Outpatient Immunosuppressive Drugs Under Medicare

Outpatient Immunosuppressive DrugsUnder Medicare

July 1991

OTA-H-452NTIS order #PB92-117720

Recommended Citation:U.S. Congress, Office of Technology Assessment, Outpatient Immunosuppressive DrugsUnder Medicare, OTA-H-452 (Washington, DC: U.S. Government Printing Office, Septem-ber 1991).

For sale by the U.S. Government Printing OfficeSuperintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328”

ISBN 0-16 -035315-7

Foreword

Of all the astonishing achievements of modern medicine, the ability to successfullytransplant a living organ from one human being to another is perhaps one of the most awesome.Immunosuppressive drugs are one of the spectrum of technological advances that have madeorgan transplants an everyday phenomenon. At the same time, however, transplant recipients’needs for these drugs have presented Medicare with a continuing policy dilemma, becauseMedicare does not usually pay for outpatient prescription drugs.

In 1984, the year after cyclosporine made its debut onto the health care market, OTAreported to Congress on the likely benefits of the drug for Medicare kidney transplantrecipients. The present report, requested by the Senate Committee on Finance in the wake ofthe repeal of the Medicare Catastrophic Coverage Act, examines Medicare’s currentimmunosuppressive drug coverage dilemma and the policy tradeoffs it entails for the 1990s.

OTA reports would not be possible without the assistance and input of a wide variety ofindividuals from both the public and the private sectors. OTA staff and contractors gratefullyacknowledge the contributions of the many people who provided data, clarified facts,presented views, and reviewed the drafts of this report. The final responsibility for the contentof the report rests with OTA.

. . .ill

Acknowledgments

OTA staff would like to thank the following individuals for their assistance during the preparation of this report.(These individuals do not necessarily agree or disagree with the findings and conclusions of this report.) OTA assumesfull responsibility for the report and the accuracy of its contents.

James ArmitageNorth American Autologous Bone Transplant RegistryLincoln, NERemy AronoffU.S. Health Resources and Services AdministrationRockville, MDRobert BlockBlue Cross and Blue Shield AssociationChicago, ILCarmella BocchinoNursing EconomicsWashington, DCJudith BraslowU.S. Health Resources and Services AdministrationRockville, MDBureau of Policy DevelopmentU.S. Health Care Financing AdministrationBaltimore, MDWilliam ComanorUniversity of California, Santa BarbaraSanta Barbara, CADennis CotterHealth Technology AssociationWashington, DCPaul EggersU.S. Health Care Financing AdministrationBaltimore, MDDenis GradySandoz Pharmaceuticals Corp.East Hanover, NJPhilip HeldUrban InstituteWashington, DCTom HolohanOffice of Health Technology AssessmentRockville, MDAlan HullDallas Nephrology AssociatesDallas, TXBarry KahanThe University of Texas Health Science CenterHouston, TX

Joel KallichRAND Corp.Santa Monica, CAD’Etta Waldoch KoserInternational Bone Marrow Transplant RegistryMilwaukee, WISusan LaudecinaIntergovernmental Health Policy ProjectWashington, DCJames LightWashington Hospital CenterWashington, DCShari McCulloughIMS AmericaPlymouth Meeting, PAWilliam McGivneyAmerican Medical AssociationChicago, ILJohn NewmanReston, VAJulie OstrowskyChicago, ILRichard RettigInstitute of MedicineWashington, DCWalter RutemuellerU.S. Health Care Financing AdministrationBaltimore, MDBernadette SchumakerU.S. Health Care Financing AdministrationBaltimore, MDLinda SheafferDivision of HIV ServicesRockville, MDJane SiskDobbs Ferry, NYSandy ZacharyU.S. Health Care Financing AdministrationBaltimore, MD

iv

OTA Project Staff—Outpatient Immunosuppressive Drugs Under Medicare

Roger C. Herdrnan, Assistant Director, OTAHealth and Life Sciences Division

Clyde J. Behney, Health Program Manager

Project Staff

Elaine J. Power, Project Director

Diane Burnside Murdock, Contractor/Principal Analyst

Other Contributing Staff

Sharon Y. Hamilton, Research Assistant

David P. Reeker, Congressional Fellow

Administrative Staff

Virginia Cwalina, Office Administrator

Carolyn Martin, Word Processor Specialist

Eileen Murphy, P.C. Specialist

v

ContentsPage

Chapter 1: Summary and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Chapter 2: Overview of the Transplant Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Chapter 3: Immunosuppressive Drug Therapks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Chapter 4: The Adequacy of Current Medicare Coverage of Immunosuppressive Therapy . . . . . . . . . . . . . 31

Chapter 5: Medicare Expenditures for Immunosuppressive Drug Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Appendix A: Method of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Appendix B: Medicare Payment Policy for Organ Transplant Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Appendix C: Glossary of Abbreviations and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

References . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

vi

Chapter 1

Summary and Options

Contents

INTRODUCTION ... ... ... *.. .*. ..*. ... ... ... ... ... .+*. ..** +"*" *""" *""" *""" `"** +" """e** 3THE TRANSPLANT RECIPIENT POPULATION ..+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ● ..,. 3IMMUNOSUPPRESSIVE DRUGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

THE ADEQUACY OF CURRENT MEDICARE COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6MEDICARE EXPENDITURES FOR IMMUNOSUPPRESSIVE DRUGS ..... + . . . . . . . . . . . . . 8ISSUES AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

FiguresFigure Page

1. Organ Transplants: Distribution by Type of Organ and Medicare Coverage, 1988 ..........42. Future Medicare Coverage for Recipients of Medicine-Covered Transplants ...........,.. 5

TablesTable Page

1. Kidney Transplant Patients’ Risk of Out-of-Pocket Liabilities for OutpatientImmunosuppressive Drugs by Insurance Status . . . . . . . . . . . . . . . . . . . . . .+ . . . . . . .++”+”’”’””” 7

2. Factors Influencing Future Medicare Expenditures for Immunosuppressive Drug Therapy . . 83. Medicare Policy Options for Outpatient Immunosuppressive Drugs . . . . . ,. . . . . . . . . . . . ● ● 94. Estimated Number of Persons for Whom Medicare Would Have Paid for

Immunosuppressive Drug Therapy Based on Selected Coverage Policy Options,1988-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . ..,....+, 11

Chapter 1

Summary and Options

INTRODUCTIONDrugs that act to suppress the body’s normal

immune reactions are a critical medical therapy forpersons who have received organ transplants. Mostsuch individuals must continue imrnunosuppressivedrug therapy throughout their lives to prevent organrejection.

Medicare, the Nation’s health insurance programfor the elderly and disabled, does not usually coveroutpatient prescription drugs. Congress granted aspecial exception to this rule in 19861 to ensure thatMedicare transplant recipients had at least initialaccess to outpatient immunosuppressive therapy. Atpresent, however, Medicare’s coverage of this ther-apy is limited to 1 year, starting upon the patient’sdischarge from the hospital after a Medicare-covered transplant procedure.

In March 1990, the Senate Committee on Financeasked the Office of Technology Assessment (OTA)to examine Medicare’s coverage and payment poli-cies for outpatient immunosuppressive drug ther-apy. 2 In response to that request, this report ad-dresses two basic questions. First, do Medicarebeneficiaries have adequate access to outpatientimmunosuppressive drugs under existing coverageand payment rules? Second, how might Medicarecoverage and payment for immunosuppressive drugsbe changed, and what are the likely implications ofthose changes?

To provide a framework for discussing possibleoptions for changing Medicare immunosuppressivedrug policy, the report presents background on foursubjects. Chapter 2 describes the patient populationusing immunosuppressive drugs-i. e., transplantrecipients with a functioning graft (implanted organ).Chapter 3 describes the immunosuppressive drugsused by transplant recipients and the variation thatexists in drug protocols and their costs. Chapter 4examines the adequacy of current coverage policyfor immunosuppressive drugs used by Medicarebeneficiaries. Chapter 5 discusses national and

Medicare expenditures for outpatient immunosupp-ressive drugs and some factors that might affectfuture expenditures.

The remainder of this chapter summarizes t h ereport and discusses the advantages and disadvan-tages of several possible approaches to changingMedicare coverage and payment for immunosup-pressive drugs,

THE TRANSPLANT RECIPIENTPOPULATION

The demand for outpatient post-transplant im-munosuppressive drugs depends heavily on thenumber of eligible organ transplant recipients witha successful, functioning graft. Medicare restricts itsorgan transplant coverage to certain organs andcertain categories of patients. Presently, Medicarecovers heart, kidney, liver, and bone marrow trans-plants (for beneficiaries with certain medical condi-tions). Medicare does not cover heart/lung, lung, orpancreas transplants, although these transplants aresometimes covered by other insurers.

In 1988, the most recent year for which compre-hensive data are available, nearly 15,000 organtransplants were performed in the United States.3

Kidney transplants were the most frequently per-formed, accounting for 62 percent of the U.S. total(figure 1). Medicare covered an overwhelmingmajority (nearly 90 percent) of those kidney trans-plants, compared with only 7 percent of hearttransplants, 3 percent of allogeneic bone marrowtransplants, and less than 1 percent of liver trans-plants. Nonetheless, because kidneys are the mostcommonly performed transplants, Medicare covereda majority (57 percent) of the Nation’s transplantprocedures overall in 1988.

The percentage of transplant recipients coveredby Medicare is high because of Medicare’s End-Stage Renal Disease (ESRD) entitlement program,which covers nearly all of the U.S. kidney transplantrecipients for 3 years following the day of surgery

1 The statutory exception permitting short-term coverage of these drugs took effect on Jan.. 1, 1987 (Public Law 99-509).2The committee requested an axamination of coverage and payment for home intravenous drug therapy in the same letter. The OTA report on that

topic will be published separately.3 Includes all organ transplants and all allogeneic bone marrow t r a n s p l a n t s .

–3–

4 ● outpatient Immunosuppressive Drugs UnderMedicare

Figure l—Organ Transplants: Distribution by Type of Organ andMedicare Coverage, 1988

Bone

Kidney

mar row

1

I

0.2%Heart 11% Heart/lung 0.5%

14,706 transplants

1

Medicare 89%

Other payer 11%

9,123 kidney transplants

Medic

Other

are 3%

payer 97%

6,583 other organ transplants

SOURCE: Office of Technology Assessment, 1991. Based on information provided by U.S. Department of Health andHuman Services, Public Health Service, Health Resources and Services Administration, Division of OrganTransplantation; and the Prospective Payment Assessment Commission.

(figure 2).4 Whereas other persons must already beentitled to Medicare (by being elderly or disabled) inorder to receive a Medicare-covered transplant, anypatient diagnosed with end-stage renal failure whorequires dialysis or a kidney transplant may beentitled to Medicare as a result of this medical need.Although about half of kidney transplant recipientswith a functioning graft lose Medicare eligibilityafter 3 years, the remaining 50 percent continue toreceive Medicare benefits past the 3-year limit dueto their age or continuing disability (17).5

The total number of organ transplants performedper year has been increasing. The average annualrate of increase in kidney transplants has been only5 percent in recent years6 due to the limited supplyof kidney organs available for transplant. Theaverage annual growth rates for other organ trans-plants have been much higher. The number of livertransplants, for example, has been increasing bynearly 50 percent per year. The supply of donated

organs is still not sufficient to meet the needs ofthose waiting for these transplants, however. Eventhe waiting lists may understate actual medical need;some physicians believe that the number of qualifiedpatients who are not represented on the waiting listsis as large as the number who are (25).

The number and success of transplant procedureshave increased over the past decade, although graftsurvival rates vary markedly by the type of organ.For lung and heart/lung transplants, l-year graftsurvival rates are still less than 60 percent (5).7

Kidney graft survival rates are much higher, withl-and 5-year cadaveric kidney survival rates of 78and 52 percent, respectively. Living-donor kidneytransplants are even more successful (5). Overall, ofthe nearly 15,000 individuals who received organtransplants in 1988, OTA estimates that approximately11,000 (73 percent) were living in 1989 with afunctioning graft. Almost all of these patients wouldhave been on immunosuppressive drug therapy.

Conversely, Medicare covers only a small percentage of nonrenal transplants because few transplant recipients are elderly (5).5 In fact, advocates argue that patients strive for continued disability status to assure insurance coverage of ongoing outpatient care (9).

6 Based on 1984--89 data.7 Survival rates are based on 1989 data.

Chapter Summary and Options ● 5

Figure 2—Future Medicare Coverage for Recipients of Medicare-Covered Transplants

3 years

I 1 year1

Kidneytransplantrecipients

Recipientsof other

organs

Recipient not eligible Recipient eligiblefor Medicare for Medicare

SOURCE: Office of Technology Assessment, 1991.

IMMUNOSUPPRESSIVE DRUGS

Medicare’s policy is to cover all drug products foroutpatient self-administration that are approved bythe U.S. Food and Drug Administration (FDA) andhave a label indicating use for immunosuppressivetherapy. At present, only four drugs are FDA-approved for post-transplant immunosuppression:azathioprine (Imuran), cyclosporine (Sandimmune),antithymocyte globulin (Atgam), and muromonabCD3 (Orthoclone OKT-3). Each of these drugs ismade by only a single manufacturer. In addition,Medicare covers adjunct prescription drugs (e.g.,prednisone) when they are used as part of theimmunosuppressive therapeutic regimen (56).

Early approaches to chemical immunosuppres-sion relied mainly on a combination of azathioprineand prednisone. With cyclosporine’s introductioninto widespread use in 1984, however, a variety ofnew drug protocols followed. At present, nearly allare based on cyclosporine; 90 percent of transplantrecipients receive this drug as the primary immuno-suppressive agent (5).

-

—

—

Medicare coversimmunosuppressive drugs

Cyclosporine has improved graft survival ratesand decreased the number of infection-related com-plications, the average length of hospital stay, andthe number of organ rejection episodes comparedwith early approaches (7,43). However, the costs ofprotocols using this drug are dramatically higherthan the cost of traditional therapies. For example,the reported cost of outpatient therapy using onlyprednisone and azathioprine was $2 per day in 1988,compared with reported average costs for cy-closporine therapies ranging from $9 to $23 per day(6,7). The average annual costs of cyclosporine-based protocols range from an estimated $4,000 to$6,000 per year (7).8 Costs for immunosuppressioncan vary substantially across recipients, becausesome recipients still receive the traditional lesscostly drug protocols, and because the cost oftherapy for patients on cyclosporine-based protocolsoften decreases as drug dosages are reduced overtime (7,28). Future per-patient costs may increase ordecrease as new drugs (e.g., FK-506) enter themarket. Costs may also change when Sandoz’spatent for cyclosporine expires in 1995.

8 These costs include he costs of other drugs used in the protocols.

6 ● Outpatient Immunosuppressive Drugs Under Medicare

THE ADEQUACY OF CURRENTMEDICARE COVERAGE

Since January 1, 1987, Medicare has coveredoutpatient immunosuppressive drugs. Drug cover-age is for 1 year from the date of a patient’s dischargefrom the hospital after a Medicare-covered kidney,heart, liver, or bone marrow transplant (see figure 2)(Public Law 99-509).

Medicare reimburses for these drugs on a reason-able charge basis when the drugs are dispensed bya retail pharmacy, physician, or other supplier, andon the basis of reasonable costs when the drugs aredispensed by a hospital pharmacy.9 In both cases, thebeneficiary is subject to the Part B deductible of$100, a coinsurance amount (20 percent of thecharge lO), and (if the drugs are obtained from anonhospital supplier) any additional amount abovethe Medicare-allowed charge.

In addition to the drugs themselves, certainservices related to imrnunosuppressive therapy mayalso be billed to Medicare. Physicians may bill forpatient visits during which they provide only therapymanagement services, and if the management visittakes place in a hospital outpatient setting thehospital could submit a bill for this encounter aswell. The extent of such billing in practice, and theamount of patient coinsurance obligations thataccompany it, are unknown.

Expanding Medicare’s coverage policy will havethe most impact on access to therapy if a significantnumber of beneficiaries do not already have ade-quate coverage of outpatient immunosuppressivesthrough other payment sources. Under current rules,a beneficiary with no health care coverage other thanMedicare must pay the 20 percent coinsurance forthe drugs during his or her first year on outpatientimmunosuppressives, or between roughly $570 and$850 (in 1988 dollars) (see ch. 4). After the l-yeardrug coverage period ends, this beneficiary wouldpay the full cost of the treatment, or roughly $4,000to $6,000 per year. (The beneficiary might also bepurchasing additional drugs uncovered by Medicare,such as antifungal or antiviral drugs used to protect

the transplanted organ, or drugs to treat underlyingdiabetes or hypertension.)

Beneficiaries with other third-party coverage inaddition to Medicare have some protections fromthese costs. During the first year of outpatientimmunosuppression, when Medicare covers theimmunosuppressive drugs, many beneficiaries haveprivate insurance or Medicaid that covers thebeneficiaries 20 percent coinsurance liability. There-after, however, Medicare drug coverage ends. Theother insurer’s policies then apply, and transplantrecipients are obligated to pay that insurer’s coinsur-ance and any other liabilities (e.g., deductibles).

Beneficiaries whose private insurance is primarymust pay some coinsurance during the frost year.Medicare requires that private insurers coveringESRD beneficiaries be the primary payer for the frost18 months these beneficiaries are on Medicare. Inother words, even though an ESRD patient is entitledto Medicare coverage, Medicare will pay for coveredservices provided to these beneficiaries only afterany existing private insurance policies have paid.About half of ESRD kidney transplant recipientsundergo the transplant during the frost year ofMedicare eligibility (17). Consequently, for theserecipients the private insurer is primary during atleast part of the frost year on outpatient immuno-suppressives, and the beneficiary must pay thatinsurer’s required coinsurance during that time.

Thus, the degree to which Medicare transplantrecipients are at risk of high out-of-pocket expendi-tures for imnmnosuppressive drugs depends heavilyon whether they have additional third-party cover-age. As shown in table 1, a majority of Medicaretransplant recipients (approximately 57 to 87 per-cent, or roughly 4,700 to 7,200 recipients in 198811)have third-party coverage through private insurers orState Medicaid programs that pay for outpatientimmunosuppressive therapy after Medicare drugcoverage ends (see ch. 4). As long as they remaineligible for Medicare, these patients are at low tomedium risk of significant out-of-pocket expenses,depending primarily on whether they are liable forcopayments. For most of these patients, the major

9 See app. C for definitions of reasonable charges and reasonable costs.10 The relevant charge is the Medicare-allowed charge for nonhospital suppliers and the submitted charge for hospital pharmacies. Although hospital

pharmacies are reimbursed by Medicare on the basis of their costs, the beneficiaries’ coinsurance is calculated as 20 percent of the submitted chargeof these pharmacies.

11 The year 1988 is the most recent for which comprehensive transplant data are available. Projections for 1992 and beyond would entail a somewhathigher number of individuals, since the number of transplants per year has been increasing.

Chapter l-Summary and Options ● 7

Table l—Kidney Transplant Patients’ Risk of Out-of-Pocket Liabilities for Outpatient ImmunosuppressiveDrugs by Insurance Status

Percentage oftotal kidney

Post-transplant period

Insurance status transplants Lessthan 1 yeara 1-3 yearsb More than 3 years

Medicare/Medicaidc 20%

Medicare/private 37 to 37 to 67%insurance

Beneficiary obligations/degree of financial risk

No coinsurance obligations/generally minimal out-of-pocket expenses(Low risk group)

if Medicare prirnary,d privatecoverage wraps around-nocoinsurance obligations(Low risk group)If Medicare secondary,generally third-partycoverage of drug benefit-coinsurance obligations(Medium risk group)

Same as iess than 1 year(Low risk group)

Same as iess than 1 yearbut Medicare is primarypayer for mostbeneficiaries during thisperiod(Low to medium riskgroup)

Same as iess than 1 year(Low risk group)

Coinsurance obligations oriiabie for premium or fulicost of drug(Medium to high riskgroup)

Subtotai 57 to 87%Medicare only 13 to 4370 Premium and coinsurance

obligations(Medium risk group)

Liable for fuii cost of drug(High risk group)

Same as 1 to 3 years(High risk group)

Total 100%a Medicare coverage of outpatient immunosuppressive drugs ends 1 year after hospital discharge following transplant surgery.b Medicare End Stage Renal Disease (ESRD) eligibility ends 3 years after the date of transplant surgery (see figure 1).c Some Medicaid programs have dollar limits and limits on number of scripts, which would affect adequacy of coverage of outpatient immunosuppresive drugsfor these recipients.

d Medicare is the mandatory seondary payer for 18 months after an ESRD beneficiary becomes eligible for the program. About half of kidney transplantrecipients undergo the procedure within their first year of eligibility. Thus, most recipients with private insurance have Medicare as secondary payer for at leastpart of their first post-transplant year. Few, however, have primary private insurance beyond that year.

SOURCE: Office of Technology Assessment, 1991, based on data from the Health Care Financing Administration (17) and Battelle Human Affairs ResearchCenters (7).

effect of expanding Medicare’s coverage of outpa-tient immunosuppressives will be to shift financingfrom other sources to Medicare.

The remaining Medicare transplant recipients(between 13 and 43 percent, or approximately 1,000to 3,600 recipients in 1988) have no insurance otherthan Medicare. These individuals are at high risk offinancial strain, because they must usually pay thefull cost of the drug after Medicare’s l-year coverageperiod ends. Extending Medicare’s coverage wouldalleviate most of the financial burden presentlyexperienced by these patients, although they wouldstill be obligated for the 20 percent coinsurance forthe drugs.

Also financially vulnerable are those kidneytransplant recipients who are neither elderly nordisabled and who thus become ineligible for Medi-care 3 years after their transplant. Some of thesepatients are eligible for Medicaid. Others havecontinuing private insurance that covers the drugs,

although these individuals are vulnerable to losinginsurance if they change jobs. For most individualswho have no private insurance and are ineligible forMedicaid, however, the loss of Medicare eligibilitymeans the loss of all health care coverage. Theserecipients, as well as those who lose their privateinsurance due to job changes or other factors, maybeunable to obtain new insurance due to their preex-isting health conditions. If they are able to purchaseinsurance, the premium cost may be very high.

Medicare’s outpatient drug coverage policy can-not readily ease the financial burden of this group,since these individuals are no longer Medicarebeneficiaries. Like other persons with recurrent orchronic health conditions, transplant recipients mayhave great difficulty obtaining insurance to covertheir anticipated high future health care costs. Thesolution to this problem may lie in broader healthcare reforms than can be addressed by Medicarealone.

8 . Outpatient Immunosuppressive Drugs Under Medicare

Table 2—Factors Influencing Future Medicare Expenditures for Immunosuppressive Drug Therapy

Affects Medicare expenditures under:

Current Coverage Likely effects onpolicy expansion Medicare expenditures

Factors influencing the number of beneficiaries and demandfor drugs:

Increase in nonrenal transplants and Medicare coverage ofthese procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J J ‘r

Coverage policy changes by other third-party payers. . . . . . . . . . . . J T or JChange in mix of patients receiving transplants. . . . . . . . . . . . . . . . . J 1’ or—

Limited supply of living organs to match existing and future demandsfor transplants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J J —

Change in provider prescribing and patient demand if coverage ofimmunosuppressives is expanded. . . . . . . . . . . . . . . . . . . . . . . . . J T

Factors influencing cost of drug and overaii expenditures:

Development of new immunosuppressive drug productsand protocols. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \ J T or J

Expiration of cydosporine patent in 1995. . . . . . . . . . . . . . . . . . . . . .

Expanded prophylactic use of OKT-3. . . . . . . . . . . . . . . . . . . . . . . . .J ‘T or -J

J ‘rIncreased patient compliance with extended Medicare drug coverage

resulting in fewer organ failures and hospitalizations. . . . . . . . . . . J LAdditional administrative costs for monitoring drug coverage. . . . . . J TPressure to expand coverage to outpatient nonimmunosuppressive

prescription drugs required by transplant recipients. . . . . . . . . . . . J TKEY: ~ = increase expenditures; ~ = decrease expenditures; — _ no significant effect.


MEDICARE EXPENDITURES FORIMMUNOSUPPRESSIVE DRUGS

Medicare does not currently play a major role infinancing post-transplant immunosuppressive ther-apy. OTA found that at present, Medicare pays forimmunosuppressive drugs for only about 19 percentof the functioning graft recipients with Medicarecoverage and for only about 13 percent of all U.S.patients with functioning grafts. Furthermore, sincethe Medicare program pays for at most 80 percent ofthe cost of the drugs it covers, actual programoutlays are an even smaller proportion of total U.S.drug outlay than these figures would imply. OTAestimates that the Medicare program currentlyspends roughly $20 to $30 million per year onoutpatient immunosuppressive drugs, compared withtotal annual U.S. spending (including out-of-pocketexpenses) of approximately $185 to $280 million(see ch. 5).

This small proportion is due to two factors. Firstis Medicare’s l-year limit on coverage of outpatient

immunosuppressives. Second, by law Medicare isthe secondary payer for the first 18 months of apatient’s eligibility under the ESRD program, whichcan overlap with a recipient’s first year on outpatientimmunosuppressives. Kidney transplants accountfor more than 95 percent of Medicare-coveredtransplantations, and approximately 37 to 67 percentof Medicare-covered kidney transplant recipientshave private insurance during this 18-month period(7,17).

Over time, factors such as FDA approval of newproducts, generic alternatives to existing drugs, andchanges in how immunosuppressive drugs are usedcould result in either declining or increasing costs ofimmunosuppressive therapy. Such changes couldinfluence Medicare outlays in the future even if nochange in policy is made. Other changes in thenumber of eligible beneficiaries and the cost ofimmunosuppressive drugs could come about as aresult of system responses to any expansion inMedicare drug coverage. The factors influencingthese changes and their likely effects on Medicareexpenditures aressummarized in table 2.

Chapter Summary and Options ● 9

ISSUES AND OPTIONS

Even without any changes in Medicare policy, itappears that overall coverage through private andpublic insurers is sufficient to ensure that manyMedicare beneficiaries receive outpatient immuno-suppressive drug therapy for the first few years. Asubstantial minority, however are at high risk ofinadequate financial access, because they have onlyMedicare insurance and may suffer financial hard-ship in obtaining drugs after Medicare’s l-year drugcoverage period ends. In addition, in the long term,many other Medicare beneficiaries who had addi-tional coverage at one time may find it difficult toafford immunosuppressive drugs.

Congress could choose not to change Medicarepolicies regarding outpatient immunosuppressivedrug therapy. Alternatively, Congress could changeeither coverage or payment policy in any of anumber of ways (table 3). The following sectiondiscusses seven options, which could be imple-mented either independently or in combination.

Option 1: Extend the current Medicare limiton outpatient immunosuppressives past oneyear.

Option IA: Extend the limit by a specified numberof years (e.g., to cover up to 3 years afterhospital discharge).

Option IB: Eliminate the limit completely.

There are two basic goals of coverage expansionof outpatient immunosuppressive drugs: 1) ensuringaccessibility to outpatient immunosuppressive drugswith adequate financial protection to the beneficiary,and 2) assuring equal access to transplantation. Forthose Medicare patients without additional coverage(an estimated 13 to 43 percent), financial inability toobtain immunosuppressive drugs may sometimeslead to failure of the transplanted organ and a returnto dialysis (for kidney transplant recipients) or death(for recipients of other organs). Expanding Medicarecoverage for immunosuppressive drugs would easethe financial burden for those beneficiaries withinadequate insurance coverage and might improvepatient adherence to therapy. A secondary effectmight be that of enhancing “equitable access totransplants, by reducing the chance that a patientwill forgo the opportunity for a transplant (or not bereferred for one) due to financial concerns.

Table 3—Medicare Policy Options for OutpatientImmunosuppressive Drugs

Coverage options:Option 1: Extend or eliminate the current l-year limit on

outpatient immunosuppressives for Medicarebeneficiaries with a Medicare-covered transplant.

Option 2: Extend coverage for outpatient immunosuppressivedrugs to Medicare beneficiaries whose transplant wasnot covered by Medicare.

Option 3: If coverage is extended, include preexisting as well asnew transplant recipients with functioning grafts.

Payment options:Option 4: Apply Medicare secondary payer requirements to

outpatient immunosuppressive drug benefits.Option 5: Require nonhospital pharmacies to accept assignment

for outpatient immunosuppressive drugs sold toMedicare beneficiaries.

Option 6: Reduce or eliminate the coinsurance requirement foroutpatient immunosuppressive drugs.

Option 7: Change the method of paying for outpatientimmunosuppressive drugs.


Extending the l-year limit by a specified numberof years addresses these concerns in a limited way.Eliminating the l-year limit may be more effective,since it reduces the possibility of continued exten-sive out-of-pocket expenses for immunosuppres-sive for all Medicare-covered transplant recipients.Moreover, eliminating the limit may more effec-tively counteract any bias that exists in patientselection due to inability to pay for irnmunosuppres-sives, thus further enhancing the equity of access totransplants. Expanding immunosuppressive cover-age will not have much effect on the actual numberof transplants performed, because the number oftransplants is constrained by the number of suitableorgans available.

Coverage expansion will almost certainly raiseMedicare expenditures, although there will be somesmall offsetting savings from averted hospitaliza-tions and returns to dialysis. The increase inexpenditures would be less with time-limited thanwith indefinite coverage. The benefits, however,would be much less as well.

The overall shift in financing from other sourcesto Medicare that would occur if coverage wereexpanded is a substantial and legitimate concern. Anestimated 57 to 87 percent of Medicare transplantrecipients have some kind of public or privateinsurance in addition to Medicare that currently paysfor their immunosuppressive drugs.

Even with unlimited coverage expansion underthis option, approximately 50 percent of kidney


transplant recipients would still lose Medicare-based immunosuppressive drug coverage after 3years, when their ESRD-linked Medicare entitle-ment expires (17). For these patients, an additionalpolicy issue is whether they should continue to beeligible for Medicare Part B in order to receiveMedicare coverage of irnmunosuppressives. Manyof these patients may find it difficult to purchasedrugs (or insurance coverage) after losing Medicareeligibility. Permitting nondisabled transplant recipi-ents to retain Medicare eligibility would afford theseindividuals much greater protection. However, itwould also confer benefits not available to otherchronically ill individuals.

Option 2: Extend coverage for outpatientimmunosuppressive drugs to Medicare bene-ficiaries whose transplant was not coveredby Medicare.

At present, only individuals whose organ trans-plant procedure was covered by Medicare areeligible for outpatient drug coverage. Some otherorgan transplant recipients, however, are also Medi-care beneficiaries. This group of patients encom-passes recipients of pancreas, heart/lung, lung, andsome heart, liver, and bone marrow transplants whodid not meet Medicare’s conditions for coverage.Although the exact number of Medicare bene-ficiaries who fit this description is unknown, it isbelieved to be small (17).

Extending outpatient immunosuppressive drugcoverage for the first time to these recipients wouldunquestionably raise Medicare expenditures slightly.However, it could further assure protection againstthe possibility of incurring substantial out-of-pocketexpenses for all Medicare transplant recipientsregardless of type of transplant.

Option 3: If coverage is extended past thecurrent limit, include preexisting as well asnew transplant recipients.

Under current policy, Medicare pays for outpa-tient immunosuppressive drugs for approximately6,000 firstt-year transplant patients per year (see ch.4). Any contemplated coverage expansion could belimited to Medicare-covered transplant recipients

who receive their graft in or after the year in whichthe new coverage policy is made effective.

Alternatively, a new coverage extension couldpertain to all existing Medicare-covered transplantrecipients with a functioning graft as well. OTAestimates that the cumulative total of living functional-graft recipients in the United States was more than46,000 persons in 1988, of which about two-thirdshad Medicare coverage (see ch. 2). The total numberof Medicare-covered transplant recipients was over31,000 persons in 1988 and is estimated to be over36,000 in 1991.

“Grandfathering in” all Medicare beneficiarieswith functioning grafts would assure the samecoverage policy and similar financial protection toMedicare transplant recipients regardless of whenthe transplant was performed. It would also increasethe initial pool of recipients requiring Medicarepayment for irnmunosuppressives more than five-fold, resulting in corresponding increases to Medi-care expenditures (table 4). If a grandfather clausewere combined with elimination of the currentl-year limit on coverage, Medicare would cover andpay for immunosuppressive drugs for approximately67 percent of all U.S. transplant recipients with afunctioning graft, compared with the current esti-mate of 13 percent. Medicare would then have aleading role in financing post-transplant immuno-suppressive therapy. Total Medicare-related expen-ditures, including beneficiary copayments, could beexpected to increase from an estimated $24 to $36million to between $125 and $185 million (in 1988dollars) .12

Option 4: Apply Medicare secondary payerrequirements to outpatient immunosup-pressive drug benefits.

Under the ESRD program, having Medicare assecondary payer is a mandatory requirement for thefrost 18 months of eligibility .13 Medicare pays forcovered services provided to ESRD beneficiaries inthis period only after any existing private insurerpays. Private insurers are not permitted to discrimi-nate against ESRD beneficiaries, so they may notdisenroll beneficiaries or arbitrarily change theirbenefits during this time. Approximately 37 to 67

12 This increase is equivalent to an increase of less than 0.5 percent of total Medicare Part B dollars.

13 The mandaroty requirement that Medicare be the secondary payer applies to disabled and ESRD beneficiaries but not to the working-aged Medicare

population (many of whom have private employer-based insurance). For the latter group, Medicare is usually the primary payer regardless of any otherinsurance coverage, although the beneficiary can designate the private insurer as primary if he or she so chooses (37).

Chapter Summary and Options . 11

Table 4-Estimated Number of Persons for WhomMedicare Would Have Paid for ImmunosuppressiveDrug Therapy Based on Selected Coverage Policy

Options j 1988-90

Estimated number of Personsa

Policy option 1988 1989 1990

Retain current 1-year coveragelimit for drugsb. . . . . . . . . . . . . 6,000 5,800 6,100

Extend/eliminate limit(option 1) . . . . . . . . . . . . . . . . . 6,000 12,100 19,000

Extend/eliminate Iimit and cover allMedicare-covered successfulgrafts (options 1 and 3). . . . . . 31,500 35,400 40,300

a Estimated number includes only Medicare beneficiaries who have aMedicare-covered transplant procedure and for whom Medicare is theprimary payer. Estimates have been rounded to nearest 100 to reflect thedegree of uncertainty in these numbers.

b Numbers are based on 1987-89 Medicare transplant recipients withfunctioning grafts in 1989-90, respectively. The number of kidney trans-plants, while fairly constant in recent years, fell slightly from 1987 to 1988,explaining the decline in functioning graft patients shown in 1989.

SOURCE: Office of Technology Assessment, 1991. Estimates calculatedby OTA based on available information from the Health CareFinancing Administration and the Health Resources and Serv-ices Administration.

percent of Medicare kidney transplant recipientshave private coverage during this time (7,17). If thel-year coverage limit for immunosuppressive drugsis eliminated, extending the mandatory secondarypayer requirement to all kidney transplant recipientsspecific to immunosuppressive drug coverage wouldprevent a shift of financing from other sources toMedicare for those patients with additional cover-age.

This option could apply to all beneficiaries, notjust kidney transplant recipients. However, there isno precedent for expanding mandatory secondarypayer policies to a specific service for the generalMedicare population. Since Medicare would still bethe primary payer for all other services provided tothe population, this provision might be difficult toadminister. This option is also only effective to theextent that private insurers can be prevented fromchanging their enrollment and benefit packages. Atpresent, such protection exists in law only for ESRDbeneficiaries.

Option 5: Require nonhospital pharmaciesand other suppliers to accept assignment foroutpatient immunosuppressive drugs.

Individuals requiring outpatient immunosuppres-sive drugs can obtain these drugs from eitherhospital pharmacies or from nonhospital pharma-

cies, physicians, and other sources. Hospital phar-macies serving Medicare patients must accept theMedicare cost-based payment plus the beneficiarycopayment (coinsurance and any applicable deduct-ible) as payment in full for the drug. Nonhospitalsuppliers are not subject to this constraint and maybill beneficiaries more than the Medicare-allowedcharge (i.e., more than the Medicare payment plusbeneficiary copayment).

Congress could mandate that all nonhospitalsuppliers accept assignment for post-transplant out-patient irnmunosuppressive drugs. These supplierswould then be required to agree to accept Medicare’sallowed charge as payment in full in order todispense these drugs to Medicare beneficiaries. Thisoption would restrict providers’ behavior in ex-change for reducing beneficiaries’ financial lia-bilities. The exact extent of protection that would beafforded by this option is unclear; it depends on theextent to which patients purchase their drugs fromnonhospital sources.

Option 6: Reduce or eliminate the coinsurancerequirement for outpatient immunosuppres-sive drugs.

Expanding coverage by eliminating the l-yearlimit does not protect the beneficiary from coinsur-ance obligations. Under current policy, the patientmust pay a coinsurance amount equal to 20 percentof reasonable charges (if the drug is dispensed by anonhospital pharmacy or supplier) or 20 percent ofthe actual submitted charge (if dispensed by ahospital pharmacy). OTA estimates that averagecoinsurance obligations were between roughly $570and $850 per year in 1988. Payment policy could bechanged to recognize a higher proportion (up to 100percent) of reasonable charges, thus reducing oreliminating the coinsurance liability. This changecould be made regardless of any other changes incoverage or payment policy.

The unquestionable benefit of eliminating co-insurance requirements for outpatient irnrnunosup-pressives is that it would ease the financial obliga-tions of beneficiaries. However, this benefit wouldbe achieved at the expense of Medicare. Theelimination of coinsurance might increase patientadherence to prescribed drug regimens and preventsome organ rejection episodes, with some associatedMedicare savings, but the magnitude of the savingsis probably small.

292-878 - 91 - 2


Changing coinsurance requirements for outpa-tient immunosuppressive drugs raise some issues ofequitable treatment of other Medicare beneficiaries,who also must pay coinsurance for the benefits theyreceive. For example, implementing this optioncould result in pressure to reduce coinsuranceobligations for dialysis visits, since coinsuranceexpenses are higher for that treatment than foroutpatient drug therapy.

The most comprehensive alternative for reducingbeneficiary out-of-pocket costs would be a combina-tion of three options: eliminating the current l-yearcoverage limit, requiring mandatory assignment,and eliminating the coinsurance requirement. Thisapproach would offer beneficiaries almost completeprotection from the high cost of irnmunosuppressivedrugs. (Increases to Medicare outlays could beconstrained slightly by mandating Medicare assecondary payer.) However, this approach wouldraise particularly strong equity issues, since it wouldafford transplant recipients a degree of financialprotection unavailable to any other Medicare benefi-ciaries.

Option 7: Change the method of paying foroutpatient immunosuppressive drugs.

At present under the outpatient immunosuppres-sive drug benefit, the drug is paid separately from thephysician visits relating to therapy management andfrom any associated hospital outpatient visit. Oneeventual alternative might be to bundle the variouscovered services together for the purposes of pay-ment. If, as one study suggests, outpatient immunos-uppressive drugs are obtained more often fromhospital outpatient pharmacies than from retailpharmacies (7), then a global fee with the profes-sional and technical components included might be

practical. Two disadvantages with moving imme-diately to global fees for immunosuppressive drugtherapy are the difficulty of paying consistently forhospital- and nonhospital-based services and thepotential incompatibility with any other futurechanges in payment for ambulatory services.

Another payment approach might be to pay forimmunosuppressive drugs according to a fee sched-ule, under which the dispenser would be paid asingle price per given amount of drug, regardless ofthe type of pharmacy from which the drug wasobtained. At present, an immunosuppressive ob-tained from a hospital pharmacy is reimbursed on adifferent basis than one dispensed by a nonhospitalpharmacy or supplier. Under this option, the actualamount paid could be based on a fee schedule thatapplied uniformly across different suppliers andaccounted for factors such as drug dosage level andwhether the drug was a generic or a sole sourceproduct.

Advantages to a fee schedule for immunosuppres-sive from Medicare’s perspective are that theprogram could better control its expenditures andcould encourage or discourage the use of particulardrugs, if desired, by raising or lowering paymentrates. A fee schedule might also confer benefits onbeneficiaries by making their payments lower andmore predictable, particularly if this option wereimplemented in tandem with mandatory assignment.Disadvantages to a fee schedule include the potentialfor establishing rates too low (discouraging techno-logical innovation or reducing beneficiary access) ortoo high (resulting in unnecessary expenditures),and the administrative burden of establishing appro-priate rates and updating them frequently.

Chapter 2

Overview of theTransplant Population

ContentsPage

TRANSPLANT COVERAGE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + . . . 15Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .+. . . . . . . . . . . . 15Other Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. 15

NUMBER OF TRANSPLANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................17TRANSPLANT RECIPIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. ... 18

Characteristics . .. . .. . .. 18Number of Functioning Graft Patients . . . . . . . . . . . . . . . . . . .. . .. . .. .. 18

TablesTable Page

5. Medicare Coverage Policy for Selected Transplant Procedures... . . . . . . . . . . . . . . . . . . . . . 166. Percentage of Medicaid programs and private Insurance Plans Covering Transplants . . . . . 167. Number of Transplants Performed: U.S. Total, Medicine-Covered,

and Medicaid-Covered, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 178. Number of U.S. Transplants Performed and percent Change, 1984-89 ... .... . . . . . . . 189. Characteristics of Transplant Recipients, 1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

10. Estimated Number of U.S. Transplant Recipients With a Functioning Graft andWith Medicare Coverage, 1988 .. .. .. .. .. .. .. +. ..+. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chapter 2

Overview of the Transplant Population

The demand for outpatient post-transplant im-munosuppressive drugs depends heavily on thenumber of people receiving organ transplants. SinceJanuary 1987, Medicare has covered these drugs forpatients who received a Medicare-covered trans-plant (Public Law 99-509). This chapter provides anoverview of existing coverage policy for transplants,the number of U.S. and Medicare-covered transplantrecipients, and transplant patient characteristics. Itthen presents estimates of the number of livingtransplant patients with a functioning graft-anessential number in determining how many personsrequire immunosuppressives.

TRANSPLANT COVERAGEPOLICY

Medicare

Medicare restricts its coverage of transplants tocertain organs and, to some degree, certain catego-ries of patients. At present, Medicare covers heart,kidney, liver, and bone marrow transplants (table 5)(54). 1 2 Liver and bone marrow transplants arerestricted to Medicare beneficiaries with certainmedical conditions. At this time, Medicare does notcover heart/hmg, lung, or pancreas transplants,regardless of the patient’s condition.3

Medicare coverage of kidney transplants is statu-torily mandated, based on Medicare eligibilitythrough the End-Stage Renal Disease (ESRD) Pro-gram. Whereas other patients must already beentitled to Medicare (by being elderly or disabled) inorder to receive a Medicare-covered transplant, anypatient who needs kidney dialysis or a kidneytransplant due to chronic renal failure may be

entitled to Medicare as a result of this need.4

Medicare ESRD-linked entitlement for kidney trans-plant beneficiaries ends 3 years after the date oftransplant surgery (42 U. S. C. A.~426-1).

Statepolicies

Other Insurers

Medicaid programs’ and private insurers’concerning organ transplants are similar to

Medicare’s in many instances. For example, kidney,liver, and bone marrow transplants are covered byover 90 percent of State Medicaid programs (table6). Similarly, kidney transplants are covered byalmost all private insurers; heart and liver trans-plants are covered by many Blue Cross/Blue Shieldplans and commercial insurers. As of the rnid-1980s,health maintenance organizations’ coverage policiesalso generally appeared to resemble those of theMedicare program (22).

Many private insurers and Medicaid programsalso cover transplant procedures currently not cov-ered by Medicare. For example, more than 70percent of the Blue Cross/Blue Shield plans and acomparable percentage of commercial insurers cov-ered heart/lung transplants even in 1985 (8,22).Almost 25 States cover heart/lung transplants underMedicaid (317). Moreover, all evidence points tocontinued expansion in coverage of transplants byStates and private insurers (27).

Thus, Medicare’s coverage policy of nonrenaltransplants is comparatively restrictive. Medicare’srole in transplant coverage is also somewhat con-strained because of the age limit for transplant;people 65 years and over are not generally consid-ered acceptable candidates at present.

IMe&cMe alSO covers cornea and skin transplants. These tissue transplant procedures were not included in thk study because they do not usuMYrequire immunosuppressive drugs.

zAlthoughliver ~msplmts forc~~en~ve been ~over~ sirlce 1984, coverage for ad~ts was CIrlly re~ntly extend~ (56 FR 15006). Adtit coverageis retroactive to Ma.mh 1990.

aMe&c~e’s Paynent policy for transplant procedures is summtimd iII app. B.ds~chpatient~ me entitled t. M~cae if they me My or Cwnfly &W~ (or the dependent of a worker who is so iI’Isu.red) under the social seCUrity

program. Entitlement normally begins on the fmt day of the third month after the patient is placed on kidney dialysis, or the fmt day of the month inwhich the patient entered the hospital in preparation for a kidney transplant (42 CFR 406.20).

–15-

lb ● Outpatient Immunosuppressive Drugs Under lWedicare

Table 5—Medicare Coverage Policy for Selected Transplant Proceduresa

Transplant procedure Effective date Coverage restrictionskope

Kidney . . . . . . . . . . . . . . . .

Bone marro@Allogeneic . . . . . . . . . . .

Autologous . . . . . . . . . .

Heart . . . . . . . . . . . . . . . . .

Liver . . . . . . . . . . . . . . . . . .

Heart./lung . . . . . . . . . . . . .

Lung . . . . . . . . . . . . . . . . .

Pancreas . . . . . . . . . . . . .

July l,1973

Aug. 1,1978June3,1985

Apr.28,1989

November1979

June 13,1980

Oct. 17,1986

Feb. 9,1984Mar.8,1990d

Coverage is tied to patient eligibility under Medicare’s End-Stage Renal DiseaseProgram. Coverage can begin the month of hospitalization for the transplant.Coverage ends 36 months after the date of transplant surgery unless the recipientis also elderly or disabled.

Covered for treatment of leukemia or aplastic anemia.Covered for treatment of severe combined immunodeficiency disease or Wlskott-

Aldrich syndrome.Covered for patients with various specified conditions.Tentatively covered for transplants performed at Stanford University, pending

development of final criteria for transplant.Covered only for transplant and treatment performed at Stanford University and

University of Arizona Medical Center on or before June 12, 1980, or on transplantcandidates accepted on or before June 12, 1980. Future transplants not revered.

Covered if performed according to specific protocols in selected U.S. heart transplantcenters.c

Covered for Medicare recipients age 17 and under with specified conditions.Covered for adults with specified renditions. Both children’s and adults’ liver

transplants must be performed in Medicare-designated liver transplant centers tobe revered.

Not covered.Not covered.

Not covered.aSkin andcornealtransplants arealsocovered by Medicare. Both procedures were accepted medical practi~ atthetime Medicare was implemented and thusrequired no specific Iatercoverage decision. Allothertransplants arecoveredonlywhen Medicare has determined that they are “reasonable and necessary.”

bAllogeneic bone marrow transplants are those in which the marrow is obtained from a healthy donor. Autologous transplants, in Contrast, use the Patient’sown previously extracted and treated bone marrow.

CAS of January 1991, there were 40 approved heart transplant centers in the United States.dAdult [ivertransplant final r~ulations Wnotappear until Apr. 12, 1991, butcoveragewas made retroactive to Mar. 8, 1990 (the date the Proposal r%ulationswere first published).

SOURCE: Health Care Financing Administration, Bureau of Policy Developmentf Division of Dialysis and Transplant Payment Policy, 1991.

Table 6-Percentage of Medicaid Programs and Private Insurance Plans Covering Transplants

Private insurers

HealthMedicaid Blue Cross/ Commercial maintenance

programsa Blue Shield insurersb organizationsTransplant procedure (1990) (1985) (1985) (1985)

(Percent of States) (Percent of plans)

Heart . . . . . . . . . . . . . . . . . 78% 89Y0 85?40 33!Z0Kidney . . . . . . . . . . . . . . . . 98 100 97 97Liver . . . . . . . . . . . . . . . . . . 94 91 80 81Hearfflung . . . . . . . . . . . . . 45 82 69 25Lung . . . . . . . . . . . . . . . . . 29 NA NA NAPancreas . . . . . . . . . . . . . 24 49 57 19Bone marrow . . . . . . . . . . 92 NA NA 90

ABBREVIATIONS: NA = not available.aper~ntages include the District of Columbia.bBaSed on a survey of 65 commercial insurers.cBased on a survey of 120 members of the Group Health Association of America, to which 67 members responded.

SOURCES: Intergovernmental Health Policy Project, George Washington University, Washington, DC, September 1990; R. Block, Blue Cross and Blue ShieldAssociation, Chicago, IL, personal communication, Mar. 29, 1991; and F.J. Hellinger, “Status of Insurance Coverage for Organ Transplants inthe United States: A Review of Recent Surveys,” Int. J. Txtmology Assessment in Health Care 2:563-570, 1986.

Chapter 24verview of the Transplant Population . 17

Table 7—Number of Transplants Performed: U.S. Total, Medicare-Covered, and Medicaid-Covered, 1988

Medicare-oovered Media”d-covered a

Percent of Percent ofTransplant prooedure Us. total Number Us. totalb Number U.S. total

Heart . . . . . . . . . . . . . . . . . 1,647 1 17’ 7.IYO 94 5.7?40Kidney . . . . . . . . . . . . . . . . 9,1 23d 8,145” 89.3 273 3.0Liver . . . . . . . . . . . . . . . . . . 1,680 7 0.4 120 7.1Heart/lungQ . . . . . . . . . . . . 74 0Lung9 . . . . . . . . . . . . . . . . .

0.0 5.0 6.831 0 0.0 NA NA

Pancreas9 . . . . . . . . . . . . . 243 0 0.0 9 3.7Bone marred. . . . . . . . . . 1,908 55 2.9 208 10.3

Total . . . . . . . . . . . . . . . 14.706 8.324 56.6 709 4.8ABBREVIATIONS: NA = Not available.aBased on Intergovernmental Health Policy Project Organ Transplant Survey, 1988. Data reported is primarily for State fiscal year 1987.bDataprovid~ byu.s. Department of Health and Human Services, Public Health Services, Health Resources and Services Administration, Division of Or9anTransplantation, 1991.

cBased on prmp=tive payment Assessment Commission analysis using inpatient hospital data.dCalWlations of the total number of kidney transplants vary depending on the source. According to the U.S. Renal Data System, the 1988 total is 8,923.%ased on data from Office of Research and Demonstrations, U.S. Health Care Financing Administration (HCFA).~hese numbers reflect Iivertransplants for children under the age of 18. Coverage for adults was only recently extended. HCFA estimates that Medicare willcover approximately 19 percent (or over 400) of all U.S. liver transplants in 1994 (56 FR 12006).

9Medicare does not cover these procedures.hBased on International ~ne Marrow Transplant Registry data on allogeneic and Syngeneic bone marrow transplants. The total does not include Illlnlber Ofautologous transplants, of which approximately 1,200 were reported worldw”de in 1987.


NUMBER OF TRANSPLANTS

In 1988, nearly 15,000 organ transplants wereperformed in the United States (table 7).5 Kidneytransplants were the most frequently performedtransplant procedures, accounting for more than 60percent of the U.S. total.

Medicare covered an overwhelming majority(nearly 90 percent) of U.S. kidney transplants in1988.6 In contrast, Medicare covered only 7 percentof heart transplants, 3 percent of allogeneic bonemarrow transplants, and less than 1 percent of livertransplants (5,17,27,62). Nonetheless, because kid-neys were the most commonly performed trans-plants, Medicare covered a majority (57 percent) ofthe Nation’s transplant procedures overall in 1988.

State Medicaid programs sometimes cover trans-plants that Medicare does not, but Medicaid-coveredprocedures still account for less than 5 percent of thenational total of transplantations. Thus, Medicare isa major payer of kidney transplants only; Medicaid’srole is minor. Most other organ transplants are paidfor by private insurers .

The number of nonrenal transplants (i.e., oforgans other than kidneys) performed each year hasincreased dramatically over time (table 8). Averageannual growth rates from 1984 to 1989 were 48percent for liver, 37 percent for heart, 37 percent forpancreas, and 25 percent for heart/hmg transplants(5). The rapid growth was a product of majoradvances that have continually taken place in alltransplant-related disciplines-immunology, histo-compatibility, surgery, organ procurement, organpreservation, and immunosuppression.

These growth rates might have been even greaterif the supply of donated organs had been sufficientto meet the needs of those waiting for transplant. In1989, for example, 31 percent of the patients waitingfor a heart transplant died before a suitable organbecame available (60). Similarly, the number ofavailable kidney organs is sufficient to providetransplants for only about 60 percent of personscurrently on the waiting list. The constrained supplyof suitable kidneys explains the relatively smallincrease in kidney transplants, which grew by only5 percent per year from 1984 to 1989.

s~~ to~ dm~ ~Ot in~lU& s~ ~~d cornea ~anspl~ts because the~ proc~~es do not rqfie immunosuppressive tig therapy. It dSO d~s nOtinclude the U.S. number for autologous bone marrow transplants, which was was not available. This number is not critical since these recipients do notusually require immunosuppressives. Recent estimates suggest that appmxhnately 1,200 such transplants were performed worldwide (l).

6Althou@ M~iC-e covem 89 percent of U.S. ~dney ~ansp~nts, it ac~ly pays for less ~ so pe~ent of these t,fall.spkUltS, due tO the malldatOryrequirement that Medicwe be the secondary payer for the first 18 months of eligibility of any End-Stage Renal Disease beneficiary who also has privateinsurance (17).

la ● Outpatient Immunosuppressive Drugs Under Medicare

Table 8—Number of U.S. Transplants Performed and Percent Change, 1984-89

Transplant procedure

Year Heart Kidney Liver Heart/lung Lung Pancreas Bone rnarrovF Total

1984 . . . . . . . . . . . . . . . . . 346 6,968 308 22 0 87 1,000 8,7311985 . . . . . . . . . . . . . . . . . 719 7,695 602 30 2 130 1,297 11,4751986 . . . . . . . . . . . . . . . . . 1,368 8,975 924 45 0 140 1,578 13,0301987 . . . . . . . . . . . . . . . . . 1,512 8,967 1,182 41 11 180 1,659 13,5521988 . . . . . . . . . . . . . . . . . 1,647 9,123 1,680 74 31 243 1,908 14,7061989 . . . . . . . . . . . . . . . . . 1,673 8,890 2,160 67 89 413 2,194 15,486Percent change,

1984-89 . . . . . . . . . . . . . 383.5% 27.6?’. 601.3Y0 204.5’Yo NA 374.7?40 119.470 77.470Average annual

percent change . . . . . . 37.lYO 5.070 47.67. 24.9Y0 NA 36.5Y0 17.O~o 12.69’o

ABBREVIATIONS: NA=notapplicable.

aBased on international Bone Marrow Transplant Registry data on allogeneic and syngeneic bone marrow transplants. The 1988 and 1989 numbers areestimated based on a 15-percent increase each year.

SOURCE: U.S. Department of Health and Human Services, Public Health Services, Health Resources and Services Administration, Ditision of OrganTransplantation, 1991.

TRANSPLANT RECIPIENTS

Characteristics

Transplants are usually performed on relativelyyoung patients (table 9). The average patient age atthe time of transplant ranged from 25 years for bonemarrow transplant recipients to 47 years for hearttransplant recipients between October 1987 andDecember 1989 (5,62).7 Across all types of trans-plants, the majority of recipients were white.

The patient’s condition at the time of transplantvaries by transplant type. A majority of heart,heart/lung, and lung transplants in 1989 occurred inpatients who were reported to be homebound. Incontrast, a substantial proportion of individualsreceiving kidney, pancreas, and bone marrow trans-plants were working or going to school Ml-time(5,62). Repeat transplants occurred rarely, except forkidney and liver transplants.8

Most transplanted organs function for at least ayear, but graft survival rates vary markedly by typeof organ. For a 1987-89 cohort of transplant recipi-ents, over 82 percent of heart grafts survived 1 yearafter the transplant (60). In contrast, only 57 percent

of lung transplants survived that long. The l-yeargraft survival rate for cadaveric-donor kidney trans-plants, the most common type of organ transplant,was 78 percent, with 52 percent of such graftssurviving at least 5 years. One- and five-yearsurvival rates for living-donor kidneys are somewhathigher (88 and 72 percent, respectively). Patientsurvival rates are similar to graft survival rates,except for kidney and bone marrow recipients, whocan sometimes survive with alternative treatments ifthe graft fails.

Number of Functioning Graft Patients

To understand the implications of changing Medi-care’s policies regarding immunosuppressive drugs,one must first determine the number of livingtransplant recipients whose graft is still functional.Of the nearly 15,000 transplant recipients in 1988,OTA estimates that approximately 73 percent, or11,000 recipients, were living in 1989 with afunctioning graft.9 The cumulative total of livingfunctional-graft patients in the United States wasestimated to be more than 46,000 persons in 1988, ofwhich 66 percent have Medicare coverage (table 10).Kidney transplant recipients account for more than95 percent of Medicare-covered transplants.

THowever, the “age ~~~~ Cntefi Mve ken expanding. me COmmOn upper limit for heart transplant patientS fOr example, is reported to haveincreased from 50 to 55 years of age (39).

8For ~ more detail~ description of patient socioeconomic and demographics, see references 57 ~d 60.

me estimated number of recipients living in 1989 with a functioning graft was calculated by applying l-year survival rates to the pool of personswho received grafts in 1988.

Chapter 2-Overview of the Transplant Population . 19

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2(I ● Outpatient Immunosuppressive Drugs Under iWedicare

Table 10-Estimated Number of U.S. Transplant Recipients Witha Functioning Graft and With Medicare Coverage, 1988

Recipients with Medicare coveragea

As percent ofOrgan Us. total Number U.S. total

Kidney . . . . . . . . . . . . . . . . . . . . . . . . . 39,400 30,400b 77.2?40Heart . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075 220 7.1Liver . . . . . . . . . . . . . . . . . . . . . . . . . . 1,660 10’ 0.4Hearfflung . . . . . . . . . . . . . . . . . . . . . 65 d d

Lung . . . . . . . . . . . . . . . . . . . . . . . . . 10 d d

Pancreas . . . . . . . . . . . . . . . . . . . . . . 365 d d

Bone marrow... . . . . . . . . . . . . . . . . 2,030 55 2.7Total . . . . . . . . . . . . . . . . . . . . . . . 46,605 30,685 65.8

alncludesoniythoseforwhom Medicareisassumedtobethe primarypayer.Medicare istheseccmdarypayerforsomekidney recipientswith Medicarecoverage.

b~istotal is ~%d on the f inding that ~ per~nt of kidney transplant r~ipients continue to receive Medicare benef itspast the 3-year limit of End Stage Renal Disease-based Medicare eligibility.

‘These numbers include liver transplants for children under the age of 18. Coverage for adults was only recentlyextended (56 FR 15006). U.S. Health Care Financing Administration estimates that Medicare will cover approximately19 percent (orover400) of all U.S. liver transplants in 1994 compared with less than 3 percent of U.S. liver transplantscovered by Medicare in 1990.

dMedi=re Cjoes not cover these transplant pm~dures.

SOURCE: Office of Technology Assessment, 1991. Calculations based on data provided byU.S. Department of Healthand Human Services, Public Health Services, Health Resources and Services Administration, Division ofOrgan Transplantation; and Health Care Financing Administration, Office of Research and Demonstration.

The percentage of recipients covered by Medicare kidney transplant recipients with a functioning graftis high because of Medicare’s ESRD entitlement continue to receive Medicare benefits past the 3-yearprogram, which continues to cover nearly all of the limit of ESRD-based Medicare eligibility (17).U.S. kidney transplant recipients for 3 years after the Disability, not age, is usually the criterion underday of the transplant surgery. The U.S. Health Care which these recipients continue to qualify forFinancing Administration found that 50 percent of Medicare.

Chapter 3

ImmunosuppressiveDrug Therapies

.

ContentsPage

IMMUNOSUPPRESSIVE DRUG PROTOCOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . q . . . . . . . . 23C.omponents of Immunosuppressive ~erapy. .. .. .. .. do. ... +....... .. .+ .. ... ... ..+. ..OO 23Variation inDrug Treatment ~otocols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

COSTOF IMMUNOSUPPRESSIVE THERApY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

TablesTable Page11. U.S. Food and Drug Adminisfiation Approval Status andMedicMe C.overageof

Post-Transplant Immunosup~essive ~gs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2412. Typical Immunosuppressive Drug Protocols for Kidney Transplant Patients . . . . . . . . . . . . . 2413. Percentage ofKidney Transpl~t Recipients Receiving CyclospoMe, 1984-89 . . . . . . . . . . 2514. Percentage ofTransplant Recipients Receiving Specific Immunosuppressive

Drugs by Drug Type, 1987-90 . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. .. .. ... +.. ...+.,. +.. 2615. An.nual Drug Costs for Immunosuppressive Protocols ofKidney Transplant

Patients, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....”.......”.”.”.. 27

Chapter 3

Immunosuppressive Drug Therapies

This chapter reviews the immunosuppressiveagents currently used to prevent organ rejectionl anddescribes the variation in drug treatment regimensused by transplant recipients. It then discusses thecosts associated with various immunosuppressivedrug therapies.

IMMUNOSUPPRESSIVE DRUGPROTOCOLS

Components of Immunosuppressive Therapy

Despite the slow but relatively steady develop-ment of immunosuppressive products, the number ofdrugs is still few. Presently, only four drugs areapproved by the U.S. Food and Drug Administration(FDA) specifically for post-transplant irnmunosup-pression: azathioprine, cyclosporine, antithymocyteglobul in (ATG), and muromonab CD3 (OKT-3)(table 11) (55,56).2 All four of these drugs aresole-source (i.e., each is produced by only onemanufacturer). Prednisone, an adrenal corticoster-oid, is also usually aWstered to patients as partof the immunosuppressive drug regimen and iscovered under Medicare for this purpose.

Early approaches to long-term chemical irmmmo-suppression in transplant recipients included acombination of azathioprine (or, after its FDAapproval in 1981, ATG) a.ndprednisone. Cyclosporine-based protocols, introduced into general use in 1984,rapidly replaced these approaches to become themainstay of immunosuppressive therapy in patientswho receive organ grafts. The incidence and successrates of heart, heart/hmg, and lung transplantsincreased particularly dramatically in the era follow-ing FDA approval of cyclosporine (58). For kidneytransplants, cyclosporine use apparently also re-duced mortality and morbidity to levels significantlylower than the conventional protocols (7,23,29,43).

Orthoclone OKT-3 (the brand name of muro-monab CD3, a monoclinal antibody) is a relativelyrecent addition to the roster of immunosuppressiveagents. OKT-3 is approved by the FDA for thetreatment of acute rejection of transplanted organs.

However, it has also been used prophylactica.lly (i.e.,to prevent organ rejection) by some treatmentprograms as a replacement for ATG (15). To date,prophylactic OKT-3 therapy has been administeredto inpatients, but outpatient administration is notbeyond the reahn of possibility.

Antilymphocyte globulin (ALG), a new immuno-suppressive developed at the University of Minne-sota, is not yet approved for general use by the FDA.Like ATG, ALG is used primarily to reverseparticularly severe rejection episodes, but it has alsobeen administered routinely as part of a standardimmunosuppressive protocol.

Another promising new drug is FK-506, manufac-tured by a Japanese firm. FK-506 is a powerfkl andselective immunosuppressive agent with a mode ofaction similar to that of cyclosporine (7,33,47,63).The most appropriate place of FK-506 in thepost-transplant immunosuppressive drug regimen isstill a matter of study and debate. Further investiga-tion is necessary to detetie the toxicity, potentialbenefits, and most appropriate clinical applicationwhen compared with cyclosporine (16,45).

At least two other potential immunosuppressivedrugs are also under development. One new drugunder testing is 15-deoxyspergualin (also known asNKT-01), a relative of the antitumor antibioticspergualin. NKT-01 has been shown to prolong thegraft survival of organ and tissue transplants inrodents (19,44) and is currently in Phase I clinicaltrials in humans (14). Another new compound,rapamycin, has also shown encouraging potential inthe laboratory but has not yet been tested in humans(24).

All current and potential immunosuppressivedrugs have associated side effects and complica-tions. For example, despite its major contribution tothe improved outcome of human organ transplanta-tion over the past decade, cyclosporine is nephro-toxic; it can cause impaired kidney fiction in bothkidney transplant recipients and in patients withnormal kidneys who have received transplants of

l~mosuppression is used for other indications as well, such as rheumatoid arthritis and various other immune disorders. ~ese uses ~ notdiscussed in this Report.

~or a review of the historical developments in clinical and experimental immunosuppression, see references 41 and 46.

–23–

24 ● Outpatient Immunosuppressive Drugs Under iUedicare

Table 11—U.S. Food and Drug Administration (FDA) Approval Status and Medicare Coverageof Post-Transplant Immunosuppressive Drugs

FDA approval date MedicareDrug Brand or common name Manufacturer/developer (form of administration) coverage

Azathioprine. . . . . . . . . . . . . . Imuran Burroughs Wellmme Mar. 20, 1968 (oral) YesJuly 19, 1974 (IV)

Antithymocyte globulin. . . . . . Atgam Upjohn NOV. 17, 1981 (IV) YesCyclosporine . . . . . . . . . . . . . Sandimmune Sandoz NOV. 14, 1983

(oral and IV) YesMuromonab CD3 . . . . . . . . . . OrthocJone OKT-3 Ortho June 19, 1986 (IV) YesPrednisone . . . . . . . . . . . . . . . No brand name Multiple sources Multiple forms approved YesAntilymphocyte globulin. . . . . ALG University of Minnesota Not approved NoMacrolide antibiotic . . . . . . . . FK-506 Fujisawa Not approved No

ABBREVIATION: IV - intravenous.


Table 12—Typical Immunosuppressive Drug Protocols for Kidney Transplant Patients

Setting and protocol phase

Inpatient initial OutpatientDrug protocol and rejection phases maintenance phase

Traditional therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PRED + AZA PRED + AZAAugmented with ALG or ATG ... , . . . . . . . . . . . . . . . . . . . PRED + AZA + ALG/ATG PRED + AZA

Cyclosporine therapy’Double-drug . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CSA + PRED CSA + PREDTriple-drug (with ALG, ATG, or OKT-3) . . . . . . . . . . . . . . . . PRED + AZA + ALG/ATG/OKT-3 CSA + PRED + AZAQuadruple-drug cyclosporine therapy. . . . . . . . . . . . . . . . . CSA + PRED + AZA + ALG CSA + PRED + AZA

ABBREVIATIONS: PRED=i Prednisone; AZA _Azathioprine; ALG/ATG _ Anti lymphocyte orantithymocyte globulin; CSA = Cyclosporine; OKT-3 - OrthodoneOUT-3.

aThe terms double, triple, and quadruple drug therapy refer here to the number of drugs administered in the initial or inpatient sta9e.

SOURCE: Battelle Human Affairs Research Centers, Seattle, WA, Cost and Outcome Ana/ysis of Kkfney Transp/antatioru Tbe hnpkafions of Initialknrmmosuppressive Protocol and Diabetes, under agreement with the Health Care Financing Administration Cooperative Agreement14-C-985ti]0, August 1989.

other organs (7,42). Hypertension (high blood pres-sure) after heart transplant is another frequentlyobserved complication of cyclosporine-induced im-munosuppression (40).

Many of these side effects are dose-related andcan be minimized through the use of multiple-drugapproaches to irnrnunosuppression that permit lowerdoses of individual drugs. Indeed, because of thenephrotoxicity associated with cyclosporine, lowerdosages of various immunosuppressive agents arebeing used in increasingly complicated immunosup-pressive protocols.

Vari&”on in Drug Treatment Protocols

Until the clinical introduction of cyclosporine,immunosuppressive drug protocols for kidney trans-plants, the most cornrnon transplant procedure, weresimilar across transplant programs in the United

States and abroad. The mainstay traditional therapyconsisted of a combination of azathioprine andprednisone (table 12).

With the introduction of cyclosporine, a variety ofnew protocols followed in an effort to maximizeimmunosuppression while minimizing side effectssuch as nephrotoxicity and susceptibility to infec-tion. The different preferred drug combinations varyacross transplant centers and across individualpatients within any particular center (7,21). Becausethe therapy is tailored to the patient, the mix anddosages of drugs also vary over time in anyparticular patient, depending on the treatment phaseand the patient’s physiologic reactions to the drugs.

The drugs administered to a given patient differaccording to three possible immunosuppressivetreatment phases:3

3For fifiey tr~plant recipients, chronic renal dysfunction may require yet a different protocol (7).

Chapter .%lmmunosuppressive Drug Therapies . 25

●

●

●

The induction phase consists of approximatelythe first 6 weeks of use of immunosuppressivedrugs during the immediate, post-transplantperiod. Treatment is usually on an inpatientbasis during this phase, since it is the time whenthe patient’s status is most uncertain.Maintenance treatment, which is usually ad-ministered on outpatient basis, is initiated afterthe patient’s medical condition has stabilizedand when the organ function is normal ornear-normal.Therapy during acute organ rejection, whichsometimes occurs despite maintenance ther-apy, is usually a short phase requiring higherdosages and, often, different drugs while thepatient is hospitalized (7).

For kidney transplants, cyclosporine has in-creased the complexity of transplant recipient man-agement; distinguishing between a rejection episodeand nephrotoxicity is quite obviously confhsing onthe one hand and critical on the other.

The improved effectiveness of cyclosporine-based protocols over traditional therapy is reflectedin the dramatic shift in the immunosuppressivemanagement of kidney transplant recipients sinceFDA approval of cyclosporine in late 1983. From1984 to 1989, the number of cadaveric kidneytransplant recipients receiving cyclosporine grewfrom 73 to 93 percent (17) (table 13). The use of thisdrug increased even more dramatically for living-donor kidney transplant recipients, fi-om 38 percentin 1984 to 87 percent in 1989. Overall, approxi-mately 90 percent of kidney transplant recipients,regardless of source of graft, received cyclosporineas the primary immunosuppressive agent in 1989.4

The percentage of transplant recipients receivingcyclosporine is probably similar for recipients ofother organs, since cyclosporine was already knownto be the most effective irnmunosuppressive drugwhen these procedures began to be performed moreregularly. In contrast, when kidney transplants wereinitially performed, cyclosporine had not yet beenapproved by the FDA. Consequently, physicians

Table 13-Percentage of Kidney TransplantRecipients Receiving Cyclosporine, 1984-89

Source of graft

Year Living donor Cadaveric donor

1984 . . . . . . . . . . . . . . . . . 38’Yo 730/01985 . . . . . . . . . . . . . . . . . 53 841986 . . . . . . . . . . . . . . . . . 68 901987 . . . . . . . . . . . . . . . . . 78 921988 . . . . . . . . . . . . . . . . . 80 911989 . . . . . . . . . . . . . . . . . 87 93

SOURCE: Health Care Financing Administration, Office of Research andDemonstrations, Division of Beneficiary Studies, 1990.

may have tended to keep patients with oldertransplants on their original regimens. Moreover,because nephrotoxicity is the most significant sideeffect of cyclosporine, traditional therapies may bewarranted for some kidney transplant recipients.

Despite the predominance of cyclosporine as theprimary imrnunosuppressive agent, azathioprine andprednisone remain stable components of both inpa-tient and outpatient irnmunosuppression (table 14).These drugs continue to be important adjuncts tocyclosporine in most of the therapies currently inuse.

COST OF IMMUNOSUPPRESSIVETHERAPY

The variation in cost associated with immunosup-pressive agents and protocols is substantial. Costs ofcyclospmine maintenance therapy protocols, forexample, are much higher than those of traditionalmaintenance therapy.s The reported costs for tradi-tional outpatient therapy using only prednisone andazathioprine were $2 per day in 1988, comparedwith reported average costs for cyclosporine-basedtherapies ranging from $9 to $23 per day, dependingon the source of information (6,7).

Annual costs are similarly variable across proto-cols and over time (table 15). In 1988, averageamual costs for traditional therapy were reported tobe $852 for the first year of outpatient therapy and$793 for the subsequent year in 1988 (7). In contrast,

A~gene~, ~nventio~ ~Uosuppressive tiempy is only used by patients who reeeived transplants before the cyclospofie em (i.e.) before 1984)>or by patients unable to tolerate cyclosporine. Nearly all new patients are now placed on cyclosporine, while very few patients who have been onconventional therapy are converted to cyclosporine, unless unique problems arise (7).

5The 1991 average ~holes~e Pfices (A~s) for ~gs us~ ~ ~wosuppressive ~erapy were: $1$).43 for 1,000 5-mg tablets of prednisone(rnanufacturedby Rugby); $87.25 for 10050-mg tablets of azathioprine (Inmran); $209.79 for one 5-ml ampule of 50 mg/ml of antithymocyte globulin(Atgam); $214.20 for one 50-mg oral solution of 100 mgkrd of cyclosporine (Sandimmune); and $522.00 for one 5-ml ampule of 1 mg/ml of muromonabCD3 (OKT-3) (34a). These numbers do not necessarily reflect comparable dosages, but nonetheless the differences in the AWPS among traditional andmore recent drugs are striking.


Table 14—Percentage of Transplant Recipients Receiving Specific Immunosuppressive Drugsby Drug Type, 1987-90a

Percentage of patients receiving:

Transplant type Other drugsand settingb Cyclosporine Azathioprine Prednisone ALGIATG OKT-3 and therapies

HeartInpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

Kidney (cadaveric)Inpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

Kidney (iiving-donor)inpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

Liverinpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

Heart/iunginpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

Lunginpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

PancreasInpatient . . . . . . . . . . . . . . . . . .At 1 year outpatient. . . . . . . . .

94.7Y0NA

91.070NA

89.2!L0NA

26.5YoNA

28.3YoNA

1 .2?40NA

96.994.0

82.781.5

94.092.5

28.71.6

16.03.3

25.411.6

85.584.4

81.582.3

92.990.7

16.01.4

8.32.5

23.511.5

98.596.3

66.267.2

90.892.3

13.20.6

27.72.8

44.815.3

92.6NA

91.2NA

73.0NA

48.0NA

32.4NA

2.0NA

83.1NA

89.2NA

77.1NA

41.0NA

34.9NA

4.8NA

98.599.0

98.198.6

96.398.6

40.214.5

32.023.5

14.11.7

ABBREVIATIONS: NA = not available; ALG/ATG - anti lymphocyte or antithymocyte globulin; OKT-3 - Orthoclone OKT-3.aBasedon information about patients transplanted between Oct. 1, 1987and Dec. 31, 1989forwhom information was available. Most recipients received morethan one immunosuppressive drug.

bInformation on immunosuppressive therapy for bone marrow transplant recipients was not available.~he “other” category includes FK-!506, cyclophospharnide, trimethoprirn/sulfa, solumedrol, chemotherapy, total Iymphoid irradiation, and methyl-prednisolone.

SOURCE: U.S. Department of Health and Human Services, Public Health Service, Health Resources and Services Administration, Division of OrganTransplantation, 1991.

average costs for cyclosporine double drug therapy(i.e., maintenance therapy with cyclosporine pluspredisone) were $5,338 in the first year and $4,025in the subsequent years. Thus, the simplest cy -closporine maintenance therapy is roughly seventimes more costly than the traditional therapy.G

annual costs appearing in table 15 illustrate costdifferences across the more common protocols andare reasonable approximations of the 1988 costs ofoutpatient immunosuppressive protocols.

The differences in the estimates of the averageannual costs of cyclosporine therapies deserve note.The higher historical figures cited in table 15 arebased on a literature review of published data; thelower Battelle numbers are based on results of a1989 study done under a cooperative agreement withthe U.S. Health Care Financing Adrninistration.Rough cost estimates provided by some transplantsurgeons likewise suggest that the earlier publishednumbers may have been somewhat overstated com-pared with present costs. (28,32). Based on theseopinions and the findings of the Battelle study, a bestestimate of the current average annual costs of

These numbers are underestimates of total currentongoing costs, since they do not account for costsassociated with such factors as organ rejection,conversion horn one protocol to another, andgeneral inflation related to the cost of the drugs. Forexample, the treatment of organ rejection can addconsiderably to the frost-year immunosuppressivedrug costs of transplant recipients. (For the mostpart, the added drug costs would be absorbed in thehospital’s inpatient payment for Medicare patients.However, rejection episodes would increase outpa-tient costs to some extent as well.) Nonetheless, the

GNote tit tie simplest cyclospofie-based protocol is not necessarily the least expensive, since the addition of other drugs codd petit tie dosage(and thus the cost) of cyclosporine to be dezreased.

Chapter .%lmmunosuppressive Drug Therapies ● 27

Table 15-Annual Drug Costs for Immunosuppressive Protocols of Kidney Transplant Patients, 1988a

ImmunosuppressiveFirst year costs

Subsequent year 5-yearprotocol Inpatient Outpatient Total outpatient cost outpatient totalsb

Traditional therapy:Without ATG/ALG while inpatient . . . $ 95 $ 852 $ 947 $ 793 $4,024With ATG/ALG while inpatient. . . . . . 10,385 852 11,237 793 4,024

Cyclosporine therapy:cDouble-drug

Historicald. . . . . . . . . . . . . . . . . . . . . . . 638 8,126 8,764 8,198 40,918Battelle studye . . . . . . . . . . . . . . . . . . 550 5,338 5,888 4,028 21,450

Triple-drugHistoricald. . . . . . . . . . . . . . . . . . . . . . . 4,034 7,756 11,790 8,227 40,664Battelle studye . . . . . . . . . . . . . . . . . . 4,274 3,899 8,173 3,157 16,527

Quadruple-drugHistoricald. . . . . . . . . . . . . . . . . . . . . . . 5,626 7,193 12,819 6,870 34,673

aBa~ed on a 7r)-kg person (154 ~unds).bcosts are in constant 1988 dollars.cDouble, triple, and quadruple drug therapy refers hereto the number of drugs administered in the initial or inpatient phase.dBased on previous~ publish~ d~t~ as reviewed by Battelle Human Affairs Research Center, Seattie, WA.ef3ased on a recent Battelle study of 99 patients, August 1989.

SOURCE: Battelle Human Affairs Research Centers, Seattle, WA, Cost and Outcome Analysis of Kidney Transp/arrtation: Tbe /mp/ications of /rritia//immunosuppressive Protocol and Diabetes, under agreement with the Health Care Finanang Administration, Cooperative Agreement14-G9856410, August 1989.

cyclosporine-based treatment protocols is $4,000 to$6,000 per year.

A likely reason for lower present than historicalcyclosporine costs is that the dosage requirements,and thus the costs, for cyclosporine have declinedover time. The added cost of drugs used adjunctivelywith cyclosporine is apparently not high enough tooffset the cost savings from the lower cyclosporinedosages in the protocols using these drugs.

Although the annual therapy-related costs of thecyclosporine protocols are still higher than those of

traditional therapy, dramatic improvements in graftsurvival and decreased complications are also evi-dent (7,23,28). Consequently, the higher therapy-related costs are balanced to some extent with costsavings from preventing complications and episodesof acute rejection. Recent studies have suggested,however, that the initial association of cyclosporinewith lower total costs diminishes over time (42). Inother words, for grafts surviving beyond severalmonths, the use of cyclosporine may reduce actualCOStS Ol@ slightly.

Chapter 4

The Adequacy of CurrentMedicare Coverage of

Immunosuppressive Therapy

—

ContentsPage

MEDICARE COVERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Historical Overview . . . . . . . . . . . . . . . . . . . . . .......8.+””C”S””0 . . . . . . . . . . . . . . . . . . . . . . . ...* 31Current Coverage and payment policies . . . . . . . . . . . . . . . . . . . . . . . .. ... .. ””+”.-.”. .......++ 31Beneficiary Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...”......”.....”...~...+ ... 33

C O V E R A G E B Y O T H E R PAYERS .. ....................”...”’.” ..”...”..+............ 33ASSESSING THE ADEQUACY OF COVERAGE .. .. .. .. .. .. .. .. +. ... .., ..”...’ ....... 34

Extent ofCoexisting Private Coverage forMedicare Recipients . . . . . . . . .. .. ... ... ... .+..9 34Risk of High Drug-Related Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...+.”..+ 35Effects ofExpanding Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . ...”’..........+.” .o...*0”o” 36

BoxBox PageA. The Battelle Study . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .” ... ..00 o..00. ... ......+”.+ 34

TableTable Page

16. Kidney TransplantPatients’ Risk of Out-of-PocketLiabi.l.ities forImmunosuppressiveD rugs . . . . . . . . . . . . . . . . . . . . . . . ....+......~..”... .......++..+”+”~m. 35

Chapter 4

The Adequacy of Current Medicare Coverageof Immunosuppressive Therapy

This chapter begins with a historical overview ofthe development of Medicare’s coverage policy foroutpatient immunosuppressive drugs. It then de-scribes Medicare’s current coverage and paymentpolicies for outpatient immunosuppression and brieflyreviews the policies of other third-party payers.Finally, the chapter assesses the patient’s financialburden and the adequacy of current coverage ofimmunosuppressive drugs.

MEDICARE COVERAGE

Historical Overview

Post-transplant irnrnunosuppressive drugs approvedby the U.S. Food and Drug Administration (FDA)and administered during an inpatient hospital stay,either at the time of the transplant procedure or at anysubsequent hospitalization, are automatically cov-ered by Medicare. Reimbursement for these inpa-tient drugs is included in the hospital’s payment forinpatient services. Similarly, drugs that must beadministered under the direct supervision of aphysician are routinely covered when given in aphysician’s office.

Drugs administered outside of a medical setting,however, are subject to different rules. Medicarestatutes have historically prohibited coverage ofmost self- administered pharmaceuticals. Thus, through-out the 1960s and 1970s, Medicare did not pay foroutpatient self-administered immunosuppressivedrugs.

Congressional interest in the issue of Medicarecoverage of outpatient post-transplant immunosuppr-essive drugs dates to 1983, the year the FDAapproved cyclosporine. Evidence of cyclosporine’simproved effects over previous immunosuppressiveagents, and concern over its high costs, led theHouse Committee on Energy and Commerce toconvene a hearing on outpatient immunosuppressivedrug coverage in November 1983 (49). Although thehearing did not result in immediate legislationspecific to outpatient immunosuppressive coverage,Congress did require the Secretary of the Depart-

ment of Health and Human Services (DHHS) toestablish the National Task Force on Organ Trans-plantation as part of the National Organ Transplanta-tion Act the following year (Public Law 98-507).

The task force’s report on immunosuppressivetherapies, submitted in October 1985, emphasizedthat cyclosporine was a major breakthrough intransplant imrnunosuppression and recommendedthat all public and private health benefit programsprovide coverage for outpatient immunosuppressivedrugs (59). The task force placed particular emphasison targeting Federal funding to those patients whowere regarded as most financially needy.

Subsequently, in the Omnibus Budget Reconcili-ation Act of 1986 (Public Law 99-509), Congressextended Medicare coverage to FDA-approved im-munosuppressive drugs for 1 year following the dateon which a beneficiary is discharged from thehospital after a Medicare-covered transplant. Thus,since January 1, 1987, all patients qualifying forMedicare who purchase the optional Part B cover-agel and who received a Medicare-covered trans-plant have been eligible for outpatient immunos-uppressive drug coverage.

Congress temporarily extended the l-year cover-age limit in the Medicare Catastrophic Coverage Actof 1988 (Public Law 100-360). Under this Act,immunosuppressive drug therapy was to be coveredindefinitely as long as it was medically necessary,and coverage was also to be provided to Medicarebeneficiaries who were recipients of an organtransplant that Medicare did not cover. Both of thesecoverage extensions for self-administered immunosu-ppressive drugs, however, were repealed alongwith the Act in December 1989 (Public Law101-234).

Current Coverage and Payment Policies

In the outpatient setting, Medicare coverage andpayment rules apply separately to the two maincomponents of immunosuppressive drug therapy:the drug products themselves, and the physicianmanagement component. A facility reimbursement

IMore tin 96 percent of eligible persons purchase Pti B covtiage (53).

–31–

32 ● outpatient Immunosuppressive Drugs Under Medicare

component may also apply, if a patient visits anoutpatient hospital clinic to see a physician and fflthe prescription. Each of these components isdiscussed below.

Immunosuppressive Drug Products

Medicare currently covers self-administered out-patient immunosuppressive drugs for 1 year, startingon the date of the patient’s discharge from thehospital after a Medicare-covered kidney, heart,liver, or bone marrow transplant (2,55). Medicare’spolicy is to cover all drug products that are approvedby the FDA and have a label indicating use forimmunosuppressive therapy.2 In addition, Medicarecovers adjunct prescription drugs (e.g., prednisone)when they are used as part of the immunosuppres-sive therapeutic regimen.

Coverage applies to both oral and parenteral(non-oral) forms of administration as long as FDAhas approved the drug for that type of administra-tion. Outpatient coverage includes both prophylactictherapy to prevent organ rejection and acute treat-ment when rejection occurs.

Because Medicare’s coverage of outpatient irn-munosuppressive drugs is provided through Part B,the Supplementary Medical Insurance Trust Fund, itis limited to those patients who qualify for Medicareand who have purchased the optional Part B cover-age. The beneficiary’s premium cost for this cover-age is $29.90 per month during calendar year 1991.

Reimbursement of outpatient immunosuppres-sive drugs is determined on a customary, prevailing,and reasonable charge basis when the drugs aredispensed by a retail pharmacy, physician, supplier,or mail-order house.3 4 Reirnbursement of thesedrugs is determined on the basis of reasonable costs

when they are dispensed by a hospital pharmacy. Ineither case, the beneficiary is subject to the Part Bdeductible of $100 (Public Law 101-508). Thebeneficiary is also liable for a coinsurance amountequal to 20 percent of reasonable charges (for drugspurchased from a nonhospital source) or 20 percentof the facility’s actual submitted charges (for drugsobtained from a hospital pharmacy ).5 b

Physician Management

The management services provided by a physi-cian in comection with immunosuppressive therapyinclude prescribing and adjusting the dosage of thevarious drugs and monitoring the patient for anypossible side effects and complications associatedwith therapy. Physician management services arecovered under Medicare for all organ transplantrecipients. These services would be recognized asphysician outpatient visits and, therefore, payment isbased on the allowed charge for the visits.

Medicare’s policy varies slightly for a Medicare-covered kidney transplant procedure. Medicare rec-ognizes all transplant surgeon services furnishedduring a 60-day period following post-transplanthospital discharge as a global service. Kidneytransplant surgeons receive the lesser of the actualsubmitted charge or a maximum allowance for allrelated services, including immunosuppressive ther-apy management. After the 60-day period, immunos-uppressive drug management services are recog-nized as a physician outpatient visit and paidaccording to the allowed charge.7

Outpatient Facility Component

In a hospital outpatient setting, Medicare may paynot only for the drugs and the physician encounterbut also for the use of the facility. If the patient visits

2TW0 ~p=i~v ~onmactors process ~1 cl~s for se~.awstered drugs received from nonhospital Outpatient sourws: Tr~~eri~ O~idenM ofCalifornia and Blue Cross/Blue Shield of South Carolina. These carriers are expected to keep informed of FDA additions to the list of theimmunosuppressive drugs.

Ssee glossW (aPp. C) for an explanation of customary, prevtitig, and reasonable c~ges.dMedicmeJs paPent for self-awstm~ imm~osuppressive drugs ~ be ~ected by the implemen~tion of the new Medicare physician fee

schedule-based payment system that begins January 1992 (55 FR 36178). Payment for immunosuppressives, however, will be included in the feeschedule when the drug cannot be self-administered and is provided as part of a physician visit.

5S~W tie ~g is ~imbursed on a reasonable cost basis, and these costs are not determin ed until after the service is performed, it is administrativelyinfeasible to base beneficiary coinsurance on actual Medicare payments. The beneficiary’s out-of-pocket costs are based on submitted charges for theseproviders, and thus they can be higher than when the drug is received through other sources even if Medicare’s payment is lower.

Wongress is considering other systems of payment for hospital outpatient services (Public Law 99-509). Reimbursement of immunosuppressivedrugs in the outpatient hospital setting could be affected by any such system.

Tmrmmosuppressive therapy management services will not be included in the forthcoming Medicare fee schedule until a Common ProcedureTerrninology (CPT) code is created that recognizes the provision of this service. According to staff at the Health Care Financing Adrninistratio% theagency has requested carriers to continue assigning local codes for immunosuppressive management services in the absence of a CPT code.

Chapter 4-The Adequacy of Current Medicare Coverage of Immunosuppressive Therapy ● 33

the physician while at a hospital-based clinic, thehospital may submit a bill for the facility-relatedcosts of that visit. Payment to the hospital is basedon reasonable costs. Under this circumstance, aseparate physician bill for immunosuppressive ther-apy management could also be submitted, as coulda bill from the hospital pharmacy for the drug. Inshort, depending on the site of the therapy, multiplebills may be submitted to Medicare for coverage ofservices related to immunosuppressive therapy.

Beneficiary Liabilities

From the patient perspective, out-of-pocket ex-penditures for outpatient irnmunosuppressive drugtherapy can be substantial. Average annual costs formost maintenance immunosuppressive treatmentare between approximately $4,000 and $6,000 (seech. 3). Given that the national average chargereduction rate for Medicare was 28.8 percent in 1988(3,36), aroughapproximationof the average Medicare-determined allowed charge is $2,850 to $4,270.8 Thebeneficiary would be required to pay 20 percent ofthe allowed charge, or between $570 and $850 onaverage during the first year following the trans-plant.

Similar cost-sharing requirements would holdtrue in subsequent years for patients with privateinsurance in addition to their Medicare benefits.However, those patients with Medicare only wouldbe responsible for the full cost of the outpatientimmunosuppressive treatment every year that ther-apy is needed following the first year post-transplant.

These estimates of beneficiary liabilities may beunderstated, if protocol and drug costs have in-creased since 1988. Furthermore, the out-of-pocketexpenses could be still greater if the pharmaceuticalprovider does not accept assignment.9 In this case,the beneficiary is obligated to pay any billed amountthat is above the Medicare-determined allowedcharge.

Out-of-pocket expenditures for outpatient im-munosuppressive drugs are believed by some to actas disincentives that discourage some end-stagerenal disease (ESRD) patients from having a trans-plant. The extent of the disincentives is unclearbecause the alternative treatment to kidney trans-plants is dialysis, for which the coinsurance amount($3,800 a year)10 is nearly as much as the annualcostof outpatient imrnunosuppressive drugs. Since boththe dialysis coinsurance amount and the annual costsof immunosuppressive vary substantially amongpatients, however, for some patients immunosup-pressive may indeed be significantly more costly. Astronger disincentive may be fear of losing allMedicare coverage. Half of kidney transplant recipi-ents become ineligible after 3 years, whereas dialy-sis patients are eligible indefinitely (17).

Some beneficiaries have protection from theseobligations. During the first year of immunosuppres-sive therapy when Medicare drug coverage applies,some patients have their coinsurance paid by Medic-aid or private insurers (7,17). After that frost year,recipients with private insurance are usually coveredfor the majority of their drug costs from that source.They are then responsible for that payer’s coinsur-ance and any other insurance-related payments (e.g.,premium costs). In contrast, beneficiaries withinsufficient coverage (no drug benefit)-or with noadditional third-party coverage at all-would berequired to pay the full cost of outpatient immunos-uppressive therapy entirely out-of-pocket after thefrost year (see below).

COVERAGE BY OTHER PAYERSState Medicaid programs appear to have broad

coverage of outpatient immunosuppressive drugs(31). Although prescription drug coverage is anoptional Medicaid service, virtually all States in-clude it (48).11 A 1990 survey of 10 State Medicaidprograms, which examined their ESRD coverageand payment practices, found that all surveyedStates covered and paid for immunosuppressive

g~e c~ge reduction rate is the percentage difference between a billed charge and the MedicarcAlowed charge. This calculation would not aPPIYdirectly to drugs obtained from hospital pharmacies, which are paid on the basis of their own costs. For the purposes of this repoz however, it wasassumed that Medicarwd.lowed costs were lower than patient-reported charges by a similar amount.

g“Assignment’ refers to a provider’s agreement to accept the Medicare-allowed charge as payment in full and to bill Medicare for reimbursementon the beneficiary’s behalf.

Ime H~thcweF~cing Aws@ationes~tes tit me ave~ge ann~ reco~~ (composite) rate for Ididysis is approximately $lg,~ (17).

The beneficiary’s coinsurance liability is 20 percent of this amount, or $3,800.llAs of Oct. 1, 1987, 14 States offered ~s s~im to categofi~y needy o~y, while 37 Sutes offered services to both the categoric~iy and medically

needy population (48).


drugs for eligible Medicaid recipients (26). How-ever, there are some limitations to Medicaid cover-age that may burden some patients. Twelve States,for example, limit the number of prescriptions permonth that Medicaid will reimburse (20).12

Private insurance coverage for outpatient im-munosuppressive drugs also seems to be fairlycomprehensive. Blue Cross and Blue Shield plansand commercial insurers generally have policies thatcover any medically necessary outpatient drugs (13).A 1989 Bureau of Labor survey of full-time employ-ees, for example, found that 96 percent had prescrip-tion drug coverage through their employer-basedinsurance (5a).

ASSESSING THE ADEQUACYOF COVERAGE

An estimated 31,000 Medicare beneficiaries werealive with functioning grafts in 1988 (see table 10,

mainder of this chapter is top. 20). The goal of the reestimate how many of these beneficiaries haveinadequate coverage of outpatient immunosuppressives,suggesting that unless they have high incomes theymay have impaired financial access to these drugs.

Extent of Coexisting Private Coverage forMedicare Recipients

Overall insurance coverage for outpatient im-munosuppressive medications in the year followingthe transplant appears to be fairly adequate, sinceMedicare covers the drug during that time andprivate insurance is often still in effect as well.However, in the long term the number of benefici-aries at risk of significant out-of-pocket costs forthese drugs could be substantial if they have no othersource of coverage.

In 1985, the National Task Force on OrganTransplantation concluded that approximately 25percent of transplant recipients had no coverage ofimmunosuppressive drugs by private insurers, or byMedicaid or other State programs (59). More recentinformation from the U.S. Health Care FinancingAdministration (HCFA) and from the Battelle HumanAffairs Research Centers (see box A) provideinsights into the current insurance status of Medicarekidney transplant recipients. (Kidney transplants

account for that vast majority of Medicare-coveredtransplants (95 percent in 1988).)

A 1988 survey of kidney transplant patients byBattelle found that approximately 13 percent ofthese patients had no third-party coverage of theirimmunosuppressives other than Medicare (7). Two-thirds (67 percent) of the surveyed patients in thisstudy said that financial assistance was provided byprivate insurers, and another 20 percent receivedMedicaid benefits. Overall, slightly less than 25percent reported difficulty with paying for theirimmunosuppressive drugs.

In contrast, HCFA examined 5 years of data(1984-88) on Medicare enrollees receiving kidneytransplants and found that 37 percent of thesepatients had private insurers as primary payers (17).The Battelle study may possibly overstate coverage,if uninsured people were undersampled,13 while theHCFA number is probably an underestimate since itdid not count patients whose private coverage had

IzSome of ~e= Stites ~rmit exceptions to the limit if prior authorization k obtid (20).lssome ex~ &fieve that the Battelle sample of 258 patients overrepresents well-immwi populations and that therefore the percentage with

third-party coverage would be less than the estimated 67 percent (25,28).

Chapter The Adequacy of Current Medicare Coverage of Immunosuppressive Therapy ● 35

Table 16-Kidney Transplant Patients’ Risk of Out-of-Pocket Liabilities for Immunosuppressive Drugs

Percentage oftotal kidney

Post-transplant period

Insurance status transplants Less than 1 year 1-3 years More than 3 years

Beneficiary obligations/degree of financial risk

Medicare/Medicaida 20% No coinsurance obligations/ Same as less than 1 year Same as less than 1 yeargenerally minimal out-of- (Low risk group) (Low risk group)pocket expenses(Low risk group)

Medicare/private 37 to 67% If Medicare primary, private Same as less than 1 year Coinsurance obligations orinsurance coverage wraps around-no but Medicare is primary liable for premium or full

coinsurance obligations payer for most cost of drug(Low risk group) beneficiaries during this (Medium to high risk

If Medicare secondary, period group)

generally third-party (Low to medium risk

average of drug benefits— group)

insurance obligations(Medium risk group)

Subtotal 57 to 87%Medicare only 13 to 43% Premium and coinsurance Liable for full cost of drug Same as 1 to 3 years

obligations (High risk group) (High risk group)(Medium risk group)

Totai 100%aSome Medicaid programs have dollar limits and limits on number of scripts, which would affect adequacy of outpatient immunosuppressive drugs for theserecipients.

SOURCE: Office of Technology Assessment, 1991, based on data from the Health Care Financing Administration (1 7) and Battelle Human Affairs ResearchCenters (7).

become secondary. Thus, it is reasonable to assumethat the true percentage of beneficiaries with third-party coverage (in addition to Medicare) is some-where between 37 and 67 percent. Obviously, thelower the estimate of additional financial assistance(other than Medicare), the greater the pool ofpatients experiencing potential difficulty with pay-ing for their immunosuppressive medications.

Risk of High Drug-Related Expenses

Medicare-Only Recipients

The different categories of insurance coverage areassociated with different risks of high out-of-pocketexpenses for immunosuppressive drugs. The groupfor whom this risk is simplest to predict are thoseMedicare beneficiaries with no other insurance. If atransplant recipient has only Medicare, he (or she) isat medium risk of financial strain in the first year,when he must pay coinsurance on the drugs. He is athigh risk thereafter, because he must pay the full costof the drugs. Extrapolating from the Battelle andHCFA data, between 13 and 43 percent of Medicaretransplant recipients are in this group (table 16).

Medicare/Medicaid Recipients

A second group of beneficiaries-about 20 per-cent of Medicare transplant recipients—are thosewho are eligible for Medicaid as well as Medicare.These beneficiaries are generally at low risk offinancial strain attributable to the cost of immunos-uppressive drugs, because Medicaid usually paysfor the coinsurance and the full drug costs even whenMedicare drug coverage ends. Exceptions to thisgeneralization might be beneficiaries who requiremultiple drugs in addition to their immunosuppres-sive and who live in States that limit the number ofprescriptions covered under Medicaid.

Medicare/Private Insurance Recipients

The third major group of beneficiaries, constitut-ing between 37 and 67 percent, are those with privateinsurance in addition to Medicare. These benefici-aries are at low to medium risk of financial strain inthe first year on immunosuppressives. For many ofthese beneficiaries, Medicare is the secondary payerduring this time. This group would have to pay anydrug coinsurance required by their private payer whois the primary payer. For other beneficiaries, Medi-care is the primary payer; this group is at low risk


during the first year, when Medicare pays mostdrug-related costs and the private payer picks up theMedicare-required coinsurance.

From the end of the first to the third yearpost-transplant, all beneficiaries with private insur-ance are at medium risk of financial strain. Duringthis time, Medicare does not cover the drugs; privatepayers would cover the cost, but the beneficiarywould be liable for any coinsurance.

The period of greatest overall financial vulnera-bility for this group of beneficiaries is that beginningat 3 years post-transplant, when about half of kidneytransplant of recipients become ineligible for Medi-care (17). The remainder retain eligibility (due tocontinued disability or age) but have no drugcoverage. At this time, individuals with privateinsurance may become responsible for:

●

●

●

copayment amounts, if a private insurance wasavailable through the employer or spouse’semployer;premium and copayment amounts, if the patientwas no longer employed and was able to pur-chase an individual policy;14 orthe full cost of the drug, if the patient lost pri-vate insurance and was unable to purchaseinsurance.

Note that although Medicare-only beneficiariesdiffer substantially in risk from those who also haveprivate insurance before 3 years post-transplant,after this time many beneficiaries in that group alsolose all Medicare eligibility.

Both the Battelle and HCFA numbers on insur-ance coverage are based on information gatheredwithin 15 months after the transplant. A recipient’sprivate insurance status can change over the longterm, however. If the recipient (or the recipient’sspouse) changes jobs, for example, the recipient maybe unable to obtain full insurance coverage throughthe new employer.

There is no information available on the extent towhich transplant recipients change employmentpost-transplant and what occurs regarding continuedinsurance coverage and copayment/premium amounts.

During the period in which Medicare insures thepatient through ESRD eligibility, the patient isprotected from the loss of employment or insurancecoverage due to a law that states that employerscannot provide different insurance plans on the basisof ESRD status (Sec. Sec. Act sec. 1862). However,after Medicare eligibility is terrninated 3 yearspost-transplant, the recipient is no longer consideredto have ESRD, and therefore the possibility existsthat a different policy (or no policy at all) could beoffered by employers to kidney transplant recipients.

Effects of Expanding Coverage

Assuming that these kidney transplant-relatedpercentages are similar for Medicare recipients withsuccessful grafts of other organs, it appears thatapproximately 13 to 43 percent of transplant recipi-ents have no insurance coverage after the l-yearcoverage period by Medicare. These percentagesmay increase over time if recipients lose their privatethird-party insurance. Since recipients with Medicare-only coverage would be responsible for the fill costof the outpatient immunosuppressive drug ther-apy, 15 extending Medicare’s coverage of outpatient

immunosuppressive drug therapy would alleviate, toa large extent, the financial burden presently experi-enced by this group.

The percentage of patients eligible for transplantswho have insufficient coverage for drugs could beeven greater. It is possible that the patient’s abilityto pay for post-transplant immunosuppressives isconsidered either implicitly or explicitly when apatient is considering, or being considered for, atransplant. Thus, eliminating the limit may furtherensure that all Medicare beneficiaries who arepotential transplant recipients have equal access totransplantation.

On the other hand, current financing overallappears fairly adequate for 57 to 87 percent ofMedicare transplant recipients, at least in the shortterm. For most of these recipients, expandingMedicare’s coverage of outpatient irnmunosuppres-sion would shift financing from other sources toMedicare.

ld~e ~re~u ~o~t~ of individ~ fimmce ~licies ~e I&ely to be ve~ ~gh for ~mptit recipients, where insurance Cm be purchased at ~.15Mmy ~msplant patients might not be able to obtain private insurance because Of the preexisting condition of ES~.

Chapter 5

Medicare Expenditures forImmunosuppressive Drug Therapy

ContentsPage

CURRENT EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39FACTORS INFLUENCING FUTURE EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .40

Changes in the immmosuppressive Drug Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Patient Demand and Patient Mix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Patient Adherence to Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Manufacturers’ Incentives for Technological Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Other Program Costs Associated With Expanded Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

FigureFigure Page

3. U.S. Kidney Transplants Performed, and Persons on Waiting List 1984-89 . . . . . . . . . . . . . 41

TablesTable Page17. Estimated Number of Transplant Recipients Receiving Medicare Payment of

Immunosuppressive Drugs, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3918.Estimated U.S. and Medicare Expenditures for Outpatient Immunosuppression

Drug Therapy, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Chapter 5

Medicare Expenditures for Immunosuppressive Drug Therapy

This chapter commences with a baseline estimateof current spending for outpatient immunosuppress-ive drugs in the United States and under theMedicare program. The chapter then describesfactors influencing drug costs, the potential pool ofpatients requiring post-transplant immunosuppressivedrugs, and overall future Medicare expenditures.

CURRENT EXPENDITURESMedicare does not currently play a major role in

financing post-transplant immunosuppressive ther-apy. Medicare covers and pays for imrmmosuppres-sive drugs for only an estimated 19 percent ofMedicare-covered functioning graft recipients (table17). Likewise, Medicare pays the immunosuppres-sive drug costs for only about 13 percent of the U.S.total number of living, functioning graft patients.This small proportion is due largely to the l-yearlimit on coverage of immunosuppressives.

Another element of financing that influencesthese percentages is the mandatory requirement thatMedicare be the secondary payer for the first 18months of a patient’s eligibility under the End-StageRenal Disease (ESRD) Program.l In other words,even though an ESRD patient is entitled to Medicarecoverage once determined eligible for Medicarebenefits, Medicare will pay for covered servicesprovided these beneficiaries only after any existingprivate insurance policies have paid. Approximately37 to 67 percent of Medicare-covered kidney trans-plant recipients have private insurance during thisperiod (see ch. 4).2 Therefore, even within the l-yearcoverage period for outpatient immunosuppressives,Medicare is not paying for the drugs administered tothese ESRD kidney transplant recipients because ofthe mandatory secondary payer requirement.

The Office of Technology Assessment (OTA)estimates that national spending for outpatientimmunosuppressive agents was between $185 and$280 Won in 1988 (table 18). Medicare-relatedexpenditures, including all beneficiary liabilities,were an estimated $20 to $30 million, or nearly 11

percent of total U.S. spending in this area (7,17).These estimates are based on the assumption that allfunctioning graft patients are on a cyclosporineprotocol costing between $4,000 to $6,000 per year(see ch. 3).3 Because of patient copayments, actualMedicare program outlays would have been some-what less than 80 percent of the $24 to $36 million,or under roughly $20 to $30 million.

These estimates are a reasonable first approximat-ion of national and Medicare expenditures for

Table 17—Estimated Number of Transplant RecipientsReceiving Medicare Payment of Immunosuppressive

Drugs, 1988

Proportion with Medicare drugpayment as a percent of:

All Medicare- All U.S.covered transplant transplant

Graft type Numbera recipients recipients

Kidney . . . . . . . . . .Heart . . . . . . . . . . .Liver . . . . . . . . . . . .Heart/lung . . . . . . .Lung . . . . . . . . . . . .Pancreas . . . . . . . .Bone marrow. . . . .

Total . . . . . . . . .

5,850’95

5Co00

305,980

19704548——.5519

15%3

<1———

113

ls~m 1982, Meficwe has been tie man~to~ SeCon@ payer for ES~ beneficifies for the fiist 12 months of eligibility. A provision in the

Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508) extended this limit to cover the first 18 months of eligibility, effective Jan. 1, 1991.k contrast only 3 percent of the working aged have selected Medicare as secondary payer (37).sTh,is ~suption should result in an overestimate of expenditures, since a few patients are not on cyclosporine-based protocols.

–39–


Table 18—Estimated U.S. and Medicare Expenditures for OutpatientImmunosuppressive Drug Therapy, 1988

Number ofrecipients with

functioning cost of Total expendituresgraft therapy (in millions)a

United States . . . . . . . . . . . . . 46,605 b $4,000-$6,00W $185-$280Medicare-covered . . . . . . . . . 5,98@ $4,000-$6,00& $24-$36”aAssumes that 100 percent of functioning graft patients are on cyclosporine drug therapy. This overstates actualexpenditures, since some kidney transplant recipients are on traditional therapies with lower costs and a few are noton outpatient immunosuppressive therapy.

bsee table 11.cSee oh. 3.‘See table 16.elncludes all beneficiary liabilities. Actual program outlays would be lower.


outpatient immunosuppressive medications in 1988;1991 expenditures would be somewhat higher, dueto the continuing increase in the number of organtransplant procedures. The Medicare figure is abaseline estimate of 1988 expenditures (includingbeneficiary liabilities). It is based on coverage as setout in current law, under which outpatient immunos-uppressive drug coverage is limited to one year,starting with the patient’s discharge date from ahospital or designated transplant center after aMedicare-covered organ transplant.

Note that these figures are not estimates of theoverall cost of immunosuppressive therapy. They donot, for instance, encompass other services related toimmunosuppressive therapy, such as a hospitaloutpatient visit or physician immunosuppressivedrug management services. They also do not accountfor the costs of drug therapy in organ rejectionepisodes or the costs of treating side effects causedby immunosuppressive drugs. Other factors thatmight affect these expenditure estimates includepatient behavior, such as noncompliance; variationin patient treatment; and provider prescribing (e.g.,conversion from one therapy to another).

FACTORS INFLUENCINGFUTURE EXPENDITURES

The effect of any particular change in Medicarepolicy regarding irnrnunosuppressives depends inpart on a number of outside factors, which can beseparated into two groups. The first set of factorsaffects the cost of the drug product. A second set offactors affects the potential pool of transplantpatients receiving Medicare coverage for imrnuno-suppression. Both affect the overall cost of provid-ing this therapy.

No definitive empirical evidence is available onthe precise effect of any one of these factors oncurrent or future Medicare expenditures. Nonethe-less, the effects could be substantial. Nearly half ofthe factors could influence Medicare outlays in thefuture even if there are no changes in coveragepolicy. Other factors are issues to consider only ifMedicare’s policy for coverage of outpatient im-munosuppressives is expanded.

Changes in the ImmunosuppressiveDrug Market

Even without any changes in policy, futureMedicare expenditures for outpatient irnmunosup-pressives could be significantly affected by changesin the market. For example, any new products nowunder development (e.g., the drug FK-506) have thepotential to be more costly than cyclosporine whenapproved for clinical use. Medicare outlays foroutpatient irnmunosuppressives may increase withthe use of more costly drugs, even if coverage policyis unchanged from the l-year coverage limit. Alterna-tively, a greater choice of drugs and the developmentof lower-cost protocols could reduce Medicareexpenditures.

Other changes in drug pricing could occur whenthe patent for cyclosporine expires in 1995. Afterthat time, the potential for the availability of lessexpensive generic drugs also exists. Whether thispotential will be realized depends on whether otherpharmaceutical manufacturers decide to enter theirnrnunosuppressive market. The extent to whichfuture costs are lower also depends on Sandoz’ ownreliance on revenues from this drug. Some researchsuggests that Sandoz may maintain a high price for

Chapter S-Medicare Expenditures for Immunosuppressive Drug Therapy . 41

Figure 3-U.S. Kidney Transplants Performed, and Persons on Waiting List, 1984-89

18,000

16,000

14,000

12,000

10,000

8,000

6,000

I 16,363

13 ,947

1 1 , 8 7 3

10 ,605

9 ,761

8 , 5 6 2

>

6 , 9 6 8[

1984 1985 1986 1987 1988 1989

~ Persons on wait ing l ist + Persons with kidney transplants

SOURCE: Office of Technology Assessment, 1991, based on data provided by the Health Care FinancingAdministration.

cyclosporine if this product is a major source ofrevenues to the company (10,50).

Changes in the way existing drugs are used couldalso affect the cost of therapy and Medicare outlays.For example, the use of OKT-3 as an outpatientprophylactic would tend to increase the cost ofoutpatient immunosuppressive therapy. Minnesota’santilymphocyte globulin may also be used morewidely once it receives approval from the U.S. Foodand Drug Administration, although this is morelikely to affect inpatient costs than outpatientmaintenance expenses.

Innovations and substitutions can have significantand not always consistent consequences for the costof irnmunosuppressives. For example, if a new drugis more expensive but reduces the need for adjunctdrugs, or reduces rejection and complications-related expenses, it could result in lower treatmentcosts per patient.

Patient Demand and Patient Mix

It is possible that patient selection for a transplantprocedure may be influenced, however indirectly, bythe ability of the patient to pay for expensiveoutpatient therapy following the transplant. To this

extent that this is so, more comprehensive outpatientimmunosuppressive drug coverage by Medicaremay increase patient demand, either directly or byincreasing physician recommendations for trans-plants.

Despite possible higher demand, the limitedsupply of suitable organs will continue to constrainthe number of transplant procedures performed.Even with existing demand, for example, the numberof persons on the waiting list for kidney transplantsis much higher than the number of persons trans-planted (figure 3). The existing unmet need fordonated kidney organs is projected to continuethrough the decade (18,21). Thus, expanding irn-munosuppressive coverage may increase the de-mand for organ transplants, but it will have littleeffect on the actual number of transplants performed.

Although the number of transplants may not beinfluenced by Medicare’s coverage policy for outpa-tient irnmunosuppression, the mix of patients receiv-ing transplants may be affected. The criteria bywhich one patient is selected over other another fora transplant are broad and complex, and inability topay for drugs in the future would rarely, if ever, bean explicit criterion (30,38). Nonetheless, current


discrepancies due to insurance status and race havebeen noted in the treatment of patients for kidneyfailure (30,58). Broader Medicare drug coveragemight indirectly improve the equity of access totransplants. If Medicare’s coverage limit of 1 yearwere eliminated, for example, patients who are nowunable to afford the expense of these drugs followingkidney transplant may be more likely to consider theprocedure rather than continue on dialysis. Simi-larly, transplant centers and physicians may changetheir evaluation process for selecting transplantcandidates.

The implications that changes in patient mix mayhave for Medicare outlays overall are not easilypredicted; expenditures may either increase or de-crease depending on the resulting differences in thehealth status, age, or other characteristics of the newtransplant population served. Any effect specificallyon Medicare drug expenditures, however, wouldprobably be small.

Patient Adherence to Therapy

Expanded coverage may increase patient adher-ence to the prescribed drug regimen, resulting inmore regular and continued use of the immunosup-pressive drugs that the patient requires. The outcomemay be fewer episodes of acute organ rejection,fewer hospitalizations, and possibly fewer patientsreturning to dialysis. Expanding Medicare’s cover-age policy may thus reduce certain other Medicareexpenditures.

Estimating the number of organ rejections thatresult from nonadherence to therapy, due to afinancial inability to obtain drugs, is difficult. On theone hand, the American Society of TransplantSurgeons (ASTS) believes that nearly 47 percent oftransplant recipients have difficulty paying fordrugs, implying a high potential inability to obtaindrugs (4)4 On the other hand, U.S. Health CareFinancing Administration (HCFA) data show thatless than 3 percent of all graft failures occur as aresult of patient nonadherence to therapy for anyreason (17).5 Advocates argue that the HCFA data is

poorly coded (25,28). A National Kidney Founda-tion survey suggests that nonadherence to therapymay account for almost 10 percent of kidney graftlosses after the frost year (25).

Thus, the extent to which impaired financialaccess leads to organ rejection is highly uncertain.Furthermore, perfect patient adherence to the pre-scribed protocol is in no way guaranteed even ifMedicare’s coverage is expanded. Some patientsvoluntarily stop immunosuppressive therapy be-cause of their perceived poor quality of life (7).Nonetheless, it is likely that at least some of the costsassociated with organ rejection (e.g., additionalhospital admissions, return to dialysis for kidneygraft failure patients, and other costs associated withrejection episodes) would be reduced with expandedMedicare coverage.

Despite the lack of precise data, tracing out a verysimplistic hypothetical scenario is a useful exerciseto explore the potential magnitude of savings. If,hypothetically, as many as 10 percent of all graftfailures were caused by the patient’s financialinability to adhere to the drug regimen, this wouldmean that beyond the frost year of a transplant,approximately 268 Medicare recipient renal graftfailures per year would be associated with nonadher-ence.G In the case of patients with ESRD, increasedgraft failure results in more patients returning todialysis, at an annual average cost to Medicare(including patient liabilities) of approximately $19,000per patient each year (17). Thus, under this hypothe-sis, a Medicare policy that eliminated all graftfailures associated with nonadherence would havean offsetting program savings of roughly $5 millionper year. Under a hypothesis of fewer graft failuresdue to nonadherence, offsetting savings would becorrespondingly lower (e.g., if 3 percent failed forthis reason, eliminating all of these failures wouldsave approximately $1.5 million). Preventing hospi-talizations due to acute organ rejection would resultin some additional savings.

Another way to view the potential savings fromaverting graft failure is to examine the relative

4~em ~e some ~tenti~ ~roblem~ ~th this fiWe. It is based on a s~ey of s~geons’ opinions regartig the percentage of their patien~ who hWe

financial difficulty, not a survey of the patients themselves. In additiom the analysis of this sumey averaged all of the surgeon-reported percentagestogether, which results in an accurate aggregate percentage only if all surgeons have the same number of patients.

sBased on ~ ~sessment of ~~ey graft fail~e c~es from the @ansplant follo~p forms for all transplant ftid~s oCCWTkg dtig the Calendar

years 1985 through 1988. Of the 5,580 graft failures in which a failure code was submitted, 3.3 percent were due to poor patient compliance withimmunosuppressive therapy (17).

%ere were an average of 2,677 kidney graft failures per year from 1985 to 1988 (17).

Chapter Medicare Expenditures for Immunosuppressive Drug Therapy . 43

benefits of successful transplantation. HCFA hasfound that transplants pay for themselves whencompared with dialysis within 3.7 years for living-donor kidney patients and 4.7 years for cadaver-donor kidney patients (17).7

Manufacturers’ Incentives forTechnological Developments

Medicare coverage policy changes will probablyhave only a slight effect on overall level of use ofoutpatient immunosuppressive drugs. Thus, cover-age policy changes will probably also have littleeffect on manufacturers’ incentives to pursue tech-nological developments. The main effect might be toremove any existing disincentive against developingnew immunosuppressives that would be expensiveon the market, since Medicare currently pays fairlygenerously for covered drugs.

Changes in payment policy for the drugs, on theother hand, could affect development incentivessubstantially. Studies have shown that industry isextremely sensitive to changes in method of pay-ment in terms of pricing strategies and incentives fordeveloping emerging technologies (51). The precisedirection of the incentives would depend on thepayment policy adopted.

Other Program Costs Associated WithExpanded Coverage

If coverage were expanded past the current 1-yearlimit, Medicare outlays would increase due to thecost of the outpatient immunosuppressive drug. Inaddition, Medicare expenditures would result fromany related increase in services provided by physi-cians and outpatient hospital facilities.

Furthermore, if coverage for drugs were ex-panded, Medicare might come under pressure tocover other outpatient services that are required bytransplant recipients or other Medicare benefici-aries. For example, some transplant recipients re-quire outpatient nonimmunosuppressive prescrip-tions to prevent development of secondary compli-cations (e.g., hypertension, stomach ulcers, and bonedisorders). Total program costs might increase ifcoverage were extended to include these drugs aswell. Similarly, easing financial access to drugs fortransplant recipients through measures such asreducing coinsurance obligations might lead otherMedicare beneficiaries (e.g., dialysis patients) toargue that their coinsurance obligations should bereduced as well.

7~e ~sts fi MS Comp~son did not ~clude ~unosupp~ssive drug costs for ~~plant patients or costs of erydlropOiedIl fOr dkdySiS.

Appendix A

Method of the Study

History of the Project

The origins of this study lie in the passage of theMedicare Catastrophic Coverage Act of 1988 and itssubsequent repeal in 1989. That act included a broadmeasure that would have extended Medicare coverage tooutpatient prescription drugs. In doing so, it would haveresulted in greater coverage of outpatient immunosup-pressive drugs (now limited to coverage for only 1 year),and it also would have established a home intravenousdrug therapy benefit. With the repeal of that act, these twospecific coverage expansions once again became issuesbefore Congress.

In April of 1990, the Senate Committee on Financeasked the Office of Technology Assessment (OTA) torevisit these two topics and the relevant coverage andpayment issues they involve. The proposed assessmentwas approved by OTA’s congressional TechnologyAssessment Board on June 2, 1990, and it began thefollowing month. The assessment was conducted in twoparts leading to two separate reports, one on immunosup-pressive drugs and one on home intravenous drugs.

Conduct of the ImmunosuppressiveDrug Study

The preliminary draft of the study of immunosuppres-sive drugs was prepared under contract to OTA by DianeBurnside Murdock of Falls Church, Virginia.1 During herpreparation of the draft, the contractor consulted withconsumer and professional organizations, Federal andState agency personnel, health services researchers,independent health professionals, and other interestedindividuals in order to identify critical issues and relevantsources of data. The contractor also consulted frequentlywith OTA staff regarding the scope and directions of thestudy.

In addition, the contractor conducted literature reviewsand received a substantial amount of data from a varietyof individuals and organizations. Some of these data werepreviously unpublished, and OTA is indebted to theseindividuals and organizations for their cooperation andassistance.

Most major OTA studies have a panel of outsideexperts chosen to advise OTA staff on the study andensure that all significant points of view are represented.This study was originally intended to be performed incoordination with an ongoing study of drug research anddevelopment, with the same advisory panel. It transpired,however, that the two studies had little directly incommon, and the advisory panel for the earlier studyproved inappropriate for the existing study. Because ofthe short time me for this study, it also proved infeasibleto appoint a separate advisory panel at the point for thecurrent study.

To ensure that sufficient expert advise was obtainedand that all viewpoints were represented, OTA staff tookespecially great care to involve a variety of outsidepersons in the review of the draft material. Somepreliminary findings from the report were presented inorganized informal discussions with staff of the U.S.Health Care Financing Administration, the Urban Insti-tute, and OTA. A revised draft was then sent to over 40experts in the field, including medical providers, patientorganizations, health care payers, researchers, and otherswith interest and knowledge in the area of organtransplantation and immunosuppressive therapy for theirreview and comment. The final draft, incorporatingrevisions based on reviewers’ comments, was transmittedto the Technology Assessment Board in May 1991.

1 Dime BurnSide Murdock is a consultant in health pOficy and PI arming in the Washington DC area. Before turning to consulting she held a numberof positions in the health policy field, including senior policy analyst at the Prospective Payment Assessment Commission and senior budget analystat the Congressional Budget Office.

4’1–

Appendix B

Medicare Payment Policy for Organ Transplant Procedures

Service Payment recipient Payment method

Organ procurement . . . . . . . . Hospital . . . . . . . . . . . . . . . . . . . . .

Physician . . . . . . . . . . . . . . . . . . .

Transplant procedure . . . . . . Hospital . . . . . . . . . . . . . . . . . . . . .

Physician:Heart, liver, and bone

marrow transplants . . . . . . .

Kidney transplants . . . . . . . . .

Paid through Medicare Part A based on actual Costs.e

Charges considered to be part of hospital costs and paid as partof those rests if organ obtained from a cadaver. Chargesreimbursed directly on the basis of customary, prevailing, andreasonable charges if living-donor organ.

No beneficiary coinsurance required.Paid through Medicare Part A’s prospective payment system for

hospital inpatient Care.b

Paid through Medicare Part Bon basis of customary, prevailing,and reasonable charges.

Patient pays Part B deductible and coinsurance.

Payment is the lesser of the customary/prevailing/reasonablecharge or a maximum amount in a carrier’s area for renaltransplant surgery.

Patient pays Part B deductible and coinsurance.aF~r bone marrow transplants, the payment for acquisitions is incl~ed in the diagnosis-related group payment Under the prOS@iVe payment SyStem.bA few hospit~ls (e.g., ~fiain ~nmr s~alty hospitals) are not paid under the prosp~tive payment system. Inpatient care in these hospitals k based On

historical hospital-specific costs.

SOURCE: U.S. Health Care Financing Administration, Bureau of Policy Development, Division of Dialysis and Transplant Payment Policy, 1991.

4 8 –

Appendix C

Glossary of Abbreviations and Terms

A L G —A M A —ASTS —ATG —AWP —AZA —CPT —C S A —DHHS —

ESRD —F D A —

HCEA —OKT-3 —OTA —

PRED —UNOS —

Abbrevia.tions

Antilymphocyte globulinAmerican Medical AssociationAmerican Society of Transplant SurgeonsAntithymocyte globulinAverage wholesale priceAzathioprineCommon Procedure TerminologyCyclosporineU.S. Department of Health and Human Serv-icesEnd-stage renal diseaseFood and Drug Administration (PublicHealth Service)Health Care Financing Administration (DHHS)Orthoclone OKT-3 (muromonab CD3)Office of Technology Assessment (U.S. Con-gress)PrednisoneUnited Network of Organ Sharing

Terms

Adjunct prescription drugs: Medications that are usedas part of the immunosuppressive therapeutic regimenbut that are not themselves primary post-transplantimmunosuppressive drugs.

Allogeneic bone marrow transplant: A procedure inwhich the bone marrow is obtained from a healthydonor and delivered by intravenous infusion into therecipient.

Aplastic anemia: A blood disorder in which the bonemarrow fails to produce adequate numbers of red bloodcells.

Assignment: A process whereby a Medicare beneficiaryassigns his or her right to payment from Medicare to thephysician or supplier. In return, the physician orsupplier agrees to accept Medicare’s reasonable (i.e.,allowed) charge as payment in full for covered services.The physician (or supplier) may not charge thebeneficiary more than the applicable deductible andcoinsurance amounts. For physicians and supplierswho do not accept assignment, payment is made byMedicare directly to the beneficiary, who is responsiblefor paying the bill. In addition to the deductible andcoinsurance amounts, the beneficiary is liable for anydifference between the physician’s actual charge andMedicare’s reasonable (allowed) charge.

Autologous bone marrow transplant: A procedure inwhich a patient’s own bone marrow is extracted,treated, and then restored to the patient.

Balance billing: In the Medicare program, the practice ofbilling a Medicare beneficiary in excess of Medicare’sallowed charge. The “balance billing’ amount wouldbe the difference between Medicare’s allowed chargeand the physician’s (or supplier’s) billed charge.

Cadaveric kidney: A kidney obtained from a deceaseddonor.

Carrier: A fiscal agent (typically a private insurancecompany) under contract to the Health Care FinancingAdministration to administer Medicare Part B benefits.

Coinsurance: That percentage of covered hospital andmedical expenses, -after subtraction of any deductible,for which an insured person is responsible. UnderMedicare Part B, after the annual deductible has beenmet, Medicare will generally pay 80 percent ofapproved charges for covered services and supplies; theremaining 20 percent is the coinsurance, which thebeneficiary pays.

Conventional immunosuppressive therapy: See tradi-tional immunosuppressive therapy

Customary, prevailing, and reasonable charge method(Medicare): The method used by Medicare carriers todetermine the approved charge for a particular Part Bservice from a particular physician or supplier. Underthis method, the approved charge is limited to thelowest of the physician’s actual charge for the service,the physician’s customary charge for the service, andcharges by peer physicians or suppliers in the samelocality. If necessary, prevailing charges are adjustedby the Medicare Economic Index.

Deductible: The Medicare Part B deductible is theportion of approved charges (for covered services eachcalendar year) for which a beneficiary is responsiblebefore Medicare assumes liability. The deductible is setat $100 in 1991.

Functioning graft: An implanted organ that is stillfunctioning to some capacity of its purpose.

Graft: An implanted organ.Histocompatibility: The genetic compatibility between

the donor and recipient, which determines in partwhether an organ graft will be rejected.

Hypertension: High blood pressure.Immunology: The science concerned with the study of

the immune system.Immunosuppressive drug: Any drug that suppresses the

natural reactions of the immune system. In organtransplants, such drugs can reduce or prevent thebody’s immune system’s rejection of the organ as aforeign substance.

In vitro: Outside of the living body and in an artificialenvironment.

Medicare coverage: Refers to the health care benefitsavailable to eligible Medicare beneficiaries.


Nephrotoxic: Poisonous to the kidney.Nonrenal transplant: Any transplant other than a kidney

transplant (e.g., heart, liver).Organ graft failure: The failure of an implanted organ

to function and fulfill its purpose. For kidney transplantpatients, this means a return to dialysis until anotherorgan is available. For other transplant patients, organfailure could mean death unless another organ isavailable for transplantation.

Organ rejection: A condition caused by the incompati-bility between an organ recipient’s genetic makeup andthe donor’s genetic makeup, leading the recipient’simmune system to act against the transplanted organ. Ifuntreated, organ rejection leads to organ failure.

Parenteral drug administration: Any non-oral meansof introducing a drug into the body (e.g., by injection).

Prophylactic therapy: Preventive measures to inhibitdisease. For transplant recipients, prophylactic immunos-uppressive therapy is that which prevents or inhibitsorgan rejection.

Protocol: A standard course of therapy, designed toachieve certain ends.

Reasonable charge (Medicare): Payment on the basis ofcustomary, prevailing, and reasonable charges.

Reasonable cost-based reimbursement (Medicare): Amethod of payment for health care services in whichhospitals (or other providers) are paid their incurredcosts of treating patients after the treatment hasOccurred.

Regimen: Any plan of therapy designed to achievecertain ends.

Renal: Of or relating to the kidney.Successful graft: An organ that functions effectively.Syngeneic: In bone marrow transplantation, refers to a

transplant involving a donor and recipient with identi-cal genetic makeups.

Traditional immunosuppressive therapy: Drug ther-apy to prevent organ rejection using azathioprine andprednisone.

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