changes in the utilization of these drugs. The Government Accountability Office released a report in December that recommended the CMS recalculate payments to dialysis providers. Its findings were similar to the inspector general's office, reporting that the CMS could have saved up to $880 million in 2011 if the payments reflected current prescribing trends.

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