Federal Register, Volume 75, Number 226, November 24, 2010, Pages 71519-72652 Page: 71,952
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No. 226/Wednesday, November 24, 2010/Rules and Regulations
drugs with high pharmacy overhead
costs and one for drugs with low
pharmacy overhead costs (73 FR 41492).
We noted that we expected that CCRs
from the proposed new cost centers
would be available in 2 to 3 years to
refine OPPS drug cost estimates by
accounting for differential hospital
markup practices for drugs with high
and low overhead costs. After
consideration of the public comments
received and the APC Panel
recommendations, we finalized a CY
2009 policy (73 FR 68659) to provide
payment for separately payable
nonpass-through drugs and biologicals
based on costs calculated from hospital
claims at a 1-year transitional rate of
ASP+4 percent, in the context of an
equivalent average ASP-based payment
rate of ASP+2 percent calculated
according to our standard drug payment
methodology from the final rule claims
data and cost report data. We did not
finalize our proposal to split the single
standard "Drugs Charged to Patients"
cost center into two cost centers largely
due to concerns raised to us by hospitals
about the associated administrative
burden. Instead, we indicated in the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68659) that we
would continue to explore other
potential approaches to improve our
drug cost estimation methodology,
thereby increasing payment accuracy for
separately payable drugs and
biologicals.
In response to the CMS proposals for
the CY 2008 and CY 2009 OPPS, a group
of pharmacy stakeholders (hereinafter
referred to as the pharmacy
stakeholders), including some cancer
hospitals, some pharmaceutical
manufacturers, and some hospital and
professional associations, commented
that CMS should pay an acquisition cost
of ASP+6 percent for separately payable
drugs, should substitute ASP+6 percent
for the packaged cost of all packaged
drugs and biologicals on procedure
claims, and should redistribute the
difference between the aggregate
estimated packaged drug cost in claims
and payment for all drugs, including
packaged drugs at ASP+6 percent, as
separate pharmacy overhead payments
for separately payable drugs. They
indicated that this approach would
preserve the aggregate drug cost
observed in the claims data, while
significantly increasing payment
accuracy for individual drugs and
procedures by redistributing drug cost
from packaged drugs. Their suggested
approach would provide a separate
overhead payment for each separatelypayable drug or biological at one of
three different levels, depending on the
pharmacy stakeholders' assessment of
the complexity of pharmacy handling
associated with each specific drug or
biological (73 FR 68651 through 68652).
Each separately payable drug or
biological HCPCS code would be
assigned to one of the three overhead
categories, and the separate pharmacy
overhead payment applicable to the
category would be made when each of
the separately payable drugs or
biologicals was paid.
In the CY 2010 OPPS/ASC proposed
rule (74 FR 35332), we proposed to
redistribute between one-third and one-
half of the estimated overhead cost
associated with coded packaged drugs
and biologicals with an ASP, which
resulted in our proposal to pay for the
acquisition and pharmacy overhead
costs of separately payable drugs and
biologicals that did not have pass-
through payment status at ASP+4
percent. We calculated estimated
overhead cost for coded packaged drugs
and biologicals by determining the
difference between the aggregate claims
cost for coded packaged drugs and
biologicals with an ASP and the ASP
dollars (ASP multiplied by the drug's or
biological's units in the claims data) for
those same coded drugs and biologicals;
this difference was our estimated
overhead cost for coded packaged drugs
and biologicals. In our rationale
described in the CY 2010 OPPS/ASC
proposed rule (74 FR 35326 through
35333), we stated that we believed that
approximately $150 million of the
estimated $395 million total in
pharmacy overhead cost included in our
claims data for coded packaged drugs
and biologicals with reported ASP data
should be attributed to separately
payable drugs and biologicals and that
the $150 million serves as the
adjustment for the pharmacy overhead
costs of separately payable drugs and
biologicals. As a result, we also
proposed to reduce the costs of coded
drugs and biologicals that are packaged
into payment for procedural APCs to
offset the $150 million adjustment to
payment for separately payable drugs
and biologicals. In addition, we
proposed that any redistribution of
pharmacy overhead cost that may arise
from CY 2010 final rule data would
occur only from coded packaged drugs
and biologicals with an ASP to
separately payable drugs and
biologicals, thereby maintaining the
estimated total cost of drugs and
biologicals.
Using our CY 2010 proposed rule
data, and applying our longstanding
methodology for calculating the totalcost of separately payable drugs and
biologicals in our claims compared to
the ASP dollars for the same drugs and
biologicals, without applying the
proposed overhead cost redistribution,
we determined that the estimated
aggregate cost of separately payable
drugs and biologicals (status indicators
"K" and "G"), including acquisition and
pharmacy overhead costs, was
equivalent to ASP-2 percent. Therefore,
under the standard methodology for
establishing payment for separately
payable drugs and biologicals, we
would have paid for those drugs and
biologicals at ASP-2 percent for CY
2010, their equivalent average ASP-
based payment rate. We also determined
that the estimated aggregate cost of
coded packaged drugs and biologicals
with an ASP (status indicator "N"),
including acquisition and pharmacy
overhead costs, was equivalent to
ASP+247 percent.
While we had no way of assessing
whether this current distribution of
overhead cost to coded packaged drugs
and biologicals with an ASP was
appropriate, we acknowledged that the
established method of converting billed
charges to costs had the potential to
"compress" the calculated costs to some
degree. Further, we recognized that the
attribution of pharmacy overhead costs
to packaged or separately payable drugs
and biologicals through our standard
drug payment methodology of a
combined payment for acquisition and
pharmacy overhead costs depends, in
part, on the treatment of all drugs and
biologicals each year under our annual
drug packaging threshold. Changes to
the packaging threshold may result in
changes to payment for the overhead
cost of drugs and biologicals that do not
reflect actual changes in hospital
pharmacy overhead cost for those
products. For these reasons, we stated
that we believed some portion, but not
all, of the total overhead cost that is
associated with coded packaged drugs
and biologicals (the difference between
aggregate cost for those drugs on the
claims and ASP for the same drugs),
based on our standard drug payment
methodology, should, at least for CY
2010, be attributed to separately payable
drugs and biologicals.
We acknowledged that the observed
combined payment for acquisition and
pharmacy overhead costs of ASP-2
percent for separately payable drugs and
biologicals may be too low and
ASP+247 percent for coded packaged
drugs and biologicals with reported ASP
data in the CY 2010 claims data may be
too high (74 FR 35328). We stated that
a middle ground of approximately one-
third to one-half of the total pharmacyoverhead cost currently associated with
71952 Federal Register/Vol. 75,
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United States. Office of the Federal Register. Federal Register, Volume 75, Number 226, November 24, 2010, Pages 71519-72652, periodical, November 24, 2010; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc52807/m1/441/: accessed April 17, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.