Department of Health and Human Services 
OFFICE OF 
  
INSPECTOR GENERAL 
 
 
 
 
 
L C A
EAST  OSTLY  LTERNATIVE 
 
 
P : I
OLICIES    MPACT ON 
 
 
P C D
ROSTATE  ANCER  RUGS 
 
  C U
OVERED  NDER                  
 
M P B 
EDICARE  ART 
 
 
Daniel R. Levinson  
Inspector General 
 
November 2012 
OEI-12-12-00210   
   
EXECUTIVE SUMMARY  LEAST COSTLY ALTERNATIVE POLICIES:  
IMPACT ON PROSTATE CANCER DRUGS COVERED UNDER MEDICARE 
PART B, OEI-12-12-00210 
 
WHY WE DID THIS STUDY  
 
Between 1995 and 2010, certain prostate cancer drugs covered under Medicare Part B 
were subject to least costly alternative (LCA) policies, which based the payment amount 
for a group of clinically comparable products on that of the least costly one.  However, in 
April 2010, LCA policies for Part B drugs were discontinued in response to a court ruling 
stating that the use of an LCA policy was not authorized under Medicare law.  Recently, 
Congressman Ken Calvert expressed concerns that the withdrawal of LCA policies for 
prostate cancer drugs may have created an unintentional incentive for physicians to 
administer costlier drugs.  Congressman Calvert requested an examination of the policy 
withdrawal and its impact. 
 
HOW WE DID THIS STUDY 
 
For each quarter between the beginning of the third quarter of 2010 and the end of the 
second quarter of 2011, we identified the lowest Medicare payment amount among 
clinically comparable luteinizing hormone-releasing hormone (LHRH) agonists used to 
treat prostate cancer and calculated the amount that Medicare would have saved if the 
more expensive LHRH agonists had been reimbursed at these lower amounts.  To 
determine whether the withdrawal of LCA policies affected utilization patterns for LHRH 
agonists, we tracked quarterly shifts in utilization from 1 year before the policies were 
withdrawn to 1 year after. 
 
WHAT WE FOUND 
 
If LCA policies for LHRH agonists had not been rescinded, Medicare expenditures would 
have been reduced by $33.3 million over 1 year, from $264.6 million to $231.3 million.  
After LCA policies were removed, utilization patterns shifted dramatically in favor of 
certain costlier products.  However, the overall utilization of LHRH agonists to treat 
prostate cancer has been decreasing, a trend that began at least 1 year prior to elimination 
of LCA policies and continued for more than a year after.  
 
WHAT WE RECOMMEND 
 
Our results indicate that Medicare spending for LHRH agonists is higher in the absence 
of LCA policies.  We also confirmed changes in utilization patterns for LHRH agonists, 
some of which appear to have occurred independently of LCA policies and some of 
which coincided with their removal.  LCA policies may be a useful tool for conserving 
taxpayer funds, provided that patients retain access to appropriate care, but are not likely 
to be restored without legislative action.  Therefore, we recommend that the Centers for 
Medicare & Medicaid Service (CMS) consider seeking legislative authority to implement 
LCA policies for Part B drugs under appropriate circumstances. CMS partially concurred 
with our recommendation.   
     
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................5 
Findings........................................................................................................8 
Medicare and its beneficiaries would have saved $33 million                       
in 1 year if LCA policies for LHRH agonists had not been 
rescinded ..........................................................................................8 
After LCA policies were rescinded, utilization patterns shifted              
dramatically in favor of certain costlier products ............................8 
However, the overall utilization of LHRH agonists has been 
steadily decreasing ...........................................................................9 
Conclusion and Recommendation .............................................................12 
Agency Comments and Office of Inspector General Response .....13 
Appendix ....................................................................................................14 
A:  Agency Comments ...................................................................14 
Acknowledgments......................................................................................15 
 
     
   
OBJECTIVES 
1.  To determine the financial impact of rescinding least costly alternative 
(LCA) policies for certain prostate cancer drugs covered under 
Medicare Part B. 
2.  To determine how Medicare Part B utilization for certain prostate 
cancer drugs changed after the LCA policies were rescinded. 
BACKGROUND  
Between 1995 and 2010, certain drugs covered under Medicare Part B 
were subject to LCA policies, which based the payment amount for a 
group of clinically comparable drugs on that of the least costly one.  
However, in April 2010, the Centers for Medicare & Medicaid Services 
(CMS) discontinued all LCA policies for Part B drugs in response to a 
December 2009 court ruling that considered the use of an LCA policy for 
a Part B-covered inhalation drug and found that Medicare law did not 
authorize the use of the LCA policy.1 
Recently, Congressman Ken Calvert expressed concerns that the 
withdrawal of LCA policies for certain prostate cancer drugs may have 
created an unintentional incentive for physicians to administer costlier 
drugs.  In a letter to the Office of Inspector General (OIG), he requested an 
examination of the policy withdrawal and its impact on pricing.
 
Medicare Part B Coverage of Prescription Drugs 
Most outpatient prescription drugs paid for by Medicare are covered under 
Part D; however, a limited number of drugs are covered under Medicare 
Part B, including physician-administered injectable drugs, certain 
self-administered oral anticancer and immunosuppressive drugs, and drugs 
used in conjunction with durable medical equipment.   
Medicare Part B Payments for Prescription Drugs 
CMS contracts with private companies to process and pay Medicare 
Part B claims, including those for covered drugs.  To obtain 
reimbursement for covered drugs, health care providers submit claims to 
their Medicare contractors using Healthcare Common Procedure Coding 
 
1 Hays v. Sebelius, 589 F. 3d 1279, 1283 (D.C. Cir. 2009). 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     1   
   
System (HCPCS) codes.2  In 2011, Medicare and its beneficiaries spent 
over $12 billion for drugs covered under Part B.3 
Reimbursement Methodology for Most Part B Drugs  
Since 2005, Medicare Part B has paid for most covered drugs using a 
reimbursement methodology based on average sales prices (ASP).4  Under 
the ASP pricing methodology, the Medicare allowance for most Part B 
drugs is equal to 106 percent of the volume-weighted ASP for the drugs 
HCPCS code.5  Medicare beneficiaries are generally responsible for 
20 percent of this amount in the form of coinsurance.   
Least Costly Alternative Policies for Medicare Part B Drugs 
Historically, Medicare contractors have established LCA policies for 
various Part B items and services, including Part B drugs.  LCA policies 
for Part B drugs set the payment amount for a group of clinically similar 
HCPCS codes using the ASP-based reimbursement amount for the least 
costly drug.   
Under these policies, Medicare would generally not cover the additional 
cost of a more expensive drug product if a clinically comparable, lower 
priced drug product exists; however, a beneficiary may continue to receive 
the more expensive product, with the additional cost covered by either the 
provider or the beneficiary.6, 7  Beneficiaries may indicate their willingness 
to accept financial responsibility for additional costs by signing Advanced 
Beneficiary Notices of Noncoverage (ABN). 
LCA policies for certain prostate cancer drugs.  As part of treatment for 
prostate cancer, many patients undergo hormone therapy, either as a 
 
2 CMS established HCPCS codes to provide a standardized system for describing the 
specific items and services provided in the delivery of health care. 
3 Medicare expenditures for Part B drugs in 2011 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  The PBAR data for 2011 were 98 percent complete 
when the data were downloaded in May 2012. 
4 Pursuant to section 1847A(c) of the Social Security Act (the Act), an ASP is a 
manufacturers sales of a drug to all purchasers in the United States in a calendar quarter 
divided by the total number of units of the drug sold by the manufacturer in that same 
quarter.  The ASP is net of any price concessions, such as volume discounts, prompt 
pay discounts, cash discounts, free goods contingent on purchase requirements, 
chargebacks, and rebates other than those obtained through the Medicaid drug rebate 
program.  Sales that are nominal in amount are exempted from the ASP calculation, as 
are sales excluded from the determination of best price in Medicaids drug rebate 
program. 
5 Section 1847A(b) of the Act. 
6 All archived coverage documents for LHRH agonists containing LCA policies can be 
accessed at http://coverage.cms.fu.com/mcd_archive. 
7 Certain Medicare contractors may also cover the additional cost of a more expensive 
drug under limited circumstances. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     2   
   
stand-alone treatment or in conjunction with other treatments, such as 
radiation therapy or prostatectomy.8  Although hormone therapy alone 
does not cure prostate cancer, it can suppress male hormones that 
stimulate the growth of prostate cancer cells.9  This hormone suppression 
is most commonly achieved by administering drugs called luteinizing 
hormone-releasing hormone (LHRH) agonists.10   
In 1995, Medicare contractors began using LCA policies to control the 
cost of LHRH agonists used to treat prostate cancer.11  Initially, contractors 
instituted LCA policies for two LHRH agonists that are administered as 
monthly injections.12  These policies set the payment amount for the more 
expensive drug (Lupron) at the level of its lower priced alternative 
(Zoladex).13, 14   
Between 2001 and 2004, four additional LHRH agonists entered the 
prescription drug market.  Contractors generally included two new 
monthly injections, Eligard and Trelstar, in the LCA policies along with 
Lupron and Zoladex.  Most contractors established separate LCA policies 
for the other two new LHRH agonists, Vantas and Viadur, which are 
administered as annual implants.15  In 2011, Medicare and its beneficiaries 
paid approximately $289 million for all LHRH agonists, representing 
about 2 percent of all spending on Part B drugs during that year.16  
 
8 Prostate Cancer Detailed Guide.  American Cancer Society.  Accessed at 
http://www.cancer.org on August 17, 2012. 
9 Ibid. 
10 Increased health risks associated with hormone therapy, including LHRH agonists, 
may include anemia, loss of bone density, diabetes, vascular problems, and colorectal 
cancer. 
11 Medicare Payment Advisory Commission. Report to the Congress:  Impact of Changes 
in Medicare Payments for Part B Drugs (January 2007).  Accessed at 
http://www.medpac.gov on August 17, 2012. 
12 For example, see Local Medical Review Policy for Leuprolide Acetate (Lupron) and 
Goserelin Acetate (Zoladex), Document ID L7657 (Retired), National Government 
Services, Inc.  Accessed at http://coverage.cms.fu.com/mcd_archive on August 17, 2012. 
13 Zoladex is administered as a small implant that is injected under the skin of the 
stomach.  For the purposes of this report, we will consider Zoladex to be an injection. 
14 The LHRH agonists included in these LCA policies are represented by more than one 
HCPCS code and marketed by different manufacturers.  Therefore, the ASPs (and 
ASP-based payment amounts) may differ. 
15 In December 2007, Bayer announced that it would phase out marketing of Viadur in 
April 2008, citing diminished market demand and growing manufacturing costs.  The 
other LHRH agonist administered as an annual implant, Vantas, continues to be 
manufactured by Endo Pharmaceuticals. 
16 Medicare expenditures for LHRH agonists in 2011 were calculated using PBAR data 
that were 98 percent complete when the data were downloaded in May 2012. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     3   
   
According to LCA policies for LHRH agonists, there is no difference in 
effectiveness among LHRH agonists used to treat prostate cancer;17 a 2010 
study published in the Journal of the National Cancer Institute concluded 
that decreased physician reimbursement for hormone therapy was 
associated with a reduction in overtreatment without a reduction in needed 
services.18  However, some advocacy groups have voiced opposition to 
LCA policies, stating that they drive providers to base treatment decisions 
on cost rather than on clinical factors, such as an individual patients 
response to a drug or its side effects.19  Others have expressed concern that 
LCA policies would ultimately push patients toward less expensive but 
more invasive methods for achieving hormone suppression, such as simple 
orchiectomy (i.e., the surgical removal of one or both testicles).   
Proposed LCA policies for inhalation drugs.  In April 2008, certain 
Medicare contractors proposed instituting LCA policies for Xopenex and 
DuoNeb, two Part B-covered inhalation drugs used to treat chronic 
obstructive pulmonary disease and other lung diseases due to external 
agents.20  LCA policies for these inhalation drugs were scheduled to take 
effect July 1, 2008.  However, after separate lawsuits were filed regarding 
LCA policies for Xopenex and Duoneb, the LCA policies for Xopenex 
were withdrawn and implementation of the LCA policies for DuoNeb was 
delayed pending further review by CMS.    
Elimination of LCA policies for Part B drugs.  In October 2008, the U.S. 
District Court for the District of Columbia ruled that the Secretary of 
Health and Human Services was required by statute to pay for                             
Part B-covered drugs such as DuoNeb based on ASP and therefore lacked 
legal authority under Medicare law to establish LCA policies for 
DuoNeb.21  This prompted CMS to withdraw the proposed policies for that 
drug.  The U.S. Court of Appeals for the District of Columbia Circuit 
upheld the lower courts decision in December 2009, ruling that Medicare 
 
17 For example, see Local Coverage Determination for Gonadotropin-Releasing 
Hormone Analogs, Document ID L17602 (Superseded), NHIC Corp.  Accessed at 
http://coverage.cms.fu.com/mcd_archive on August 17, 2012. 
18 Sean P. Elliott et al., Reduction in Physician Reimbursement and Use of Hormone 
Therapy in Prostate Cancer, Journal of the National Cancer Institute, 102, no. 24 
(2010): 1826. 
19 Prostate Cancer Groups Demand Doctors and Patients Given Control Over Patients 
Prostate Cancer Treatment.  Mens Health Network press release (published                                
October 30, 2006).  Accessed at http://www.ustoo.org on August 17, 2012.   
20 The unimplemented LCA policies for inhalation drugs can be found in the revision 
histories of contractors current coverage documents for nebulizers, available online at 
http://www.cms.gov/medicare-coverage-database.  For example, see Local Coverage 
Determination for Nebulizers, ID Number L11499, NHIC Corp.   
21 Hays v. Leavitt, 583 F. Supp. 2d 62, 72 (D.D.C. 2008). 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     4   
   
law did not authorize LCA policies for DuoNeb.22  In April 2010, CMS 
directed contractors to discontinue all LCA policies for Part B drugs.23  At 
that time, LHRH agonists were among the few Part B drugs widely subject 
to LCA policies.24 
Previous OIG Work 
According to an OIG report released in January 2004, Medicare 
contractors in all but 10 of 57 jurisdictions had LCA policies for Lupron 
and Zoladex in 2002.25  If the 10 remaining contractors had applied similar 
LCA policies during that year, payments for the 2 drugs would have been 
reduced by 27 percent, saving Medicare and its beneficiaries $40 million.  
OIG recommended that CMS encourage all Medicare contractors to apply 
LCA policies to Lupron.  In response, CMS agreed to facilitate 
communication between contractors that had adopted LCA policies and 
those that had not.  By 2010, Medicare contractors in all States and the 
District of Columbia had LCA policies for LHRH agonists. 
METHODOLOGY 
Data Collection  
Medicare Part B Payment Amounts.  We obtained the published Medicare 
payment amounts for LHRH agonists for each quarter between the second 
quarter of 2009 and the second quarter of 2011.  Because one of the two 
LHRH agonists administered as annual implants has been discontinued 
(thus leaving no alternative), we examined payment amounts only for 
those HCPCS codes representing LHRH agonists administered as monthly 
injections, as shown in Table 1.   
Table 1:  HCPCS Codes Subject to LCA Policies for LHRH Agonists 
Administered as Monthly Injections 
HCPCS Code  Description  Brand Name 
J3315    Triptorelin pamoate  Trelstar 
J9202  Goserelin acetate implant  Zoladex 
J9217  Leuprolide acetate suspension  Lupron, Eligard 
 
 Source: CMSs Medicare Part B reimbursement files. 
 
22 Hays v. Sebelius, 589 F. 3d 1279, 1283 (D.C. Cir. 2009). 
23 See, for example, May 2010 LCA Updates, NHIC Corp. (published April 29, 2010).  
Accessed at http://www.medicarenhic.com on August 17, 2012. 
24 Prior to April 2010, LCA policies were also applied to liposomal amphotericin B used 
in conjunction with external infusion pumps.  However, Medicare expenditures for these 
drugs were very low relative to those for LHRH agonists, totaling only about $2.7 million 
in 2011.  
25 OIG, Medicare Reimbursement for Lupron, OEI-03-03-00250, January 2004.  This 
report was issued prior to implementation of ASP-based reimbursement for Medicare 
Part B drugs. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     5   
   
Medicare Part B Claims Data.  For each of the HCPCS codes in Table 1, 
we obtained all of the claims paid by contractors for dates of service 
between April 1, 2009, and June 30, 2011.  We selected all claims 
associated with prostate cancer (specifically, diagnosis code 185, 
malignant neoplasm of the prostate) and summarized expenditures and 
utilization for each HCPCS code in each quarter under review. 26, 27 
We also obtained all of the claims for Vantas annual implants (HCPCS 
code J9225) and simple orchiectomies (procedure code 54520) with dates 
of service between April 1, 2009, and June 30, 2011.  For each HCPCS 
code, we selected all paid claims associated with prostate cancer 
(diagnosis code 185) and summarized expenditures and utilization for 
each quarter under review.28 
Data Analysis 
Analysis of expenditures for LHRH agonists previously subject to LCA 
policies.  For each quarter between the third quarter of 2010 and the 
second quarter of 2011,29 we identified the lowest of the Medicare 
payment amounts for the three HCPCS codes representing monthly 
injections (Table 1).  To calculate the amount that Medicare would have 
saved if payment amounts had been based on the LCA, we multiplied the 
least costly amounts by the utilization for each of the more expensive 
drugs and subtracted the result from the actual expenditures for the drugs.  
Analysis of utilization trends for LHRH agonists and other hormone 
therapy.  To determine whether the withdrawal of LCA policies coincided 
with changes in utilization patterns for monthly injections, we used 
summarized Part B claims data to track quarterly shifts in utilization from 
 
26 Although certain Medicare contractors applied their LCA policies to more than one 
prostate cancer diagnosis code, we focused our analysis on diagnosis code 185, which 
appeared most frequently in contractors LCA policies and accounted for 98 percent of 
the Medicare payments for all LHRH agonists during the period under review. 
27 We excluded any individual claim for more than six doses because such claims may 
represent billing errors.  Individual claims for more than six doses constitute only                  
0.01 percent of all claims for monthly injections.  We also excluded any claim with a 
modifier indicating that the beneficiary signed an ABN and therefore accepted financial 
responsibility for noncovered costs.  Only about 0.6 percent of all paid claims for 
monthly injections used to treat prostate cancer had modifiers indicating that ABNs had 
been filed. 
28 For Vantas implants, we excluded any individual claim for more than one dose because 
we would generally expect providers to bill for only one annual implant at a time.  We 
also excluded any claim with a modifier indicating that the beneficiary signed an ABN 
and therefore accepted financial responsibility for noncovered costs.  Only about                    
0.3 percent of all paid claims for Vantas implants used to treat prostate cancer had 
modifiers indicating that ABNs had been filed. 
29 This time period represents the first full year following the withdrawal of LCA policies 
for prostate cancer drugs. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     6   
   
1 year before the LCA policies were withdrawn (i.e., the second quarter of 
2009) to 1 year after (i.e., the second quarter of 2011). 
As points of comparison for trends in the utilization of monthly injections, 
we also tracked quarterly shifts in utilization for Vantas implants and 
simple orchiectomies from the second quarter of 2009 through the second 
quarter of 2011. 
Limitations 
Medicare contractors LCA policies for LHRH agonists varied with 
respect to certain criteria, such as the specific diagnosis codes subject to 
the policies and whether the contractors made exceptions for patients who 
had been receiving a more expensive drug prior to implementation of the 
policies.  We did not tailor our analysis to account for all policy variations 
among contractors; rather, our analysis is based on the criteria common 
among the majority of LCA policies. 
There may be instances in which LCA policies would not have generated 
savings for Medicare and its beneficiaries because the contractors, the 
providers, or the patients opted to pay for the additional cost of the more 
expensive drugs.  To address this issue, we excluded claims with modifiers 
indicating that the beneficiaries signed ABNs and accepted financial 
responsibility for noncovered amounts.  However, we did not identify or 
exclude claims for more expensive drugs for which the contractors or 
providers may have covered the additional cost. 
We did not review the Part B claims for accuracy, nor did we review any 
documentation in support of the claims included in our study.  Also, we 
did not examine utilization trends for additional types of hormone therapy 
used to treat prostate cancer, such as LHRH antagonists, antiandrogens, 
and estrogens.  We also did not examine trends in other prostate cancer 
treatments, such as chemotherapy, radiation therapy, or prostatectomy. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     7   
   
FINDINGS 
Medicare and its beneficiaries would have saved              
$33 million in 1 year if LCA policies for LHRH agonists 
had not been rescinded 
If LCA policies had been in effect between the third quarter of 2010 and 
the second quarter of 2011, payment amounts for Lupron, Eligard, and 
Zoladex would have been based on that of the least costly alternative, 
Trelstar.  As shown in Table 2, the potential savings per dose in each 
quarter would have ranged from $1.61 to $33.49 for Zoladex and from 
$17.70 to $40.85 for Lupron and Eligard. 
If the more expensive products had been reimbursed at the lower price in 
each quarter under review, total expenditures for monthly injections over 
the year period would have been reduced from $264.6 million to                
$231.3 million, yielding a total savings of $33.3 million (13 percent).  
Twenty percent of these savings ($6.7 million) would have been realized 
by Medicare beneficiaries in the form of reduced coinsurance amounts.     
Table 2:  Payment Amounts for Monthly Injections                                
Third  Fourth  First  Second 
HCPCS  Quarter    Quarter    Quarter    Quarter   
Code  Brand  2010  2010  2011  2011 
Payment Amounts for the Least Costly Product 
J3315    Trelstar  $164.59  $181.93  $176.27  $197.31 
Additional Amounts Paid for More Expensive Products 
J9202  Zoladex  + $33.49  + $12.36  + $26.08  + $1.61 
J9217  Lupron, Eligard  + $40.85  + $26.28  + $32.83  + $17.70 
 
Source: Medicare reimbursement amounts published by CMS for third quarter 2010 through second quarter 2011.
After LCA policies were rescinded, utilization patterns 
shifted dramatically in favor of costlier drugs  
During the year before LCA policies were rescinded, the most costly 
LHRH monthly injectionsLupron and Eligardwere administered at 
about twice the rate of the least costly alternative, Trelstar (Figure 1).30 
However, utilization of these pricier drugs was declining during this time, 
decreasing 11 percent from the second quarter of 2009 through the first 
 
30 As mentioned previously, LCA policies do not require that the least costly drug be 
administered; they require only that payment for the more expensive drugs be limited to 
that of the least costly drug.  
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     8   
   
quarter of 2010.  Meanwhile, utilization of Trelstar was rising, increasing 
almost 5 percent over the same four quarters.   
Figure 1:  Utilization of Monthly Injections Before and After Removal of LCA 
Policies 
 
Lupron/Eligard Trelstar Zoladex
  ) 
ns 300,000
  o
ti
  ec 250,000
   hly Inj 200,000
t
n
  o
M 150,000
  s (
  se 100,000
o
  D
al  50,000
  t
o
T
  0
 
 
 
 Note:  Data points for each quarter represent the total utilization as of the end of that quarter.  The vertical line 
distinguishes utilization under LCA policies from utilization after LCA policies were removed.   
 Source:  OIG analysis of Medicare Part B claims data, 2012. 
As shown in Figure 1, utilization patterns for monthly injections shifted 
dramatically in favor of the costlier products almost immediately after 
LCA policies were rescinded.  Utilization of Lupron and Eligard increased 
substantially, rising a total of 31 percent from the beginning of the second 
quarter of 2010 through the end of the second quarter of 2011.   
During the same period, the administration of Trelstar plummeted by              
74 percent, with the largest utilization drops occurring in the quarter 
during which the LCA policies were removed and the first full quarter 
after.  By the end of the second quarter of 2011, Lupron and Eligard were 
administered at almost 10 times the rate of Trelstar. 
Although the administration of Zoladex decreased over the entire                        
27 months under review, utilization remained extremely low relative to 
utilization of Lupron; Eligard; and, to a lesser extent, Trelstar. 
However, the overall utilization of LHRH agonists has 
been steadily decreasing  
Despite variations in the administration of individual LHRH agonists, the 
number of doses of LHRH agonists administered overall for the treatment 
of prostate cancer began decreasing at least a year before CMS instructed 
contractors to rescind LCA policies and continued to fall for more than a 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     9   
   
year afterward.  This downward trend was evident not only for the more 
commonly administered monthly injections, but also for annual implants. 
Figure 2:  Decrease in Utilization of Monthly Injections To Treat Prostate 
Cancer 
370,000
s)  360,000
n
o
ti
c
e 350,000
nj
y I
hl 340,000
t
n
o
M
s ( 330,000
e
s
Do 320,000
al 
t
o
T 310,000
 
 Note:  Data points for each quarter represent the total utilization as of the end of that quarter.  The vertical line 
distinguishes utilization under LCA policies from utilization after LCA policies were removed.   
Source:  OIG analysis of Medicare Part B claims data, 2012.    
The number of monthly injections used to treat prostate cancer decreased 
about 7 percent during the year before elimination of LCA policies and 
continued to decrease another 5 percent in the 15 months after, resulting in 
an overall decrease of 12 percent from the second quarter of 2009 through 
the second quarter of 2011.  (See Figure 2.) 
The overall decrease in the administration of the annual Vantas implant 
was even more pronounced.  The number of these implants used to treat 
prostate cancer fell by 23 percent in the year prior to elimination of LCA 
policies and continued to fall another 23 percent in the 15 months after, 
resulting in an overall decrease of 41 percent. 
Although the use of LHRH agonists has been decreasing, we did not find a 
compensatory increase in another type of hormone therapy, the simple 
orchiectomy.  The number of these procedures performed to treat prostate 
cancer declined 15 percent during the year before the elimination of LCA 
policies and continued to decline an additional 16 percent afterward.  
A study published in 2009 in The Journal of Urology identified a similar 
reduction in the use of hormone therapy to treat prostate cancer.  This 
study, which examined claims and payment data from 2003 to 2007, 
attributed the overall reduction in hormone therapy to a number of 
different factors, including a decrease in Medicare payment amounts 
following the implementation of the ASP-based reimbursement 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     10   
   
methodology, the increased use of intermittent hormone therapy, and an 
increased recognition of the adverse effects associated with hormone 
therapy.31, 32  The study authors conclude that these factors, taken together, 
may have resulted in a more discriminating physician practice pattern and 
shrinking pool of appropriate candidates for LHRH agonists. 
 
 
31 Steven L. Chang, Joseph C. Liao, and Rajesh Shinghal, Decreasing Use of Luteinizing 
Hormone-Releasing Hormone Agonists in the United States is Independent of 
Reimbursement Changes:  A Medicare and Veterans Health Administration Claims 
Analysis, The Journal of Urology 182 (2009): 255.  
32 As mentioned previously, increased health risks associated with hormone therapies 
may include anemia, loss of bone density, diabetes, vascular problems, and colorectal 
cancer. 
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     11   
   
CONCLUSION AND RECOMMENDATION 
In 1995, Medicare contractors began using LCA policies to control the 
cost of LHRH agonists used to treat prostate cancer.  However, CMS 
eliminated these policies in April 2010 as a result of a 2009 court ruling 
stating that Medicare law did not authorize the use of an LCA policy for 
an inhalation drug covered under Medicare Part B.  Congressman 
Ken Calvert subsequently raised concerns that elimination of LCA 
policies for prostate cancer drugs may have provided physicians with an 
incentive to administer costlier drugs to patients.   
Our results indicate that Medicare spending on clinically comparable 
LHRH agonists is higher in the absence of LCA policies, costing Medicare 
and its beneficiaries $33 million in 1 year.  Our results also confirm 
changes in utilization patterns for LHRH agonists, some of which appear 
to have occurred independently of LCA policies and some of which 
coincided with their removal.  Specifically, the use of hormone therapy 
has been decreasing overall, which may be attributable in part to Medicare 
reimbursement but may also be influenced by clinical factors, such an 
increased awareness of hormone therapys health risks.  In contrast, the 
shift in utilization patterns in favor of costlier products coincided directly 
with the removal of LCA policies.   
LCA policies may be a useful tool for conserving taxpayer funds, provided 
that patients retain access to appropriate care; however, in light of the 
2009 court ruling, LCA policies are not likely to be restored without 
legislative action.  Therefore, we recommend that CMS: 
Consider seeking legislative authority to implement LCA 
policies for Part B drugs under appropriate circumstances 
By seeking a legislative change to amend the current statutory Medicare 
provisions applicable to Medicare Part B drugs, CMS could regain the 
flexibility to implement LCA policies for certain clinically comparable 
products under circumstances it deems appropriate.    
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     12   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred, in part, with the recommendation.  CMS stated that it has 
evaluated its current authority in light of the court ruling and determined 
that further legislative action on this issue must occur before any LCA 
policies can be implemented.  CMS additionally noted that any request for 
legislative authority for agency policies would be included in the annual 
Presidents Budget.  However, CMS did not indicate whether it plans to 
seek such legislative authority consistent with our recommendation. 
We did not make any changes to the report on the basis of CMSs 
comments.  We ask that, in its final management decision, CMS more 
clearly indicate whether it concurs with our recommendation and what 
steps, if any, it will take to implement it. 
For the full text of CMSs comments, see Appendix A.   
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     13  APPENDIX A 
APPENDIX A
Agency Comments 
Agency Comments
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Administrator 
Administrator
Washington, DC 20201 
Washington, DC 20201
SSEEPP 228 82 0210212 
DATE: 
DATE:
TO: 
TO: Stuart Wright
D puty Inspector General forEvaluations andInspections
FFRROOMM: :  MarilynTavenner
Acting Administ tor
SUBJECT:  Office of Inspector General Draft Report: "Least Costly Alternative Policies: 
SUBJECT: Office ofInspector General Draft Report: "Least Costly Alternative Policies:
Impact on Prostate Cancer Drugs Covered Under Medicare" (OEI-12-12-0021 0) 
Impact onProstate Cancer Drugs Covered Under Medicare" (OEI-12-12-00210)
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
TheCenters forMedicare &Medicaid Services (CMS) appreciates theopportunity toreview and
rersepsopnodndt otot hteheO Offfifcieceo offI nInspsepcetcotrorG Geneenrearlal( D(OIGIG))D DrarfatftR Repeoprotrte nentittiletlde,d," L"LeaesatstC CosotsltylyA Altletrenrantaivtieve 
Policies: Impact on Prostate Cancer Drugs Covered Under Medicare." CMS appreciates OIG's 
Policies: Impact onProstate Cancer Drugs Covered Under Medicare." CMS appreciates OIG's
effort to examine this issue. 
efforttoexamine this issue.
In 1995, Medicare contractors began using least costly alternative (LCA) policies to control the 
In 1995,Medicare contractors began using leastcostly alternative (LCA) policies tocontrol the
cost of luteinizing hormone-releasing hormone agonlsts used in the treatment of prostate cancer. 
costofluteinizing hormone-releasing hormone agonists used inthetreatment ofprostate cancer.
However, CMS eliminated these policies in April 2010 as a result of a 2009 court ruling that 
However, CMS eliminated these policies inApril 2010 asaresult ofa2009 court ruling that
found that Medicare law did not authorize the use of an LCA policy for an inhalation drug 
foundthat Medicare law didnotauthorize theuseofanLCA policy foraninhalation drug
covered under Medicare Part B. A member of Congress subsequently raised concerns that the 
covered under Medicare PartB. Amember ofCongress subsequently raised concerns thatthe
elimination ofLCA policies for prostate cancer drugs may have provided physicians with an 
elimination ofLCA policies forprostate cancer drugs may have provided physicians with an
incentive to administer costlier drugs to patients. 
incentive toadminister costlier drugstopatients.
OIG Recommendation 
OIG Recommendation
Consider seeking legislative authority to implement LCA policies for Part B drugs under 
Consider seeking legislative authority toimplement LCApolicies forPart Bdrugs under
appropriate circumstances. 
appropriate circumstances.
CMS Response 
CMS Response
CMS concurs, in part, with the recommendation. CMS has completed evaluating its current 
CMS concurs, inpart, with therecommendation. CMS hascompleted evaluating itscurrent
authority in light of the December 2009 court ruling.  CMS has determined that further 
authority inlight oftheDecember 2009 court ruling. eMS has determined that further
legislative action on this issue must occur before it can implement any LCA policies. We note 
legislative action onthis issuemust occurbefore itcan implement any LCApolicies. Wenote
that any request for legislative authority for Agency policies would be included in the annual 
thatanyrequest forlegislative authority forAgency policies would beincluded intheannual
President's Budget. 
President's Budget.
CMS thanks the OIG for the opportunity to review and comment on this report. 
CMS thanks theOIG fortheopportunity toreview and comment onthis report.
Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-0021 0)  14 
LeastCostlyAlternative Policies: ImpactonProstateCancerDrugsCoveredUnderPartB(OEI-12-12-00210) 14  
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and David Tawes, Regional Inspector General for 
Evaluation and Inspections in the Baltimore regional office.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who provided support include Althea Hosein, Meghan Kearns, 
Christine Moritz, and Tasha Trusty.  
Least Costly Alternative Policies:  Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210)     15   
Office of Inspector General 
http://oig.hhs.gov 
 
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