Outpatient Immunosuppressive Drugs

Under Medicare

July 1991

OTA-H-452

NTIS order #PB92-117720
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Outpatient Immunosuppressive Drugs

Under Medicare, OTA-H-452 (Washington, DC: U.S. Government Printing Office, September 1991).

For sale by the U.S. Government Printing Office

Superintendent 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 successfully

transplant 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 made

organ transplants an everyday phenomenon. At the same time, however, transplant recipients’

needs for these drugs have presented Medicare with a continuing policy dilemma, because

Medicare does not usually pay for outpatient prescription drugs.

In 1984, the year after cyclosporine made its debut onto the health care market, OTA

reported to Congress on the likely benefits of the drug for Medicare kidney transplant

recipients. The present report, requested by the Senate Committee on Finance in the wake of

the repeal of the Medicare Catastrophic Coverage Act, examines Medicare’s current

immunosuppressive 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 of

individuals from both the public and the private sectors. OTA staff and contractors gratefully

acknowledge 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 content

of 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 assumes

full responsibility for the report and the accuracy of its contents.

James Armitage

North American Autologous Bone Transplant Registry

Lincoln, NE

Remy Aronoff

U.S. Health Resources and Services Administration

Rockville, MD

Robert Block

Blue Cross and Blue Shield Association

Chicago, IL

Carmella Bocchino

Nursing Economics

Washington, DC

Judith Braslow

U.S. Health Resources and Services Administration

Rockville, MD

Bureau of Policy Development

U.S. Health Care Financing Administration

Baltimore, MD

William Comanor

University of California, Santa Barbara

Santa Barbara, CA

Dennis Cotter

Health Technology Association

Washington, DC

Paul Eggers

U.S. Health Care Financing Administration

Baltimore, MD

Denis Grady

Sandoz Pharmaceuticals Corp.

East Hanover, NJ

Philip Held

Urban Institute

Washington, DC

Tom Holohan

Office of Health Technology Assessment

Rockville, MD

Alan Hull

Dallas Nephrology Associates

Dallas, TX

Barry Kahan

The University of Texas Health Science Center

Houston, TX

Joel Kallich

RAND Corp.

Santa Monica, CA

D’Etta Waldoch Koser

International Bone Marrow Transplant Registry

Milwaukee, WI

Susan Laudecina

Intergovernmental Health Policy Project

Washington, DC

James Light

Washington Hospital Center

Washington, DC

Shari McCullough

IMS America

Plymouth Meeting, PA

William McGivney

American Medical Association

Chicago, IL

John Newman

Reston, VA

Julie Ostrowsky

Chicago, IL

Richard Rettig

Institute of Medicine

Washington, DC

Walter Rutemueller

U.S. Health Care Financing Administration

Baltimore, MD

Bernadette Schumaker

U.S. Health Care Financing Administration

Baltimore, MD

Linda Sheaffer

Division of HIV Services

Rockville, MD

Jane Sisk

Dobbs Ferry, NY

Sandy Zachary

U.S. Health Care Financing Administration

Baltimore, MD

iv
OTA Project Staff—Outpatient Immunosuppressive Drugs Under Medicare

Roger C. Herdrnan, Assistant Director, OTA

Health 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
Contents

Page

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** 3

THE TRANSPLANT RECIPIENT POPULATION ..+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ● ..,. 3

IMMUNOSUPPRESSIVE DRUGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

THE ADEQUACY OF CURRENT MEDICARE COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

MEDICARE EXPENDITURES FOR IMMUNOSUPPRESSIVE DRUGS ..... + . . . . . . . . . . . . . 8

ISSUES AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Figures

Figure Page

1. Organ Transplants: Distribution by Type of Organ and Medicare Coverage, 1988 ..........4

2. Future Medicare Coverage for Recipients of Medicine-Covered Transplants ...........,.. 5

Tables

Table Page

1. Kidney Transplant Patients’ Risk of Out-of-Pocket Liabilities for Outpatient

Immunosuppressive Drugs by Insurance Status . .....................+.......++”+”’”’””” 7

2. Factors Influencing Future Medicare Expenditures for Immunosuppressive Drug Therapy . . 8

3. Medicare Policy Options for Outpatient Immunosuppressive Drugs . . . . . ,. . . . . . . . . . . . ● ● 9

4. 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

INTRODUCTION

Drugs that act to suppress the body’s normal

immune reactions are a critical medical therapy for

persons who have received organ transplants. Most

such individuals must continue imrnunosuppressive

drug therapy throughout their lives to prevent organ

rejection.

Medicare, the Nation’s health insurance program

for the elderly and disabled, does not usually cover

outpatient prescription drugs. Congress granted a

special exception to this rule in 19861 to ensure that

Medicare transplant recipients had at least initial

access to outpatient immunosuppressive therapy. At

present, however, Medicare’s coverage of this therapy is limited to 1 year, starting upon the patient’s

discharge from the hospital after a Medicarecovered transplant procedure.

In March 1990, the Senate Committee on Finance

asked the Office of Technology Assessment (OTA)

to examine Medicare’s coverage and payment policies for outpatient immunosuppressive drug therapy.

2 In response to that request, this report addresses two basic questions. First, do Medicare

beneficiaries have adequate access to outpatient

immunosuppressive drugs under existing coverage

and payment rules? Second, how might Medicare

coverage and payment for immunosuppressive drugs

be changed, and what are the likely implications of

those changes?

To provide a framework for discussing possible

options for changing Medicare immunosuppressive

drug policy, the report presents background on four

subjects. Chapter 2 describes the patient population

using immunosuppressive drugs-i. e., transplant

recipients with a functioning graft (implanted organ).

Chapter 3 describes the immunosuppressive drugs

used by transplant recipients and the variation that

exists in drug protocols and their costs. Chapter 4

examines the adequacy of current coverage policy

for immunosuppressive drugs used by Medicare

beneficiaries. Chapter 5 discusses national and

Medicare expenditures for outpatient immunosuppressive drugs and some factors that might affect

future expenditures.

The remainder of this chapter summarizes th e

report and discusses the advantages and disadvantages of several possible approaches to changing

Medicare coverage and payment for immunosuppressive drugs,

THE TRANSPLANT RECIPIENT

POPULATION

The demand for outpatient post-transplant immunosuppressive drugs depends heavily on the

number of eligible organ transplant recipients with

a successful, functioning graft. Medicare restricts its

organ transplant coverage to certain organs and

certain categories of patients. Presently, Medicare

covers heart, kidney, liver, and bone marrow transplants (for beneficiaries with certain medical conditions). Medicare does not cover heart/lung, lung, or

pancreas transplants, although these transplants are

sometimes covered by other insurers.

In 1988, the most recent year for which comprehensive data are available, nearly 15,000 organ

transplants were performed in the United States.3

Kidney transplants were the most frequently performed, accounting for 62 percent of the U.S. total

(figure 1). Medicare covered an overwhelming

majority (nearly 90 percent) of those kidney transplants, compared with only 7 percent of heart

transplants, 3 percent of allogeneic bone marrow

transplants, and less than 1 percent of liver transplants. Nonetheless, because kidneys are the most

commonly performed transplants, Medicare covered

a majority (57 percent) of the Nation’s transplant

procedures overall in 1988.

The percentage of transplant recipients covered

by Medicare is high because of Medicare’s EndStage Renal Disease (ESRD) entitlement program,

which covers nearly all of the U.S. kidney transplant

recipients 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 transplants .

–3–
4 ● outpatient Immunosuppressive Drugs UnderMedicare

Figure l—Organ Transplants: Distribution by Type of Organ and

Medicare 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 and

Human Services, Public Health Service, Health Resources and Services Administration, Division of Organ

Transplantation; and the Prospective Payment Assessment Commission.

(figure 2).4 Whereas other persons must already be

entitled to Medicare (by being elderly or disabled) in

order to receive a Medicare-covered transplant, any

patient diagnosed with end-stage renal failure who

requires dialysis or a kidney transplant may be

entitled to Medicare as a result of this medical need.

Although about half of kidney transplant recipients

with a functioning graft lose Medicare eligibility

after 3 years, the remaining 50 percent continue to

receive Medicare benefits past the 3-year limit due

to their age or continuing disability (17).5

The total number of organ transplants performed

per year has been increasing. The average annual

rate of increase in kidney transplants has been only

5 percent in recent years6 due to the limited supply

of kidney organs available for transplant. The

average annual growth rates for other organ transplants have been much higher. The number of liver

transplants, for example, has been increasing by

nearly 50 percent per year. The supply of donated

organs is still not sufficient to meet the needs of

those waiting for these transplants, however. Even

the waiting lists may understate actual medical need;

some physicians believe that the number of qualified

patients who are not represented on the waiting lists

is as large as the number who are (25).

The number and success of transplant procedures

have increased over the past decade, although graft

survival rates vary markedly by the type of organ.

For lung and heart/lung transplants, l-year graft

survival rates are still less than 60 percent (5).7

Kidney graft survival rates are much higher, with

l-and 5-year cadaveric kidney survival rates of 78

and 52 percent, respectively. Living-donor kidney

transplants are even more successful (5). Overall, of

the nearly 15,000 individuals who received organ

transplants in 1988, OTA estimates that approximately

11,000 (73 percent) were living in 1989 with a

functioning graft. Almost all of these patients would

have 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 year

1

Kidney

transplant

recipients

Recipients

of other

organs

Recipient not eligible Recipient eligible

for Medicare for Medicare

SOURCE: Office of Technology Assessment, 1991.

IMMUNOSUPPRESSIVE DRUGS

Medicare’s policy is to cover all drug products for

outpatient self-administration that are approved by

the U.S. Food and Drug Administration (FDA) and

have a label indicating use for immunosuppressive

therapy. At present, only four drugs are FDAapproved for post-transplant immunosuppression:

azathioprine (Imuran), cyclosporine (Sandimmune),

antithymocyte globulin (Atgam), and muromonab

CD3 (Orthoclone OKT-3). Each of these drugs is

made by only a single manufacturer. In addition,

Medicare covers adjunct prescription drugs (e.g.,

prednisone) when they are used as part of the

immunosuppressive therapeutic regimen (56).

Early approaches to chemical immunosuppression relied mainly on a combination of azathioprine

and prednisone. With cyclosporine’s introduction

into widespread use in 1984, however, a variety of

new drug protocols followed. At present, nearly all

are based on cyclosporine; 90 percent of transplant

recipients receive this drug as the primary immunosuppressive agent (5).

-

—

—

Medicare covers

immunosuppressive drugs

Cyclosporine has improved graft survival rates

and decreased the number of infection-related complications, the average length of hospital stay, and

the number of organ rejection episodes compared

with early approaches (7,43). However, the costs of

protocols using this drug are dramatically higher

than the cost of traditional therapies. For example,

the reported cost of outpatient therapy using only

prednisone and azathioprine was $2 per day in 1988,

compared with reported average costs for cyclosporine therapies ranging from $9 to $23 per day

(6,7). The average annual costs of cyclosporinebased protocols range from an estimated $4,000 to

$6,000 per year (7).8 Costs for immunosuppression

can vary substantially across recipients, because

some recipients still receive the traditional less

costly drug protocols, and because the cost of

therapy for patients on cyclosporine-based protocols

often decreases as drug dosages are reduced over

time (7,28). Future per-patient costs may increase or

decrease as new drugs (e.g., FK-506) enter the

market. Costs may also change when Sandoz’s

patent 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 CURRENT

MEDICARE COVERAGE

Since January 1, 1987, Medicare has covered

outpatient immunosuppressive drugs. Drug coverage is for 1 year from the date of a patient’s discharge

from 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 reasonable charge basis when the drugs are dispensed by

a retail pharmacy, physician, or other supplier, and

on the basis of reasonable costs when the drugs are

dispensed by a hospital pharmacy.9 In both cases, the

beneficiary is subject to the Part B deductible of

$100, a coinsurance amount (20 percent of the

charge lO), and (if the drugs are obtained from a

nonhospital supplier) any additional amount above

the Medicare-allowed charge.

In addition to the drugs themselves, certain

services related to imrnunosuppressive therapy may

also be billed to Medicare. Physicians may bill for

patient visits during which they provide only therapy

management services, and if the management visit

takes place in a hospital outpatient setting the

hospital could submit a bill for this encounter as

well. The extent of such billing in practice, and the

amount of patient coinsurance obligations that

accompany it, are unknown.

Expanding Medicare’s coverage policy will have

the most impact on access to therapy if a significant

number of beneficiaries do not already have adequate coverage of outpatient immunosuppressives

through other payment sources. Under current rules,

a beneficiary with no health care coverage other than

Medicare must pay the 20 percent coinsurance for

the drugs during his or her first year on outpatient

immunosuppressives, or between roughly $570 and

$850 (in 1988 dollars) (see ch. 4). After the l-year

drug coverage period ends, this beneficiary would

pay the full cost of the treatment, or roughly $4,000

to $6,000 per year. (The beneficiary might also be

purchasing additional drugs uncovered by Medicare,

such as antifungal or antiviral drugs used to protect

the transplanted organ, or drugs to treat underlying

diabetes or hypertension.)

Beneficiaries with other third-party coverage in

addition to Medicare have some protections from

these costs. During the first year of outpatient

immunosuppression, when Medicare covers the

immunosuppressive drugs, many beneficiaries have

private insurance or Medicaid that covers the

beneficiaries 20 percent coinsurance liability. Thereafter, however, Medicare drug coverage ends. The

other insurer’s policies then apply, and transplant

recipients are obligated to pay that insurer’s coinsurance and any other liabilities (e.g., deductibles).

Beneficiaries whose private insurance is primary

must pay some coinsurance during the frost year.

Medicare requires that private insurers covering

ESRD beneficiaries be the primary payer for the frost

18 months these beneficiaries are on Medicare. In

other words, even though an ESRD patient is entitled

to Medicare coverage, Medicare will pay for covered

services provided to these beneficiaries only after

any existing private insurance policies have paid.

About half of ESRD kidney transplant recipients

undergo the transplant during the frost year of

Medicare eligibility (17). Consequently, for these

recipients the private insurer is primary during at

least part of the frost year on outpatient immunosuppressives, and the beneficiary must pay that

insurer’s required coinsurance during that time.

Thus, the degree to which Medicare transplant

recipients are at risk of high out-of-pocket expenditures for imnmnosuppressive drugs depends heavily

on whether they have additional third-party coverage. As shown in table 1, a majority of Medicare

transplant recipients (approximately 57 to 87 percent, or roughly 4,700 to 7,200 recipients in 198811)

have third-party coverage through private insurers or

State Medicaid programs that pay for outpatient

immunosuppressive therapy after Medicare drug

coverage ends (see ch. 4). As long as they remain

eligible for Medicare, these patients are at low to

medium risk of significant out-of-pocket expenses,

depending primarily on whether they are liable for

copayments. 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 charge

of 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 somewhat

higher 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 Immunosuppressive

Drugs by Insurance Status

Percentage of

total 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-ofpocket expenses

(Low risk group)

if Medicare prirnary,d private

coverage wraps around-no

coinsurance obligations

(Low risk group)

If Medicare secondary,

generally third-party

coverage of drug benefitcoinsurance obligations

(Medium risk group)

Same as iess than 1 year

(Low risk group)

Same as iess than 1 year

but Medicare is primary

payer for most

beneficiaries during this

period

(Low to medium risk

group)

Same as iess than 1 year

(Low risk group)

Coinsurance obligations or

iiabie for premium or fuli

cost of drug

(Medium to high risk

group)

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 drugs

for 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 transplant

recipients undergo the procedure within their first year of eligibility. Thus, most recipients with private insurance have Medicare as secondary payer for at least

part 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 Research

Centers (7).

effect of expanding Medicare’s coverage of outpatient immunosuppressives will be to shift financing

from other sources to Medicare.

The remaining Medicare transplant recipients

(between 13 and 43 percent, or approximately 1,000

to 3,600 recipients in 1988) have no insurance other

than Medicare. These individuals are at high risk of

financial strain, because they must usually pay the

full cost of the drug after Medicare’s l-year coverage

period ends. Extending Medicare’s coverage would

alleviate most of the financial burden presently

experienced by these patients, although they would

still be obligated for the 20 percent coinsurance for

the drugs.

Also financially vulnerable are those kidney

transplant recipients who are neither elderly nor

disabled and who thus become ineligible for Medicare 3 years after their transplant. Some of these

patients are eligible for Medicaid. Others have

continuing private insurance that covers the drugs,

although these individuals are vulnerable to losing

insurance if they change jobs. For most individuals

who have no private insurance and are ineligible for

Medicaid, however, the loss of Medicare eligibility

means the loss of all health care coverage. These

recipients, as well as those who lose their private

insurance due to job changes or other factors, maybe

unable to obtain new insurance due to their preexisting health conditions. If they are able to purchase

insurance, the premium cost may be very high.

Medicare’s outpatient drug coverage policy cannot readily ease the financial burden of this group,

since these individuals are no longer Medicare

beneficiaries. Like other persons with recurrent or

chronic health conditions, transplant recipients may

have great difficulty obtaining insurance to cover

their anticipated high future health care costs. The

solution to this problem may lie in broader health

care reforms than can be addressed by Medicare

alone.
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 on

policy expansion Medicare expenditures

Factors influencing the number of beneficiaries and demand

for drugs:

Increase in nonrenal transplants and Medicare coverage of

these procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J J ‘r

Coverage policy changes by other third-party payers. . . . . . . . . . . . J T or J

Change in mix of patients receiving transplants. . . . . . . . . . . . . . . . . J 1’ or—

Limited supply of living organs to match existing and future demands

for transplants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J J —

Change in provider prescribing and patient demand if coverage of

immunosuppressives is expanded. . . . . . . . . . . . . . . . . . . . . . . . . J T

Factors influencing cost of drug and overaii expenditures:

Development of new immunosuppressive drug products

and protocols. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \ J T or J

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

Expanded prophylactic use of OKT-3. . . . . . . . . . . . . . . . . . . . . . . . .

J ‘T or -J

J ‘r

Increased patient compliance with extended Medicare drug coverage

resulting in fewer organ failures and hospitalizations. . . . . . . . . . . J L

Additional administrative costs for monitoring drug coverage. . . . . . J T

Pressure to expand coverage to outpatient nonimmunosuppressive

prescription drugs required by transplant recipients. . . . . . . . . . . . J T

KEY: ~ = increase expenditures; ~ = decrease expenditures; — _ no significant effect.

SOURCE: Office of Technology Assessment, 1991.

MEDICARE EXPENDITURES FOR

IMMUNOSUPPRESSIVE DRUGS

Medicare does not currently play a major role in

financing post-transplant immunosuppressive therapy. OTA found that at present, Medicare pays for

immunosuppressive drugs for only about 19 percent

of the functioning graft recipients with Medicare

coverage and for only about 13 percent of all U.S.

patients with functioning grafts. Furthermore, since

the Medicare program pays for at most 80 percent of

the cost of the drugs it covers, actual program

outlays are an even smaller proportion of total U.S.

drug outlay than these figures would imply. OTA

estimates that the Medicare program currently

spends roughly $20 to $30 million per year on

outpatient immunosuppressive drugs, compared with

total annual U.S. spending (including out-of-pocket

expenses) of approximately $185 to $280 million

(see ch. 5).

This small proportion is due to two factors. First

is Medicare’s l-year limit on coverage of outpatient

immunosuppressives. Second, by law Medicare is

the secondary payer for the first 18 months of a

patient’s eligibility under the ESRD program, which

can overlap with a recipient’s first year on outpatient

immunosuppressives. Kidney transplants account

for more than 95 percent of Medicare-covered

transplantations, and approximately 37 to 67 percent

of Medicare-covered kidney transplant recipients

have private insurance during this 18-month period

(7,17).

Over time, factors such as FDA approval of new

products, generic alternatives to existing drugs, and

changes in how immunosuppressive drugs are used

could result in either declining or increasing costs of

immunosuppressive therapy. Such changes could

influence Medicare outlays in the future even if no

change in policy is made. Other changes in the

number of eligible beneficiaries and the cost of

immunosuppressive drugs could come about as a

result of system responses to any expansion in

Medicare drug coverage. The factors influencing

these changes and their likely effects on Medicare

expenditures aressummarized in table 2.
Chapter Summary and Options ● 9

ISSUES AND OPTIONS

Even without any changes in Medicare policy, it

appears that overall coverage through private and

public insurers is sufficient to ensure that many

Medicare beneficiaries receive outpatient immunosuppressive drug therapy for the first few years. A

substantial minority, however are at high risk of

inadequate financial access, because they have only

Medicare insurance and may suffer financial hardship in obtaining drugs after Medicare’s l-year drug

coverage period ends. In addition, in the long term,

many other Medicare beneficiaries who had additional coverage at one time may find it difficult to

afford immunosuppressive drugs.

Congress could choose not to change Medicare

policies regarding outpatient immunosuppressive

drug therapy. Alternatively, Congress could change

either coverage or payment policy in any of a

number of ways (table 3). The following section

discusses seven options, which could be implemented either independently or in combination.

Option 1: Extend the current Medicare limit

on outpatient immunosuppressives past one

year.

Option IA: Extend the limit by a specified number

of years (e.g., to cover up to 3 years after

hospital discharge).

Option IB: Eliminate the limit completely.

There are two basic goals of coverage expansion

of outpatient immunosuppressive drugs: 1) ensuring

accessibility to outpatient immunosuppressive drugs

with adequate financial protection to the beneficiary,

and 2) assuring equal access to transplantation. For

those Medicare patients without additional coverage

(an estimated 13 to 43 percent), financial inability to

obtain immunosuppressive drugs may sometimes

lead to failure of the transplanted organ and a return

to dialysis (for kidney transplant recipients) or death

(for recipients of other organs). Expanding Medicare

coverage for immunosuppressive drugs would ease

the financial burden for those beneficiaries with

inadequate insurance coverage and might improve

patient adherence to therapy. A secondary effect

might be that of enhancing “equitable access to

transplants, by reducing the chance that a patient

will forgo the opportunity for a transplant (or not be

referred for one) due to financial concerns.

Table 3—Medicare Policy Options for Outpatient

Immunosuppressive Drugs

Coverage options:

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

outpatient immunosuppressives for Medicare

beneficiaries with a Medicare-covered transplant.

Option 2: Extend coverage for outpatient immunosuppressive

drugs to Medicare beneficiaries whose transplant was

not covered by Medicare.

Option 3: If coverage is extended, include preexisting as well as

new 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 to

Medicare beneficiaries.

Option 6: Reduce or eliminate the coinsurance requirement for

outpatient immunosuppressive drugs.

Option 7: Change the method of paying for outpatient

immunosuppressive drugs.

SOURCE: Office of Technology Assessment, 1991.

Extending the l-year limit by a specified number

of years addresses these concerns in a limited way.

Eliminating the l-year limit may be more effective,

since it reduces the possibility of continued extensive out-of-pocket expenses for immunosuppressive for all Medicare-covered transplant recipients.

Moreover, eliminating the limit may more effectively counteract any bias that exists in patient

selection due to inability to pay for irnmunosuppressives, thus further enhancing the equity of access to

transplants. Expanding immunosuppressive coverage will not have much effect on the actual number

of transplants performed, because the number of

transplants is constrained by the number of suitable

organs available.

Coverage expansion will almost certainly raise

Medicare expenditures, although there will be some

small offsetting savings from averted hospitalizations and returns to dialysis. The increase in

expenditures would be less with time-limited than

with indefinite coverage. The benefits, however,

would be much less as well.

The overall shift in financing from other sources

to Medicare that would occur if coverage were

expanded is a substantial and legitimate concern. An

estimated 57 to 87 percent of Medicare transplant

recipients have some kind of public or private

insurance in addition to Medicare that currently pays

for their immunosuppressive drugs.

Even with unlimited coverage expansion under

this option, approximately 50 percent of kidney
10 . Outpatient Immunosuppressive Drugs Under Medicare

transplant recipients would still lose Medicarebased immunosuppressive drug coverage after 3

years, when their ESRD-linked Medicare entitlement expires (17). For these patients, an additional

policy issue is whether they should continue to be

eligible for Medicare Part B in order to receive

Medicare coverage of irnmunosuppressives. Many

of these patients may find it difficult to purchase

drugs (or insurance coverage) after losing Medicare

eligibility. Permitting nondisabled transplant recipients to retain Medicare eligibility would afford these

individuals much greater protection. However, it

would also confer benefits not available to other

chronically ill individuals.

Option 2: Extend coverage for outpatient

immunosuppressive drugs to Medicare beneficiaries whose transplant was not covered

by Medicare.

At present, only individuals whose organ transplant procedure was covered by Medicare are

eligible for outpatient drug coverage. Some other

organ transplant recipients, however, are also Medicare beneficiaries. This group of patients encompasses recipients of pancreas, heart/lung, lung, and

some heart, liver, and bone marrow transplants who

did not meet Medicare’s conditions for coverage.

Although the exact number of Medicare beneficiaries who fit this description is unknown, it is

believed to be small (17).

Extending outpatient immunosuppressive drug

coverage for the first time to these recipients would

unquestionably raise Medicare expenditures slightly.

However, it could further assure protection against

the possibility of incurring substantial out-of-pocket

expenses for all Medicare transplant recipients

regardless of type of transplant.

Option 3: If coverage is extended past the

current limit, include preexisting as well as

new transplant recipients.

Under current policy, Medicare pays for outpatient immunosuppressive drugs for approximately

6,000 firstt-year transplant patients per year (see ch.

4). Any contemplated coverage expansion could be

limited to Medicare-covered transplant recipients

who receive their graft in or after the year in which

the new coverage policy is made effective.

Alternatively, a new coverage extension could

pertain to all existing Medicare-covered transplant

recipients with a functioning graft as well. OTA

estimates that the cumulative total of living functionalgraft recipients in the United States was more than

46,000 persons in 1988, of which about two-thirds

had Medicare coverage (see ch. 2). The total number

of Medicare-covered transplant recipients was over

31,000 persons in 1988 and is estimated to be over

36,000 in 1991.

“Grandfathering in” all Medicare beneficiaries

with functioning grafts would assure the same

coverage policy and similar financial protection to

Medicare transplant recipients regardless of when

the transplant was performed. It would also increase

the initial pool of recipients requiring Medicare

payment for irnmunosuppressives more than fivefold, resulting in corresponding increases to Medicare expenditures (table 4). If a grandfather clause

were combined with elimination of the current

l-year limit on coverage, Medicare would cover and

pay for immunosuppressive drugs for approximately

67 percent of all U.S. transplant recipients with a

functioning graft, compared with the current estimate of 13 percent. Medicare would then have a

leading role in financing post-transplant immunosuppressive therapy. Total Medicare-related expenditures, including beneficiary copayments, could be

expected to increase from an estimated $24 to $36

million to between $125 and $185 million (in 1988

dollars) .12

Option 4: Apply Medicare secondary payer

requirements to outpatient immunosuppressive drug benefits.

Under the ESRD program, having Medicare as

secondary payer is a mandatory requirement for the

frost 18 months of eligibility .13 Medicare pays for

covered services provided to ESRD beneficiaries in

this period only after any existing private insurer

pays. Private insurers are not permitted to discriminate against ESRD beneficiaries, so they may not

disenroll beneficiaries or arbitrarily change their

benefits 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 other

insurance 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 Whom

Medicare Would Have Paid for Immunosuppressive

Drug Therapy Based on Selected Coverage Policy

Options j 1988-90

Estimated number of Personsa

Policy option 1988 1989 1990

Retain current 1-year coverage

limit for drugsb. . . . . . . . . . . . . 6,000 5,800 6,100

Extend/eliminate limit

(option 1) . . . . . . . . . . . . . . . . . 6,000 12,100 19,000

Extend/eliminate Iimit and cover all

Medicare-covered successful

grafts (options 1 and 3). . . . . . 31,500 35,400 40,300

a Estimated number includes only Medicare beneficiaries who have a

Medicare-covered transplant procedure and for whom Medicare is the

primary payer. Estimates have been rounded to nearest 100 to reflect the

degree of uncertainty in these numbers.

b Numbers are based on 1987-89 Medicare transplant recipients with

functioning grafts in 1989-90, respectively. The number of kidney transplants, 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 calculated

by OTA based on available information from the Health Care

Financing Administration and the Health Resources and Services Administration.

percent of Medicare kidney transplant recipients

have private coverage during this time (7,17). If the

l-year coverage limit for immunosuppressive drugs

is eliminated, extending the mandatory secondary

payer requirement to all kidney transplant recipients

specific to immunosuppressive drug coverage would

prevent a shift of financing from other sources to

Medicare for those patients with additional coverage.

This option could apply to all beneficiaries, not

just kidney transplant recipients. However, there is

no precedent for expanding mandatory secondary

payer policies to a specific service for the general

Medicare population. Since Medicare would still be

the primary payer for all other services provided to

the population, this provision might be difficult to

administer. This option is also only effective to the

extent that private insurers can be prevented from

changing their enrollment and benefit packages. At

present, such protection exists in law only for ESRD

beneficiaries.

Option 5: Require nonhospital pharmacies

and other suppliers to accept assignment for

outpatient immunosuppressive drugs.

Individuals requiring outpatient immunosuppressive drugs can obtain these drugs from either

hospital pharmacies or from nonhospital pharmacies, physicians, and other sources. Hospital pharmacies serving Medicare patients must accept the

Medicare cost-based payment plus the beneficiary

copayment (coinsurance and any applicable deductible) as payment in full for the drug. Nonhospital

suppliers are not subject to this constraint and may

bill beneficiaries more than the Medicare-allowed

charge (i.e., more than the Medicare payment plus

beneficiary copayment).

Congress could mandate that all nonhospital

suppliers accept assignment for post-transplant outpatient irnmunosuppressive drugs. These suppliers

would then be required to agree to accept Medicare’s

allowed charge as payment in full in order to

dispense these drugs to Medicare beneficiaries. This

option would restrict providers’ behavior in exchange for reducing beneficiaries’ financial liabilities. The exact extent of protection that would be

afforded by this option is unclear; it depends on the

extent to which patients purchase their drugs from

nonhospital sources.

Option 6: Reduce or eliminate the coinsurance

requirement for outpatient immunosuppressive drugs.

Expanding coverage by eliminating the l-year

limit does not protect the beneficiary from coinsurance obligations. Under current policy, the patient

must pay a coinsurance amount equal to 20 percent

of reasonable charges (if the drug is dispensed by a

nonhospital pharmacy or supplier) or 20 percent of

the actual submitted charge (if dispensed by a

hospital pharmacy). OTA estimates that average

coinsurance obligations were between roughly $570

and $850 per year in 1988. Payment policy could be

changed to recognize a higher proportion (up to 100

percent) of reasonable charges, thus reducing or

eliminating the coinsurance liability. This change

could be made regardless of any other changes in

coverage or payment policy.

The unquestionable benefit of eliminating coinsurance requirements for outpatient irnrnunosuppressives is that it would ease the financial obligations of beneficiaries. However, this benefit would

be achieved at the expense of Medicare. The

elimination of coinsurance might increase patient

adherence to prescribed drug regimens and prevent

some organ rejection episodes, with some associated

Medicare savings, but the magnitude of the savings

is probably small.

292-878 - 91 - 2
12 ● Outpatient Immunosuppressive Drugs Under Medicare

Changing coinsurance requirements for outpatient immunosuppressive drugs raise some issues of

equitable treatment of other Medicare beneficiaries,

who also must pay coinsurance for the benefits they

receive. For example, implementing this option

could result in pressure to reduce coinsurance

obligations for dialysis visits, since coinsurance

expenses are higher for that treatment than for

outpatient drug therapy.

The most comprehensive alternative for reducing

beneficiary out-of-pocket costs would be a combination of three options: eliminating the current l-year

coverage limit, requiring mandatory assignment,

and eliminating the coinsurance requirement. This

approach would offer beneficiaries almost complete

protection from the high cost of irnmunosuppressive

drugs. (Increases to Medicare outlays could be

constrained slightly by mandating Medicare as

secondary payer.) However, this approach would

raise particularly strong equity issues, since it would

afford transplant recipients a degree of financial

protection unavailable to any other Medicare beneficiaries.

Option 7: Change the method of paying for

outpatient immunosuppressive drugs.

At present under the outpatient immunosuppressive drug benefit, the drug is paid separately from the

physician visits relating to therapy management and

from any associated hospital outpatient visit. One

eventual alternative might be to bundle the various

covered services together for the purposes of payment. If, as one study suggests, outpatient immunosuppressive drugs are obtained more often from

hospital outpatient pharmacies than from retail

pharmacies (7), then a global fee with the professional and technical components included might be

practical. Two disadvantages with moving immediately to global fees for immunosuppressive drug

therapy are the difficulty of paying consistently for

hospital- and nonhospital-based services and the

potential incompatibility with any other future

changes in payment for ambulatory services.

Another payment approach might be to pay for

immunosuppressive drugs according to a fee schedule, under which the dispenser would be paid a

single price per given amount of drug, regardless of

the type of pharmacy from which the drug was

obtained. At present, an immunosuppressive obtained from a hospital pharmacy is reimbursed on a

different basis than one dispensed by a nonhospital

pharmacy or supplier. Under this option, the actual

amount paid could be based on a fee schedule that

applied uniformly across different suppliers and

accounted for factors such as drug dosage level and

whether the drug was a generic or a sole source

product.

Advantages to a fee schedule for immunosuppressive from Medicare’s perspective are that the

program could better control its expenditures and

could encourage or discourage the use of particular

drugs, if desired, by raising or lowering payment

rates. A fee schedule might also confer benefits on

beneficiaries by making their payments lower and

more predictable, particularly if this option were

implemented in tandem with mandatory assignment.

Disadvantages to a fee schedule include the potential

for establishing rates too low (discouraging technological innovation or reducing beneficiary access) or

too high (resulting in unnecessary expenditures),

and the administrative burden of establishing appropriate rates and updating them frequently.
Chapter 2

Overview of the

Transplant Population
Contents

Page

TRANSPLANT COVERAGE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + . . . 15

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .+. . . . . . . . . . . . 15

Other Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. 15

NUMBER OF TRANSPLANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................17

TRANSPLANT RECIPIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. ... 18

Characteristics . .. . .. . .. 18

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

Tables

Table Page

5. Medicare Coverage Policy for Selected Transplant Procedures... . . . . . . . . . . . . . . . . . . . . . 16

6. Percentage of Medicaid programs and private Insurance Plans Covering Transplants . . . . . 16

7. Number of Transplants Performed: U.S. Total, Medicine-Covered,

and Medicaid-Covered, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 17

8. Number of U.S. Transplants Performed and percent Change, 1984-89 ... .... . . . . . . . 18

9. Characteristics of Transplant Recipients, 1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

10. Estimated Number of U.S. Transplant Recipients With a Functioning Graft and

With Medicare Coverage, 1988 .. .. .. .. .. .. .. +. ..+. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Chapter 2

Overview of the Transplant Population

The demand for outpatient post-transplant immunosuppressive drugs depends heavily on the

number of people receiving organ transplants. Since

January 1987, Medicare has covered these drugs for

patients who received a Medicare-covered transplant (Public Law 99-509). This chapter provides an

overview of existing coverage policy for transplants,

the number of U.S. and Medicare-covered transplant

recipients, and transplant patient characteristics. It

then presents estimates of the number of living

transplant patients with a functioning graft-an

essential number in determining how many persons

require immunosuppressives.

TRANSPLANT COVERAGE

POLICY

Medicare

Medicare restricts its coverage of transplants to

certain organs and, to some degree, certain categories of patients. At present, Medicare covers heart,

kidney, liver, and bone marrow transplants (table 5)

(54). 1 2 Liver and bone marrow transplants are

restricted to Medicare beneficiaries with certain

medical conditions. At this time, Medicare does not

cover heart/hmg, lung, or pancreas transplants,

regardless of the patient’s condition.3

Medicare coverage of kidney transplants is statutorily mandated, based on Medicare eligibility

through the End-Stage Renal Disease (ESRD) Program. Whereas other patients must already be

entitled to Medicare (by being elderly or disabled) in

order to receive a Medicare-covered transplant, any

patient who needs kidney dialysis or a kidney

transplant due to chronic renal failure may be

entitled to Medicare as a result of this need.4

Medicare ESRD-linked entitlement for kidney transplant beneficiaries ends 3 years after the date of

transplant surgery (42 U. S. C. A.~426-1).

State

policies

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 by

over 90 percent of State Medicaid programs (table

6). Similarly, kidney transplants are covered by

almost all private insurers; heart and liver transplants are covered by many Blue Cross/Blue Shield

plans and commercial insurers. As of the rnid-1980s,

health maintenance organizations’ coverage policies

also generally appeared to resemble those of the

Medicare program (22).

Many private insurers and Medicaid programs

also cover transplant procedures currently not covered by Medicare. For example, more than 70

percent of the Blue Cross/Blue Shield plans and a

comparable percentage of commercial insurers covered heart/lung transplants even in 1985 (8,22).

Almost 25 States cover heart/lung transplants under

Medicaid (317). Moreover, all evidence points to

continued expansion in coverage of transplants by

States and private insurers (27).

Thus, Medicare’s coverage policy of nonrenal

transplants is comparatively restrictive. Medicare’s

role in transplant coverage is also somewhat constrained because of the age limit for transplant;

people 65 years and over are not generally considered 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 usuMY

require immunosuppressive drugs.

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

is 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 in

which 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. 1,1978

June3,1985

Apr.28,1989

November1979

June 13,1980

Oct. 17,1986

Feb. 9,1984

Mar.8,1990d

Coverage is tied to patient eligibility under Medicare’s End-Stage Renal Disease

Program. Coverage can begin the month of hospitalization for the transplant.

Coverage ends 36 months after the date of transplant surgery unless the recipient

is also elderly or disabled.

Covered for treatment of leukemia or aplastic anemia.

Covered for treatment of severe combined immunodeficiency disease or WlskottAldrich 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 transplant

candidates accepted on or before June 12, 1980. Future transplants not revered.

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

centers.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 to

be revered.

Not covered.

Not covered.

Not covered.

aSkin andcornealtransplants arealsocovered by Medicare. Both procedures were accepted medical practi~ atthetime Medicare was implemented and thus

required 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’s

own 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%ulations

were 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

Health

Medicaid Blue Cross/ Commercial maintenance

programsa Blue Shield insurersb organizations

Transplant procedure (1990) (1985) (1985) (1985)

(Percent of States) (Percent of plans)

Heart . . . . . . . . . . . . . . . . . 78% 89Y0 85?40 33!Z0

Kidney . . . . . . . . . . . . . . . . 98 100 97 97

Liver . . . . . . . . . . . . . . . . . . 94 91 80 81

Hearfflung . . . . . . . . . . . . . 45 82 69 25

Lung . . . . . . . . . . . . . . . . . 29 NA NA NA

Pancreas . . . . . . . . . . . . . 24 49 57 19

Bone 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 Shield

Association, Chicago, IL, personal communication, Mar. 29, 1991; and F.J. Hellinger, “Status of Insurance Coverage for Organ Transplants in

the 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-covereda

Percent of Percent of

Transplant prooedure Us. total Number Us. totalb Number U.S. total

Heart . . . . . . . . . . . . . . . . . 1,647 1 17’ 7.IYO 94 5.7?40

Kidney . . . . . . . . . . . . . . . . 9,1 23d

8,145” 89.3 273 3.0

Liver . . . . . . . . . . . . . . . . . . 1,680 7 0.4 120 7.1

Heart/lungQ . . . . . . . . . . . . 74 0

Lung9 . . . . . . . . . . . . . . . . .

0.0 5.0 6.8

31 0 0.0 NA NA

Pancreas9 . . . . . . . . . . . . . 243 0 0.0 9 3.7

Bone marred. . . . . . . . . . 1,908 55 2.9 208 10.3

Total . . . . . . . . . . . . . . . 14.706 8.324 56.6 709 4.8

ABBREVIATIONS: 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 Or9an

Transplantation, 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 will

cover 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 Of

autologous transplants, of which approximately 1,200 were reported worldw”de in 1987.

SOURCE: Office of Technology Assessment, 1991.

NUMBER OF TRANSPLANTS

In 1988, nearly 15,000 organ transplants were

performed in the United States (table 7).5 Kidney

transplants were the most frequently performed

transplant procedures, accounting for more than 60

percent of the U.S. total.

Medicare covered an overwhelming majority

(nearly 90 percent) of U.S. kidney transplants in

1988.6 In contrast, Medicare covered only 7 percent

of heart transplants, 3 percent of allogeneic bone

marrow transplants, and less than 1 percent of liver

transplants (5,17,27,62). Nonetheless, because kidneys were the most commonly performed transplants, Medicare covered a majority (57 percent) of

the Nation’s transplant procedures overall in 1988.

State Medicaid programs sometimes cover transplants that Medicare does not, but Medicaid-covered

procedures still account for less than 5 percent of the

national total of transplantations. Thus, Medicare is

a major payer of kidney transplants only; Medicaid’s

role is minor. Most other organ transplants are paid

for by private insurers.

The number of nonrenal transplants (i.e., of

organs other than kidneys) performed each year has

increased dramatically over time (table 8). Average

annual growth rates from 1984 to 1989 were 48

percent for liver, 37 percent for heart, 37 percent for

pancreas, and 25 percent for heart/hmg transplants

(5). The rapid growth was a product of major

advances that have continually taken place in all

transplant-related disciplines-immunology, histocompatibility, surgery, organ procurement, organ

preservation, and immunosuppression.

These growth rates might have been even greater

if the supply of donated organs had been sufficient

to meet the needs of those waiting for transplant. In

1989, for example, 31 percent of the patients waiting

for a heart transplant died before a suitable organ

became available (60). Similarly, the number of

available kidney organs is sufficient to provide

transplants for only about 60 percent of persons

currently on the waiting list. The constrained supply

of suitable kidneys explains the relatively small

increase in kidney transplants, which grew by only

5 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 nOt

include the U.S. number for autologous bone marrow transplants, which was was not available. This number is not critical since these recipients do not

usually 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 malldatOry

requirement that Medicwe be the secondary payer for the first 18 months of eligibility of any End-Stage Renal Disease beneficiary who also has private

insurance (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 8,731

1985 . . . . . . . . . . . . . . . . . 719 7,695 602 30 2 130 1,297 11,475

1986 . . . . . . . . . . . . . . . . . 1,368 8,975 924 45 0 140 1,578 13,030

1987 . . . . . . . . . . . . . . . . . 1,512 8,967 1,182 41 11 180 1,659 13,552

1988 . . . . . . . . . . . . . . . . . 1,647 9,123 1,680 74 31 243 1,908 14,706

1989 . . . . . . . . . . . . . . . . . 1,673 8,890 2,160 67 89 413 2,194 15,486

Percent change,

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

Average 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 are

estimated 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 Organ

Transplantation, 1991.

TRANSPLANT RECIPIENTS

Characteristics

Transplants are usually performed on relatively

young patients (table 9). The average patient age at

the time of transplant ranged from 25 years for bone

marrow transplant recipients to 47 years for heart

transplant recipients between October 1987 and

December 1989 (5,62).7 Across all types of transplants, the majority of recipients were white.

The patient’s condition at the time of transplant

varies by transplant type. A majority of heart,

heart/lung, and lung transplants in 1989 occurred in

patients who were reported to be homebound. In

contrast, a substantial proportion of individuals

receiving kidney, pancreas, and bone marrow transplants were working or going to school Ml-time

(5,62). Repeat transplants occurred rarely, except for

kidney and liver transplants.8

Most transplanted organs function for at least a

year, but graft survival rates vary markedly by type

of organ. For a 1987-89 cohort of transplant recipients, over 82 percent of heart grafts survived 1 year

after the transplant (60). In contrast, only 57 percent

of lung transplants survived that long. The l-year

graft survival rate for cadaveric-donor kidney transplants, the most common type of organ transplant,

was 78 percent, with 52 percent of such grafts

surviving at least 5 years. One- and five-year

survival rates for living-donor kidneys are somewhat

higher (88 and 72 percent, respectively). Patient

survival rates are similar to graft survival rates,

except for kidney and bone marrow recipients, who

can sometimes survive with alternative treatments if

the graft fails.

Number of Functioning Graft Patients

To understand the implications of changing Medicare’s policies regarding immunosuppressive drugs,

one must first determine the number of living

transplant recipients whose graft is still functional.

Of the nearly 15,000 transplant recipients in 1988,

OTA estimates that approximately 73 percent, or

11,000 recipients, were living in 1989 with a

functioning graft.9 The cumulative total of living

functional-graft patients in the United States was

estimated to be more than 46,000 persons in 1988, of

which 66 percent have Medicare coverage (table 10).

Kidney transplant recipients account for more than

95 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 have

increased 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 persons

who 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 With

a Functioning Graft and With Medicare Coverage, 1988

Recipients with Medicare coveragea

As percent of

Organ Us. total Number U.S. total

Kidney . . . . . . . . . . . . . . . . . . . . . . . . . 39,400 30,400b 77.2?40

Heart . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075 220 7.1

Liver . . . . . . . . . . . . . . . . . . . . . . . . . . 1,660 10’ 0.4

Hearfflung . . . . . . . . . . . . . . . . . . . . . 65 d d

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

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

Bone marrow... . . . . . . . . . . . . . . . . 2,030 55 2.7

Total . . . . . . . . . . . . . . . . . . . . . . . 46,605 30,685 65.8

alncludesoniythoseforwhom Medicareisassumedtobethe primarypayer.Medicare istheseccmdarypayerforsome

kidney recipientswith Medicarecoverage.

b~istotal is ~%don the f inding that ~ per~nt of kidney transplant r~ipients continue to receive Medicare benef its

past 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 recently

extended (56 FR 15006). U.S. Health Care Financing Administration estimates that Medicare will cover approximately

19 percent (orover400) of all U.S. liver transplants in 1994 compared with less than 3 percent of U.S. liver transplants

covered 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 Health

and Human Services, Public Health Services, Health Resources and Services Administration, Division of

Organ Transplantation; and Health Care Financing Administration, Office of Research and Demonstration.

The percentage of recipients covered by Medicare kidney transplant recipients with a functioning graft

is high because of Medicare’s ESRD entitlement continue to receive Medicare benefits past the 3-year

program, 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 under

day of the transplant surgery. The U.S. Health Care which these recipients continue to qualify for

Financing Administration found that 50 percent of Medicare.
Chapter 3

Immunosuppressive

Drug Therapies
Contents

Page

IMMUNOSUPPRESSIVE DRUG PROTOCOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . q . . . . . . . . 23

C.omponents of Immunosuppressive ~erapy. .. .. .. .. do. ... +....... .. .+ .. ... ... ..+. ..OO 23

Variation inDrug Treatment ~otocols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

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

Tables

Table Page

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

Post-Transplant Immunosup~essive ~gs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

12. Typical Immunosuppressive Drug Protocols for Kidney Transplant Patients . . . . . . . . . . . . . 24

13. Percentage ofKidney Transpl~t Recipients Receiving CyclospoMe, 1984-89 . . . . . . . . . . 25

14. Percentage ofTransplant Recipients Receiving Specific Immunosuppressive

Drugs by Drug Type, 1987-90 . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. .. .. ... +.. ...+.,. +.. 26

15. An.nual Drug Costs for Immunosuppressive Protocols ofKidney Transplant

Patients, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....”.......”.”.”.. 27
Chapter 3

Immunosuppressive Drug Therapies

This chapter reviews the immunosuppressive

agents currently used to prevent organ rejectionl and

describes the variation in drug treatment regimens

used by transplant recipients. It then discusses the

costs associated with various immunosuppressive

drug therapies.

IMMUNOSUPPRESSIVE DRUG

PROTOCOLS

Components of Immunosuppressive Therapy

Despite the slow but relatively steady development of immunosuppressive products, the number of

drugs is still few. Presently, only four drugs are

approved by the U.S. Food and Drug Administration

(FDA) specifically for post-transplant irnmunosuppression: azathioprine, cyclosporine, antithymocyte

globulin (ATG), and muromonab CD3 (OKT-3)

(table 11) (55,56).2 All four of these drugs are

sole-source (i.e., each is produced by only one

manufacturer). Prednisone, an adrenal corticosteroid, is also usually aWstered to patients as part

of the immunosuppressive drug regimen and is

covered under Medicare for this purpose.

Early approaches to long-term chemical irmmmosuppression in transplant recipients included a

combination of azathioprine (or, after its FDA

approval in 1981, ATG) a.ndprednisone. Cyclosporinebased protocols, introduced into general use in 1984,

rapidly replaced these approaches to become the

mainstay of immunosuppressive therapy in patients

who receive organ grafts. The incidence and success

rates of heart, heart/hmg, and lung transplants

increased particularly dramatically in the era following FDA approval of cyclosporine (58). For kidney

transplants, cyclosporine use apparently also reduced mortality and morbidity to levels significantly

lower than the conventional protocols (7,23,29,43).

Orthoclone OKT-3 (the brand name of muromonab CD3, a monoclinal antibody) is a relatively

recent addition to the roster of immunosuppressive

agents. OKT-3 is approved by the FDA for the

treatment of acute rejection of transplanted organs.

However, it has also been used prophylactica.lly (i.e.,

to prevent organ rejection) by some treatment

programs as a replacement for ATG (15). To date,

prophylactic OKT-3 therapy has been administered

to inpatients, but outpatient administration is not

beyond the reahn of possibility.

Antilymphocyte globulin (ALG), a new immunosuppressive developed at the University of Minnesota, is not yet approved for general use by the FDA.

Like ATG, ALG is used primarily to reverse

particularly severe rejection episodes, but it has also

been administered routinely as part of a standard

immunosuppressive protocol.

Another promising new drug is FK-506, manufactured by a Japanese firm. FK-506 is a powerfkl and

selective immunosuppressive agent with a mode of

action similar to that of cyclosporine (7,33,47,63).

The most appropriate place of FK-506 in the

post-transplant immunosuppressive drug regimen is

still a matter of study and debate. Further investigation is necessary to detetie the toxicity, potential

benefits, and most appropriate clinical application

when compared with cyclosporine (16,45).

At least two other potential immunosuppressive

drugs are also under development. One new drug

under testing is 15-deoxyspergualin (also known as

NKT-01), a relative of the antitumor antibiotic

spergualin. NKT-01 has been shown to prolong the

graft survival of organ and tissue transplants in

rodents (19,44) and is currently in Phase I clinical

trials in humans (14). Another new compound,

rapamycin, has also shown encouraging potential in

the laboratory but has not yet been tested in humans

(24).

All current and potential immunosuppressive

drugs have associated side effects and complications. For example, despite its major contribution to

the improved outcome of human organ transplantation over the past decade, cyclosporine is nephrotoxic; it can cause impaired kidney fiction in both

kidney transplant recipients and in patients with

normal 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 ~ not

discussed 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 Coverage

of Post-Transplant Immunosuppressive Drugs

FDA approval date Medicare

Drug Brand or common name Manufacturer/developer (form of administration) coverage

Azathioprine. . . . . . . . . . . . . . Imuran Burroughs Wellmme Mar. 20, 1968 (oral) Yes

July 19, 1974 (IV)

Antithymocyte globulin. . . . . . Atgam Upjohn NOV. 17, 1981 (IV) Yes

Cyclosporine . . . . . . . . . . . . . Sandimmune Sandoz NOV. 14, 1983

(oral and IV) Yes

Muromonab CD3 . . . . . . . . . . OrthocJone OKT-3 Ortho June 19, 1986 (IV) Yes

Prednisone . . . . . . . . . . . . . . . No brand name Multiple sources Multiple forms approved Yes

Antilymphocyte globulin. . . . . ALG University of Minnesota Not approved No

Macrolide antibiotic . . . . . . . . FK-506 Fujisawa Not approved No

ABBREVIATION: IV - intravenous.

SOURCE: Office of Technology Assessment, 1991.

Table 12—Typical Immunosuppressive Drug Protocols for Kidney Transplant Patients

Setting and protocol phase

Inpatient initial Outpatient

Drug protocol and rejection phases maintenance phase

Traditional therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PRED + AZA PRED + AZA

Augmented with ALG or ATG ... , . . . . . . . . . . . . . . . . . . . PRED + AZA + ALG/ATG PRED + AZA

Cyclosporine therapy’

Double-drug . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CSA + PRED CSA + PRED

Triple-drug (with ALG, ATG, or OKT-3) . . . . . . . . . . . . . . . . PRED + AZA + ALG/ATG/OKT-3 CSA + PRED + AZA

Quadruple-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 - Orthodone

OUT-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 Initial

knrmmosuppressive Protocol and Diabetes, under agreement with the Health Care Financing Administration Cooperative Agreement

14-C-985ti]0, August 1989.

other organs (7,42). Hypertension (high blood pressure) after heart transplant is another frequently

observed complication of cyclosporine-induced immunosuppression (40).

Many of these side effects are dose-related and

can be minimized through the use of multiple-drug

approaches to irnrnunosuppression that permit lower

doses of individual drugs. Indeed, because of the

nephrotoxicity associated with cyclosporine, lower

dosages of various immunosuppressive agents are

being used in increasingly complicated immunosuppressive protocols.

Vari&”on in Drug Treatment Protocols

Until the clinical introduction of cyclosporine,

immunosuppressive drug protocols for kidney transplants, the most cornrnon transplant procedure, were

similar across transplant programs in the United

States and abroad. The mainstay traditional therapy

consisted of a combination of azathioprine and

prednisone (table 12).

With the introduction of cyclosporine, a variety of

new protocols followed in an effort to maximize

immunosuppression while minimizing side effects

such as nephrotoxicity and susceptibility to infection. The different preferred drug combinations vary

across transplant centers and across individual

patients within any particular center (7,21). Because

the therapy is tailored to the patient, the mix and

dosages of drugs also vary over time in any

particular patient, depending on the treatment phase

and the patient’s physiologic reactions to the drugs.

The drugs administered to a given patient differ

according to three possible immunosuppressive

treatment 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 approximately

the first 6 weeks of use of immunosuppressive

drugs during the immediate, post-transplant

period. Treatment is usually on an inpatient

basis during this phase, since it is the time when

the patient’s status is most uncertain.

Maintenance treatment, which is usually administered on outpatient basis, is initiated after

the patient’s medical condition has stabilized

and when the organ function is normal or

near-normal.

Therapy during acute organ rejection, which

sometimes occurs despite maintenance therapy, is usually a short phase requiring higher

dosages and, often, different drugs while the

patient is hospitalized (7).

For kidney transplants, cyclosporine has increased the complexity of transplant recipient management; distinguishing between a rejection episode

and nephrotoxicity is quite obviously confhsing on

the one hand and critical on the other.

The improved effectiveness of cyclosporinebased protocols over traditional therapy is reflected

in the dramatic shift in the immunosuppressive

management of kidney transplant recipients since

FDA approval of cyclosporine in late 1983. From

1984 to 1989, the number of cadaveric kidney

transplant recipients receiving cyclosporine grew

from 73 to 93 percent (17) (table 13). The use of this

drug increased even more dramatically for livingdonor kidney transplant recipients, fi-om 38 percent

in 1984 to 87 percent in 1989. Overall, approximately 90 percent of kidney transplant recipients,

regardless of source of graft, received cyclosporine

as the primary immunosuppressive agent in 1989.4

The percentage of transplant recipients receiving

cyclosporine is probably similar for recipients of

other organs, since cyclosporine was already known

to be the most effective irnmunosuppressive drug

when these procedures began to be performed more

regularly. In contrast, when kidney transplants were

initially performed, cyclosporine had not yet been

approved by the FDA. Consequently, physicians

Table 13-Percentage of Kidney Transplant

Recipients Receiving Cyclosporine, 1984-89

Source of graft

Year Living donor Cadaveric donor

1984 . . . . . . . . . . . . . . . . . 38’Yo 730/0

1985 . . . . . . . . . . . . . . . . . 53 84

1986 . . . . . . . . . . . . . . . . . 68 90

1987 . . . . . . . . . . . . . . . . . 78 92

1988 . . . . . . . . . . . . . . . . . 80 91

1989 . . . . . . . . . . . . . . . . . 87 93

SOURCE: Health Care Financing Administration, Office of Research and

Demonstrations, Division of Beneficiary Studies, 1990.

may have tended to keep patients with older

transplants on their original regimens. Moreover,

because nephrotoxicity is the most significant side

effect of cyclosporine, traditional therapies may be

warranted for some kidney transplant recipients.

Despite the predominance of cyclosporine as the

primary imrnunosuppressive agent, azathioprine and

prednisone remain stable components of both inpatient and outpatient irnmunosuppression (table 14).

These drugs continue to be important adjuncts to

cyclosporine in most of the therapies currently in

use.

COST OF IMMUNOSUPPRESSIVE

THERAPY

The variation in cost associated with immunosuppressive agents and protocols is substantial. Costs of

cyclospmine maintenance therapy protocols, for

example, are much higher than those of traditional

maintenance therapy.s The reported costs for traditional outpatient therapy using only prednisone and

azathioprine were $2 per day in 1988, compared

with reported average costs for cyclosporine-based

therapies ranging from $9 to $23 per day, depending

on the source of information (6,7).

Annual costs are similarly variable across protocols and over time (table 15). In 1988, average

amual costs for traditional therapy were reported to

be $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 on

conventional 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 muromonab

CD3 (OKT-3) (34a). These numbers do not necessarily reflect comparable dosages, but nonetheless the differences in the AWPS among traditional and

more recent drugs are striking.
26 . Outpatient Immunosuppressive Drugs Under Medicare

Table 14—Percentage of Transplant Recipients Receiving Specific Immunosuppressive Drugs

by Drug Type, 1987-90a

Percentage of patients receiving:

Transplant type Other drugs

and settingb Cyclosporine Azathioprine Prednisone ALGIATG OKT-3 and therapies

Heart

Inpatient . . . . . . . . . . . . . . . . . .

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

Kidney (cadaveric)

Inpatient . . . . . . . . . . . . . . . . . .

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

Kidney (iiving-donor)

inpatient . . . . . . . . . . . . . . . . . .

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

Liver

inpatient . . . . . . . . . . . . . . . . . .

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

Heart/iung

inpatient . . . . . . . . . . . . . . . . . .

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

Lung

inpatient . . . . . . . . . . . . . . . . . .

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

Pancreas

Inpatient . . . . . . . . . . . . . . . . . .

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

94.7Y0

NA

91.070

NA

89.2!L0

NA

26.5Yo

NA

28.3Yo

NA

1 .2?40

NA

96.9

94.0

82.7

81.5

94.0

92.5

28.7

1.6

16.0

3.3

25.4

11.6

85.5

84.4

81.5

82.3

92.9

90.7

16.0

1.4

8.3

2.5

23.5

11.5

98.5

96.3

66.2

67.2

90.8

92.3

13.2

0.6

27.7

2.8

44.8

15.3

92.6

NA

91.2

NA

73.0

NA

48.0

NA

32.4

NA

2.0

NA

83.1

NA

89.2

NA

77.1

NA

41.0

NA

34.9

NA

4.8

NA

98.5

99.0

98.1

98.6

96.3

98.6

40.2

14.5

32.0

23.5

14.1

1.7

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 more

than 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 methylprednisolone.

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

Transplantation, 1991.

average costs for cyclosporine double drug therapy

(i.e., maintenance therapy with cyclosporine plus

predisone) were $5,338 in the first year and $4,025

in the subsequent years. Thus, the simplest cy -

closporine maintenance therapy is roughly seven

times more costly than the traditional therapy.G

annual costs appearing in table 15 illustrate cost

differences across the more common protocols and

are reasonable approximations of the 1988 costs of

outpatient immunosuppressive protocols.

The differences in the estimates of the average

annual costs of cyclosporine therapies deserve note.

The higher historical figures cited in table 15 are

based on a literature review of published data; the

lower Battelle numbers are based on results of a

1989 study done under a cooperative agreement with

the U.S. Health Care Financing Adrninistration.

Rough cost estimates provided by some transplant

surgeons likewise suggest that the earlier published

numbers may have been somewhat overstated compared with present costs. (28,32). Based on these

opinions and the findings of the Battelle study, a best

estimate of the current average annual costs of

These numbers are underestimates of total current

ongoing costs, since they do not account for costs

associated with such factors as organ rejection,

conversion horn one protocol to another, and

general inflation related to the cost of the drugs. For

example, the treatment of organ rejection can add

considerably to the frost-year immunosuppressive

drug costs of transplant recipients. (For the most

part, the added drug costs would be absorbed in the

hospital’s inpatient payment for Medicare patients.

However, rejection episodes would increase outpatient costs to some extent as well.) Nonetheless, the

GNote tittie 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

Immunosuppressive First year costs Subsequent year 5-year

protocol Inpatient Outpatient Total outpatient cost outpatient totalsb

Traditional therapy:

Without ATG/ALG while inpatient . . . $ 95 $ 852 $ 947 $ 793 $4,024

With ATG/ALG while inpatient. . . . . . 10,385 852 11,237 793 4,024

Cyclosporine therapy:c

Double-drug

Historicald. . . . . . . . . . . . . . . . . . . . . . . 638 8,126 8,764 8,198 40,918

Battelle studye . . . . . . . . . . . . . . . . . . 550 5,338 5,888 4,028 21,450

Triple-drug

Historicald. . . . . . . . . . . . . . . . . . . . . . . 4,034 7,756 11,790 8,227 40,664

Battelle studye . . . . . . . . . . . . . . . . . . 4,274 3,899 8,173 3,157 16,527

Quadruple-drug

Historicald. . . . . . . . . . . . . . . . . . . . . . . 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 Agreement

14-G9856410, August 1989.

cyclosporine-based treatment protocols is $4,000 to

$6,000 per year.

A likely reason for lower present than historical

cyclosporine costs is that the dosage requirements,

and thus the costs, for cyclosporine have declined

over time. The added cost of drugs used adjunctively

with cyclosporine is apparently not high enough to

offset the cost savings from the lower cyclosporine

dosages in the protocols using these drugs.

Although the annual therapy-related costs of the

cyclosporine protocols are still higher than those of

traditional therapy, dramatic improvements in graft

survival and decreased complications are also evident (7,23,28). Consequently, the higher therapyrelated costs are balanced to some extent with cost

savings from preventing complications and episodes

of acute rejection. Recent studies have suggested,

however, that the initial association of cyclosporine

with lower total costs diminishes over time (42). In

other words, for grafts surviving beyond several

months, the use of cyclosporine may reduce actual

COStS Ol@ slightly.
Chapter 4

The Adequacy of Current

Medicare Coverage of

Immunosuppressive Therapy
Contents

Page

MEDICARE COVERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Historical Overview . . . . . . . . . . . . . . . . . . . . . .......8.+””C”S””0 . . . . . . . . . . . . . . . . . . . . . . . ...* 31

Current Coverage and payment policies . . . . . . . . . . . . . . . . . . . . . . . .. ... .. ””+”.-.”. .......++ 31

Beneficiary Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...”......”.....”...~...+... 33

COVERAGE BY OTHER PAYERS .. ....................”...”’.” ..”...”..+............ 33

ASSESSING THE ADEQUACY OF COVERAGE .. .. .. .. .. .. .. .. +. ... .., ..”...’ ....... 34

Extent ofCoexisting Private Coverage forMedicare Recipients . . . . . . . . .. .. ... ... ... .+..9 34

Risk of High Drug-Related Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...+.”..+ 35

Effects ofExpanding Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . ...”’..........+.” .o...*0”o” 36

Box

Box Page

A. The Battelle Study . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .” ... ..00 o..00. ... ......+”.+ 34

Table

Table Page

16. Kidney TransplantPatients’ Risk of Out-of-PocketLiabi.l.ities for

ImmunosuppressiveD rugs . . . . . . . . . . . . . . . . . . . . . . . ....+......~..”..........++..+”+”~m. 35
Chapter 4

The Adequacy of Current Medicare Coverage

of Immunosuppressive Therapy

This chapter begins with a historical overview of

the development of Medicare’s coverage policy for

outpatient immunosuppressive drugs. It then describes Medicare’s current coverage and payment

policies for outpatient immunosuppression and briefly

reviews the policies of other third-party payers.

Finally, the chapter assesses the patient’s financial

burden and the adequacy of current coverage of

immunosuppressive drugs.

MEDICARE COVERAGE

Historical Overview

Post-transplant irnrnunosuppressive drugs approved

by 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 any

subsequent hospitalization, are automatically covered by Medicare. Reimbursement for these inpatient drugs is included in the hospital’s payment for

inpatient services. Similarly, drugs that must be

administered under the direct supervision of a

physician are routinely covered when given in a

physician’s office.

Drugs administered outside of a medical setting,

however, are subject to different rules. Medicare

statutes have historically prohibited coverage of

most self- administered pharmaceuticals. Thus, throughout the 1960s and 1970s, Medicare did not pay for

outpatient self-administered immunosuppressive

drugs.

Congressional interest in the issue of Medicare

coverage of outpatient post-transplant immunosuppressive drugs dates to 1983, the year the FDA

approved cyclosporine. Evidence of cyclosporine’s

improved effects over previous immunosuppressive

agents, and concern over its high costs, led the

House Committee on Energy and Commerce to

convene a hearing on outpatient immunosuppressive

drug coverage in November 1983 (49). Although the

hearing did not result in immediate legislation

specific to outpatient immunosuppressive coverage,

Congress did require the Secretary of the Department of Health and Human Services (DHHS) to

establish the National Task Force on Organ Transplantation as part of the National Organ Transplantation Act the following year (Public Law 98-507).

The task force’s report on immunosuppressive

therapies, submitted in October 1985, emphasized

that cyclosporine was a major breakthrough in

transplant imrnunosuppression and recommended

that all public and private health benefit programs

provide coverage for outpatient immunosuppressive

drugs (59). The task force placed particular emphasis

on targeting Federal funding to those patients who

were regarded as most financially needy.

Subsequently, in the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), Congress

extended Medicare coverage to FDA-approved immunosuppressive drugs for 1 year following the date

on which a beneficiary is discharged from the

hospital after a Medicare-covered transplant. Thus,

since January 1, 1987, all patients qualifying for

Medicare who purchase the optional Part B coveragel and who received a Medicare-covered transplant have been eligible for outpatient immunosuppressive drug coverage.

Congress temporarily extended the l-year coverage limit in the Medicare Catastrophic Coverage Act

of 1988 (Public Law 100-360). Under this Act,

immunosuppressive drug therapy was to be covered

indefinitely as long as it was medically necessary,

and coverage was also to be provided to Medicare

beneficiaries who were recipients of an organ

transplant that Medicare did not cover. Both of these

coverage extensions for self-administered immunosuppressive drugs, however, were repealed along

with the Act in December 1989 (Public Law

101-234).

Current Coverage and Payment Policies

In the outpatient setting, Medicare coverage and

payment rules apply separately to the two main

components of immunosuppressive drug therapy:

the drug products themselves, and the physician

management 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 an

outpatient hospital clinic to see a physician and ffl

the prescription. Each of these components is

discussed below.

Immunosuppressive Drug Products

Medicare currently covers self-administered outpatient immunosuppressive drugs for 1 year, starting

on the date of the patient’s discharge from the

hospital after a Medicare-covered kidney, heart,

liver, or bone marrow transplant (2,55). Medicare’s

policy is to cover all drug products that are approved

by the FDA and have a label indicating use for

immunosuppressive therapy.2 In addition, Medicare

covers adjunct prescription drugs (e.g., prednisone)

when they are used as part of the immunosuppressive therapeutic regimen.

Coverage applies to both oral and parenteral

(non-oral) forms of administration as long as FDA

has approved the drug for that type of administration. Outpatient coverage includes both prophylactic

therapy to prevent organ rejection and acute treatment when rejection occurs.

Because Medicare’s coverage of outpatient irnmunosuppressive drugs is provided through Part B,

the Supplementary Medical Insurance Trust Fund, it

is limited to those patients who qualify for Medicare

and who have purchased the optional Part B coverage. The beneficiary’s premium cost for this coverage is $29.90 per month during calendar year 1991.

Reimbursement of outpatient immunosuppressive drugs is determined on a customary, prevailing,

and reasonable charge basis when the drugs are

dispensed by a retail pharmacy, physician, supplier,

or mail-order house.3 4 Reirnbursement of these

drugs is determined on the basis of reasonable costs

when they are dispensed by a hospital pharmacy. In

either case, the beneficiary is subject to the Part B

deductible of $100 (Public Law 101-508). The

beneficiary is also liable for a coinsurance amount

equal to 20 percent of reasonable charges (for drugs

purchased from a nonhospital source) or 20 percent

of the facility’s actual submitted charges (for drugs

obtained from a hospital pharmacy ).5 b

Physician Management

The management services provided by a physician in comection with immunosuppressive therapy

include prescribing and adjusting the dosage of the

various drugs and monitoring the patient for any

possible side effects and complications associated

with therapy. Physician management services are

covered under Medicare for all organ transplant

recipients. These services would be recognized as

physician outpatient visits and, therefore, payment is

based on the allowed charge for the visits.

Medicare’s policy varies slightly for a Medicarecovered kidney transplant procedure. Medicare recognizes all transplant surgeon services furnished

during a 60-day period following post-transplant

hospital discharge as a global service. Kidney

transplant surgeons receive the lesser of the actual

submitted charge or a maximum allowance for all

related services, including immunosuppressive therapy management. After the 60-day period, immunosuppressive drug management services are recognized as a physician outpatient visit and paid

according to the allowed charge.7

Outpatient Facility Component

In a hospital outpatient setting, Medicare may pay

not only for the drugs and the physician encounter

but 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 of

California and Blue Cross/Blue Shield of South Carolina. These carriers are expected to keep informed of FDA additions to the list of the

immunosuppressive 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 fee

schedule when the drug cannot be self-administered and is provided as part of a physician visit.

5S~W tie ~gis ~imbursed on a reasonable cost basis, and these costs are not determined until after the service is performed, it is administratively

infeasible to base beneficiary coinsurance on actual Medicare payments. The beneficiary’s out-of-pocket costs are based on submitted charges for these

providers, 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 immunosuppressive

drugs 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 Procedure

Terrninology (CPT) code is created that recognizes the provision of this service. According to staff at the Health Care Financing Adrninistratio% the

agency 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, the

hospital may submit a bill for the facility-related

costs of that visit. Payment to the hospital is based

on reasonable costs. Under this circumstance, a

separate physician bill for immunosuppressive therapy management could also be submitted, as could

a bill from the hospital pharmacy for the drug. In

short, depending on the site of the therapy, multiple

bills may be submitted to Medicare for coverage of

services related to immunosuppressive therapy.

Beneficiary Liabilities

From the patient perspective, out-of-pocket expenditures for outpatient irnmunosuppressive drug

therapy can be substantial. Average annual costs for

most maintenance immunosuppressive treatment

are between approximately $4,000 and $6,000 (see

ch. 3). Given that the national average charge

reduction rate for Medicare was 28.8 percent in 1988

(3,36), aroughapproximationof the average Medicaredetermined allowed charge is $2,850 to $4,270.8 The

beneficiary would be required to pay 20 percent of

the allowed charge, or between $570 and $850 on

average during the first year following the transplant.

Similar cost-sharing requirements would hold

true in subsequent years for patients with private

insurance in addition to their Medicare benefits.

However, those patients with Medicare only would

be responsible for the full cost of the outpatient

immunosuppressive treatment every year that therapy is needed following the first year posttransplant.

These estimates of beneficiary liabilities may be

understated, if protocol and drug costs have increased since 1988. Furthermore, the out-of-pocket

expenses could be still greater if the pharmaceutical

provider does not accept assignment.9 In this case,

the beneficiary is obligated to pay any billed amount

that is above the Medicare-determined allowed

charge.

Out-of-pocket expenditures for outpatient immunosuppressive drugs are believed by some to act

as disincentives that discourage some end-stage

renal disease (ESRD) patients from having a transplant. The extent of the disincentives is unclear

because the alternative treatment to kidney transplants is dialysis, for which the coinsurance amount

($3,800 a year)10 is nearly as much as the annualcost

of outpatient imrnunosuppressive drugs. Since both

the dialysis coinsurance amount and the annual costs

of immunosuppressive vary substantially among

patients, however, for some patients immunosuppressive may indeed be significantly more costly. A

stronger disincentive may be fear of losing all

Medicare coverage. Half of kidney transplant recipients become ineligible after 3 years, whereas dialysis patients are eligible indefinitely (17).

Some beneficiaries have protection from these

obligations. During the first year of immunosuppressive therapy when Medicare drug coverage applies,

some patients have their coinsurance paid by Medicaid or private insurers (7,17). After that frost year,

recipients with private insurance are usually covered

for the majority of their drug costs from that source.

They are then responsible for that payer’s coinsurance and any other insurance-related payments (e.g.,

premium costs). In contrast, beneficiaries with

insufficient coverage (no drug benefit)-or with no

additional third-party coverage at all-would be

required to pay the full cost of outpatient immunosuppressive therapy entirely out-of-pocket after the

frost year (see below).

COVERAGE BY OTHER PAYERS

State Medicaid programs appear to have broad

coverage of outpatient immunosuppressive drugs

(31). Although prescription drug coverage is an

optional Medicaid service, virtually all States include it (48).11 A 1990 survey of 10 State Medicaid

programs, which examined their ESRD coverage

and payment practices, found that all surveyed

States 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 aPPIY

directly to drugs obtained from hospital pharmacies, which are paid on the basis of their own costs. For the purposes of this repoz however, it was

assumed 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 reimbursement

on 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).
34 . Outpatient Immunosuppressive Drugs Under Medicare

drugs for eligible Medicaid recipients (26). However, there are some limitations to Medicaid coverage that may burden some patients. Twelve States,

for example, limit the number of prescriptions per

month that Medicaid will reimburse (20).12

Private insurance coverage for outpatient immunosuppressive drugs also seems to be fairly

comprehensive. Blue Cross and Blue Shield plans

and commercial insurers generally have policies that

cover any medically necessary outpatient drugs (13).

A 1989 Bureau of Labor survey of full-time employees, for example, found that 96 percent had prescription drug coverage through their employer-based

insurance (5a).

ASSESSING THE ADEQUACY

OF COVERAGE

An estimated 31,000 Medicare beneficiaries were

alive with functioning grafts in 1988 (see table 10,

p. 20). The goal of the remainder of this chapter is to

estimate how many of these beneficiaries have

inadequate coverage of outpatient immunosuppressives,

suggesting that unless they have high incomes they

may have impaired financial access to these drugs.

Extent of Coexisting Private Coverage for

Medicare Recipients

Overall insurance coverage for outpatient immunosuppressive medications in the year following

the transplant appears to be fairly adequate, since

Medicare covers the drug during that time and

private insurance is often still in effect as well.

However, in the long term the number of beneficiaries at risk of significant out-of-pocket costs for

these drugs could be substantial if they have no other

source of coverage.

In 1985, the National Task Force on Organ

Transplantation concluded that approximately 25

percent of transplant recipients had no coverage of

immunosuppressive drugs by private insurers, or by

Medicaid or other State programs (59). More recent

information from the U.S. Health Care Financing

Administration (HCFA) and from the Battelle Human

Affairs Research Centers (see box A) provide

insights into the current insurance status of Medicare

kidney transplant recipients. (Kidney transplants

account for that vast majority of Medicare-covered

transplants (95 percent in 1988).)

A 1988 survey of kidney transplant patients by

Battelle found that approximately 13 percent of

these patients had no third-party coverage of their

immunosuppressives other than Medicare (7). Twothirds (67 percent) of the surveyed patients in this

study said that financial assistance was provided by

private insurers, and another 20 percent received

Medicaid benefits. Overall, slightly less than 25

percent reported difficulty with paying for their

immunosuppressive drugs.

In contrast, HCFA examined 5 years of data

(1984-88) on Medicare enrollees receiving kidney

transplants and found that 37 percent of these

patients had private insurers as primary payers (17).

The Battelle study may possibly overstate coverage,

if uninsured people were undersampled,13 while the

HCFA number is probably an underestimate since it

did 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 of

total 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/Medicaida20% No coinsurance obligations/ Same as less than 1 year Same as less than 1 year

generally 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 or

insurance 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 these

recipients.

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

Centers (7).

become secondary. Thus, it is reasonable to assume

that the true percentage of beneficiaries with thirdparty coverage (in addition to Medicare) is somewhere between 37 and 67 percent. Obviously, the

lower the estimate of additional financial assistance

(other than Medicare), the greater the pool of

patients experiencing potential difficulty with paying for their immunosuppressive medications.

Risk of High Drug-Related Expenses

Medicare-Only Recipients

The different categories of insurance coverage are

associated with different risks of high out-of-pocket

expenses for immunosuppressive drugs. The group

for whom this risk is simplest to predict are those

Medicare beneficiaries with no other insurance. If a

transplant recipient has only Medicare, he (or she) is

at medium risk of financial strain in the first year,

when he must pay coinsurance on the drugs. He is at

high risk thereafter, because he must pay the full cost

of the drugs. Extrapolating from the Battelle and

HCFA data, between 13 and 43 percent of Medicare

transplant recipients are in this group (table 16).

Medicare/Medicaid Recipients

A second group of beneficiaries-about 20 percent of Medicare transplant recipients—are those

who are eligible for Medicaid as well as Medicare.

These beneficiaries are generally at low risk of

financial strain attributable to the cost of immunosuppressive drugs, because Medicaid usually pays

for the coinsurance and the full drug costs even when

Medicare drug coverage ends. Exceptions to this

generalization might be beneficiaries who require

multiple drugs in addition to their immunosuppressive and who live in States that limit the number of

prescriptions covered under Medicaid.

Medicare/Private Insurance Recipients

The third major group of beneficiaries, constituting between 37 and 67 percent, are those with private

insurance in addition to Medicare. These beneficiaries are at low to medium risk of financial strain in

the first year on immunosuppressives. For many of

these beneficiaries, Medicare is the secondary payer

during this time. This group would have to pay any

drug coinsurance required by their private payer who

is the primary payer. For other beneficiaries, Medicare is the primary payer; this group is at low risk
36 ● Outpatient Immunosuppressive Drugs Under Medicare

during the first year, when Medicare pays most

drug-related costs and the private payer picks up the

Medicare-required coinsurance.

From the end of the first to the third year

post-transplant, all beneficiaries with private insurance are at medium risk of financial strain. During

this time, Medicare does not cover the drugs; private

payers would cover the cost, but the beneficiary

would be liable for any coinsurance.

The period of greatest overall financial vulnerability for this group of beneficiaries is that beginning

at 3 years post-transplant, when about half of kidney

transplant of recipients become ineligible for Medicare (17). The remainder retain eligibility (due to

continued disability or age) but have no drug

coverage. At this time, individuals with private

insurance may become responsible for:

●

●

●

copayment amounts, if a private insurance was

available through the employer or spouse’s

employer;

premium and copayment amounts, if the patient

was no longer employed and was able to purchase an individual policy;14 

or

the full cost of the drug, if the patient lost private insurance and was unable to purchase

insurance.

Note that although Medicare-only beneficiaries

differ substantially in risk from those who also have

private insurance before 3 years post-transplant,

after this time many beneficiaries in that group also

lose all Medicare eligibility.

Both the Battelle and HCFA numbers on insurance coverage are based on information gathered

within 15 months after the transplant. A recipient’s

private insurance status can change over the long

term, however. If the recipient (or the recipient’s

spouse) changes jobs, for example, the recipient may

be unable to obtain full insurance coverage through

the new employer.

There is no information available on the extent to

which transplant recipients change employment

post-transplant and what occurs regarding continued

insurance coverage and copayment/premium amounts.

During the period in which Medicare insures the

patient through ESRD eligibility, the patient is

protected from the loss of employment or insurance

coverage due to a law that states that employers

cannot provide different insurance plans on the basis

of ESRD status (Sec. Sec. Act sec. 1862). However,

after Medicare eligibility is terrninated 3 years

post-transplant, the recipient is no longer considered

to have ESRD, and therefore the possibility exists

that a different policy (or no policy at all) could be

offered by employers to kidney transplant recipients.

Effects of Expanding Coverage

Assuming that these kidney transplant-related

percentages are similar for Medicare recipients with

successful grafts of other organs, it appears that

approximately 13 to 43 percent of transplant recipients have no insurance coverage after the l-year

coverage period by Medicare. These percentages

may increase over time if recipients lose their private

third-party insurance. Since recipients with Medicareonly coverage would be responsible for the fill cost

of the outpatient immunosuppressive drug therapy, 15 extending Medicare’s coverage of outpatient

immunosuppressive drug therapy would alleviate, to

a large extent, the financial burden presently experienced by this group.

The percentage of patients eligible for transplants

who have insufficient coverage for drugs could be

even greater. It is possible that the patient’s ability

to pay for post-transplant immunosuppressives is

considered either implicitly or explicitly when a

patient is considering, or being considered for, a

transplant. Thus, eliminating the limit may further

ensure that all Medicare beneficiaries who are

potential transplant recipients have equal access to

transplantation.

On the other hand, current financing overall

appears fairly adequate for 57 to 87 percent of

Medicare transplant recipients, at least in the short

term. For most of these recipients, expanding

Medicare’s coverage of outpatient irnmunosuppression would shift financing from other sources to

Medicare.

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 notbe able to obtain private insurance because Of the preexisting condition of ES~.
Chapter 5

Medicare Expenditures for

Immunosuppressive Drug Therapy
Contents

Page

CURRENT EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

FACTORS INFLUENCING FUTURE EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...40

Changes in the immmosuppressive Drug Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Patient Demand and Patient Mix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Patient Adherence to Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Manufacturers’ Incentives for Technological Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Other Program Costs Associated With Expanded Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Figure

Figure Page

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

Tables

Table Page

17. Estimated Number of Transplant Recipients Receiving Medicare Payment of

Immunosuppressive Drugs, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

18.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 estimate

of current spending for outpatient immunosuppressive drugs in the United States and under the

Medicare program. The chapter then describes

factors influencing drug costs, the potential pool of

patients requiring post-transplant immunosuppressive

drugs, and overall future Medicare expenditures.

CURRENT EXPENDITURES

Medicare does not currently play a major role in

financing post-transplant immunosuppressive therapy. Medicare covers and pays for imrmmosuppressive drugs for only an estimated 19 percent of

Medicare-covered functioning graft recipients (table

17). Likewise, Medicare pays the immunosuppressive 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-year

limit on coverage of immunosuppressives.

Another element of financing that influences

these percentages is the mandatory requirement that

Medicare be the secondary payer for the first 18

months of a patient’s eligibility under the End-Stage

Renal Disease (ESRD) Program.l In other words,

even though an ESRD patient is entitled to Medicare

coverage once determined eligible for Medicare

benefits, Medicare will pay for covered services

provided these beneficiaries only after any existing

private insurance policies have paid. Approximately

37 to 67 percent of Medicare-covered kidney transplant recipients have private insurance during this

period (see ch. 4).2 Therefore, even within the l-year

coverage period for outpatient immunosuppressives,

Medicare is not paying for the drugs administered to

these ESRD kidney transplant recipients because of

the mandatory secondary payer requirement.

The Office of Technology Assessment (OTA)

estimates that national spending for outpatient

immunosuppressive agents was between $185 and

$280 Won in 1988 (table 18). Medicare-related

expenditures, 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 all

functioning graft patients are on a cyclosporine

protocol costing between $4,000 to $6,000 per year

(see ch. 3).3 Because of patient copayments, actual

Medicare program outlays would have been somewhat less than 80 percent of the $24 to $36 million,

or under roughly $20 to $30 million.

These estimates are a reasonable first approximation of national and Medicare expenditures for

Table 17—Estimated Number of Transplant Recipients

Receiving Medicare Payment of Immunosuppressive

Drugs, 1988

Proportion with Medicare drug

payment as a percent of:

All Medicare- All U.S.

covered transplant transplant

Graft type Number arecipients recipients

Kidney . . . . . . . . . .

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

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

Heart/lung . . . . . . .

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

Pancreas . . . . . . . .

Bone marrow. . . . .

Total . . . . . . . . .

5,850’

95

5C

o

0

0

30

5,980

1970

45

48

—

—

.

55

19

15%

3

<1

—

—

—

1

13

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.

kcontrast only 3 percent of the working aged have selected Medicare as secondary payer (37).

sTh,is ~suptionshould result in an overestimate of expenditures, since a few patients are not on cyclosporine-based protocols.

–39–
40 ● Outpatient Immunosuppressive Drugs Under Medicare

Table 18—Estimated U.S. and Medicare Expenditures for Outpatient

Immunosuppressive Drug Therapy, 1988

Number of

recipients with

functioning cost of Total expenditures

graft therapy (in millions)a

United States . . . . . . . . . . . . . 46,605 b

$4,000-$6,00W $185-$280

Medicare-covered . . . . . . . . . 5,98@ $4,000-$6,00& $24-$36”

aAssumes that 100 percent of functioning graft patients are on cyclosporine drug therapy. This overstates actual

expenditures, since some kidney transplant recipients are on traditional therapies with lower costs and a few are not

on outpatient immunosuppressive therapy.

b

see table 11.

cSee oh. 3.

‘See table 16.

elncludes all beneficiary liabilities. Actual program outlays would be lower.

SOURCE: Office of Technology Assessment, 1991.

outpatient immunosuppressive medications in 1988;

1991 expenditures would be somewhat higher, due

to the continuing increase in the number of organ

transplant procedures. The Medicare figure is a

baseline estimate of 1988 expenditures (including

beneficiary liabilities). It is based on coverage as set

out in current law, under which outpatient immunosuppressive drug coverage is limited to one year,

starting with the patient’s discharge date from a

hospital or designated transplant center after a

Medicare-covered organ transplant.

Note that these figures are not estimates of the

overall cost of immunosuppressive therapy. They do

not, for instance, encompass other services related to

immunosuppressive therapy, such as a hospital

outpatient visit or physician immunosuppressive

drug management services. They also do not account

for the costs of drug therapy in organ rejection

episodes or the costs of treating side effects caused

by immunosuppressive drugs. Other factors that

might affect these expenditure estimates include

patient behavior, such as noncompliance; variation

in patient treatment; and provider prescribing (e.g.,

conversion from one therapy to another).

FACTORS INFLUENCING

FUTURE EXPENDITURES

The effect of any particular change in Medicare

policy regarding irnrnunosuppressives depends in

part on a number of outside factors, which can be

separated into two groups. The first set of factors

affects the cost of the drug product. A second set of

factors affects the potential pool of transplant

patients receiving Medicare coverage for imrnunosuppression. Both affect the overall cost of providing this therapy.

No definitive empirical evidence is available on

the precise effect of any one of these factors on

current or future Medicare expenditures. Nonetheless, the effects could be substantial. Nearly half of

the factors could influence Medicare outlays in the

future even if there are no changes in coverage

policy. Other factors are issues to consider only if

Medicare’s policy for coverage of outpatient immunosuppressives is expanded.

Changes in the Immunosuppressive

Drug Market

Even without any changes in policy, future

Medicare expenditures for outpatient irnmunosuppressives could be significantly affected by changes

in the market. For example, any new products now

under development (e.g., the drug FK-506) have the

potential to be more costly than cyclosporine when

approved for clinical use. Medicare outlays for

outpatient irnmunosuppressives may increase with

the use of more costly drugs, even if coverage policy

is unchanged from the l-year coverage limit. Alternatively, a greater choice of drugs and the development

of lower-cost protocols could reduce Medicare

expenditures.

Other changes in drug pricing could occur when

the patent for cyclosporine expires in 1995. After

that time, the potential for the availability of less

expensive generic drugs also exists. Whether this

potential will be realized depends on whether other

pharmaceutical manufacturers decide to enter the

irnrnunosuppressive market. The extent to which

future costs are lower also depends on Sandoz’ own

reliance on revenues from this drug. Some research

suggests 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

11,87 3

10,605

9,761

8,56 2

>

6,96 8

[

1984 1985 1986 1987 1988 1989

~ Persons on waiting list + Persons with kidney transplants

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

Administration.

cyclosporine if this product is a major source of

revenues to the company (10,50).

Changes in the way existing drugs are used could

also affect the cost of therapy and Medicare outlays.

For example, the use of OKT-3 as an outpatient

prophylactic would tend to increase the cost of

outpatient immunosuppressive therapy. Minnesota’s

antilymphocyte globulin may also be used more

widely once it receives approval from the U.S. Food

and Drug Administration, although this is more

likely to affect inpatient costs than outpatient

maintenance expenses.

Innovations and substitutions can have significant

and not always consistent consequences for the cost

of irnmunosuppressives. For example, if a new drug

is more expensive but reduces the need for adjunct

drugs, or reduces rejection and complicationsrelated expenses, it could result in lower treatment

costs per patient.

Patient Demand and Patient Mix

It is possible that patient selection for a transplant

procedure may be influenced, however indirectly, by

the ability of the patient to pay for expensive

outpatient therapy following the transplant. To this

extent that this is so, more comprehensive outpatient

immunosuppressive drug coverage by Medicare

may increase patient demand, either directly or by

increasing physician recommendations for transplants.

Despite possible higher demand, the limited

supply of suitable organs will continue to constrain

the number of transplant procedures performed.

Even with existing demand, for example, the number

of persons on the waiting list for kidney transplants

is much higher than the number of persons transplanted (figure 3). The existing unmet need for

donated kidney organs is projected to continue

through the decade (18,21). Thus, expanding irnmunosuppressive coverage may increase the demand for organ transplants, but it will have little

effect on the actual number of transplants performed.

Although the number of transplants may not be

influenced by Medicare’s coverage policy for outpatient irnmunosuppression, the mix of patients receiving transplants may be affected. The criteria by

which one patient is selected over other another for

a transplant are broad and complex, and inability to

pay for drugs in the future would rarely, if ever, be

an explicit criterion (30,38). Nonetheless, current
42 ● Outpatient Immunosuppressive Drugs Under Medicare

discrepancies due to insurance status and race have

been noted in the treatment of patients for kidney

failure (30,58). Broader Medicare drug coverage

might indirectly improve the equity of access to

transplants. If Medicare’s coverage limit of 1 year

were eliminated, for example, patients who are now

unable to afford the expense of these drugs following

kidney transplant may be more likely to consider the

procedure rather than continue on dialysis. Similarly, transplant centers and physicians may change

their evaluation process for selecting transplant

candidates.

The implications that changes in patient mix may

have for Medicare outlays overall are not easily

predicted; expenditures may either increase or decrease depending on the resulting differences in the

health status, age, or other characteristics of the new

transplant population served. Any effect specifically

on Medicare drug expenditures, however, would

probably be small.

Patient Adherence to Therapy

Expanded coverage may increase patient adherence to the prescribed drug regimen, resulting in

more regular and continued use of the immunosuppressive drugs that the patient requires. The outcome

may be fewer episodes of acute organ rejection,

fewer hospitalizations, and possibly fewer patients

returning to dialysis. Expanding Medicare’s coverage policy may thus reduce certain other Medicare

expenditures.

Estimating the number of organ rejections that

result from nonadherence to therapy, due to a

financial inability to obtain drugs, is difficult. On the

one hand, the American Society of Transplant

Surgeons (ASTS) believes that nearly 47 percent of

transplant recipients have difficulty paying for

drugs, implying a high potential inability to obtain

drugs (4)4 On the other hand, U.S. Health Care

Financing Administration (HCFA) data show that

less than 3 percent of all graft failures occur as a

result of patient nonadherence to therapy for any

reason (17).5 Advocates argue that the HCFA data is

poorly coded (25,28). A National Kidney Foundation survey suggests that nonadherence to therapy

may account for almost 10 percent of kidney graft

losses after the frost year (25).

Thus, the extent to which impaired financial

access leads to organ rejection is highly uncertain.

Furthermore, perfect patient adherence to the prescribed protocol is in no way guaranteed even if

Medicare’s coverage is expanded. Some patients

voluntarily stop immunosuppressive therapy because of their perceived poor quality of life (7).

Nonetheless, it is likely that at least some of the costs

associated with organ rejection (e.g., additional

hospital admissions, return to dialysis for kidney

graft failure patients, and other costs associated with

rejection episodes) would be reduced with expanded

Medicare coverage.

Despite the lack of precise data, tracing out a very

simplistic hypothetical scenario is a useful exercise

to explore the potential magnitude of savings. If,

hypothetically, as many as 10 percent of all graft

failures were caused by the patient’s financial

inability to adhere to the drug regimen, this would

mean that beyond the frost year of a transplant,

approximately 268 Medicare recipient renal graft

failures per year would be associated with nonadherence.

G In the case of patients with ESRD, increased

graft failure results in more patients returning to

dialysis, at an annual average cost to Medicare

(including patient liabilities) of approximately $19,000

per patient each year (17). Thus, under this hypothesis, a Medicare policy that eliminated all graft

failures associated with nonadherence would have

an offsetting program savings of roughly $5 million

per year. Under a hypothesis of fewer graft failures

due to nonadherence, offsetting savings would be

correspondingly lower (e.g., if 3 percent failed for

this reason, eliminating all of these failures would

save approximately $1.5 million). Preventing hospitalizations due to acute organ rejection would result

in some additional savings.

Another way to view the potential savings from

averting 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 percentages

together, 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 with

immunosuppressive 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 has

found that transplants pay for themselves when

compared with dialysis within 3.7 years for livingdonor kidney patients and 4.7 years for cadaverdonor kidney patients (17).7

Manufacturers’ Incentives for

Technological Developments

Medicare coverage policy changes will probably

have only a slight effect on overall level of use of

outpatient immunosuppressive drugs. Thus, coverage policy changes will probably also have little

effect on manufacturers’ incentives to pursue technological developments. The main effect might be to

remove any existing disincentive against developing

new immunosuppressives that would be expensive

on the market, since Medicare currently pays fairly

generously for covered drugs.

Changes in payment policy for the drugs, on the

other hand, could affect development incentives

substantially. Studies have shown that industry is

extremely sensitive to changes in method of payment in terms of pricing strategies and incentives for

developing emerging technologies (51). The precise

direction of the incentives would depend on the

payment policy adopted.

Other Program Costs Associated With

Expanded Coverage

If coverage were expanded past the current 1-year

limit, Medicare outlays would increase due to the

cost of the outpatient immunosuppressive drug. In

addition, Medicare expenditures would result from

any related increase in services provided by physicians and outpatient hospital facilities.

Furthermore, if coverage for drugs were expanded, Medicare might come under pressure to

cover other outpatient services that are required by

transplant recipients or other Medicare beneficiaries. For example, some transplant recipients require outpatient nonimmunosuppressive prescriptions to prevent development of secondary complications (e.g., hypertension, stomach ulcers, and bone

disorders). Total program costs might increase if

coverage were extended to include these drugs as

well. Similarly, easing financial access to drugs for

transplant recipients through measures such as

reducing coinsurance obligations might lead other

Medicare beneficiaries (e.g., dialysis patients) to

argue that their coinsurance obligations should be

reduced 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 the

Medicare Catastrophic Coverage Act of 1988 and its

subsequent repeal in 1989. That act included a broad

measure that would have extended Medicare coverage to

outpatient prescription drugs. In doing so, it would have

resulted in greater coverage of outpatient immunosuppressive drugs (now limited to coverage for only 1 year),

and it also would have established a home intravenous

drug therapy benefit. With the repeal of that act, these two

specific coverage expansions once again became issues

before Congress.

In April of 1990, the Senate Committee on Finance

asked the Office of Technology Assessment (OTA) to

revisit these two topics and the relevant coverage and

payment issues they involve. The proposed assessment

was approved by OTA’s congressional Technology

Assessment Board on June 2, 1990, and it began the

following month. The assessment was conducted in two

parts leading to two separate reports, one on immunosuppressive drugs and one on home intravenous drugs.

Conduct of the Immunosuppressive

Drug Study

The preliminary draft of the study of immunosuppressive drugs was prepared under contract to OTA by Diane

Burnside Murdock of Falls Church, Virginia.1 During her

preparation of the draft, the contractor consulted with

consumer and professional organizations, Federal and

State agency personnel, health services researchers,

independent health professionals, and other interested

individuals in order to identify critical issues and relevant

sources of data. The contractor also consulted frequently

with OTA staff regarding the scope and directions of the

study.

In addition, the contractor conducted literature reviews

and received a substantial amount of data from a variety

of individuals and organizations. Some of these data were

previously unpublished, and OTA is indebted to these

individuals and organizations for their cooperation and

assistance.

Most major OTA studies have a panel of outside

experts chosen to advise OTA staff on the study and

ensure that all significant points of view are represented.

This study was originally intended to be performed in

coordination with an ongoing study of drug research and

development, with the same advisory panel. It transpired,

however, that the two studies had little directly in

common, and the advisory panel for the earlier study

proved inappropriate for the existing study. Because of

the short time me for this study, it also proved infeasible

to appoint a separate advisory panel at the point for the

current study.

To ensure that sufficient expert advise was obtained

and that all viewpoints were represented, OTA staff took

especially great care to involve a variety of outside

persons in the review of the draft material. Some

preliminary findings from the report were presented in

organized informal discussions with staff of the U.S.

Health Care Financing Administration, the Urban Institute, and OTA. A revised draft was then sent to over 40

experts in the field, including medical providers, patient

organizations, health care payers, researchers, and others

with interest and knowledge in the area of organ

transplantation and immunosuppressive therapy for their

review and comment. The final draft, incorporating

revisions based on reviewers’ comments, was transmitted

to 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 number

of positions in the health policy field, including senior policy analyst at the Prospective Payment Assessment Commission and senior budget analyst

at 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 part

of those rests if organ obtained from a cadaver. Charges

reimbursed directly on the basis of customary, prevailing, and

reasonable 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/reasonable

charge or a maximum amount in a carrier’s area for renal

transplant 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

ALG —

AMA —

ASTS —

ATG —

AWP —

AZA —

CPT —

CSA —

DHHS —

ESRD —

FDA —

HCEA —

OKT-3 —

OTA —

PRED —

UNOS —

Abbrevia.tions

Antilymphocyte globulin

American Medical Association

American Society of Transplant Surgeons

Antithymocyte globulin

Average wholesale price

Azathioprine

Common Procedure Terminology

Cyclosporine

U.S. Department of Health and Human Services

End-stage renal disease

Food and Drug Administration (Public

Health Service)

Health Care Financing Administration (DHHS)

Orthoclone OKT-3 (muromonab CD3)

Office of Technology Assessment (U.S. Congress)

Prednisone

United Network of Organ Sharing

Terms

Adjunct prescription drugs: Medications that are used

as part of the immunosuppressive therapeutic regimen

but that are not themselves primary post-transplant

immunosuppressive drugs.

Allogeneic bone marrow transplant: A procedure in

which the bone marrow is obtained from a healthy

donor and delivered by intravenous infusion into the

recipient.

Aplastic anemia: A blood disorder in which the bone

marrow fails to produce adequate numbers of red blood

cells.

Assignment: A process whereby a Medicare beneficiary

assigns his or her right to payment from Medicare to the

physician or supplier. In return, the physician or

supplier agrees to accept Medicare’s reasonable (i.e.,

allowed) charge as payment in full for covered services.

The physician (or supplier) may not charge the

beneficiary more than the applicable deductible and

coinsurance amounts. For physicians and suppliers

who do not accept assignment, payment is made by

Medicare directly to the beneficiary, who is responsible

for paying the bill. In addition to the deductible and

coinsurance amounts, the beneficiary is liable for any

difference between the physician’s actual charge and

Medicare’s reasonable (allowed) charge.

Autologous bone marrow transplant: A procedure in

which a patient’s own bone marrow is extracted,

treated, and then restored to the patient.

Balance billing: In the Medicare program, the practice of

billing a Medicare beneficiary in excess of Medicare’s

allowed charge. The “balance billing’ amount would

be the difference between Medicare’s allowed charge

and the physician’s (or supplier’s) billed charge.

Cadaveric kidney: A kidney obtained from a deceased

donor.

Carrier: A fiscal agent (typically a private insurance

company) under contract to the Health Care Financing

Administration to administer Medicare Part B benefits.

Coinsurance: That percentage of covered hospital and

medical expenses, -after subtraction of any deductible,

for which an insured person is responsible. Under

Medicare Part B, after the annual deductible has been

met, Medicare will generally pay 80 percent of

approved charges for covered services and supplies; the

remaining 20 percent is the coinsurance, which the

beneficiary pays.

Conventional immunosuppressive therapy: See traditional immunosuppressive therapy

Customary, prevailing, and reasonable charge method

(Medicare): The method used by Medicare carriers to

determine the approved charge for a particular Part B

service from a particular physician or supplier. Under

this method, the approved charge is limited to the

lowest of the physician’s actual charge for the service,

the physician’s customary charge for the service, and

charges by peer physicians or suppliers in the same

locality. If necessary, prevailing charges are adjusted

by the Medicare Economic Index.

Deductible: The Medicare Part B deductible is the

portion of approved charges (for covered services each

calendar year) for which a beneficiary is responsible

before Medicare assumes liability. The deductible is set

at $100 in 1991.

Functioning graft: An implanted organ that is still

functioning to some capacity of its purpose.

Graft: An implanted organ.

Histocompatibility: The genetic compatibility between

the donor and recipient, which determines in part

whether 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 organ

transplants, such drugs can reduce or prevent the

body’s immune system’s rejection of the organ as a

foreign substance.

In vitro: Outside of the living body and in an artificial

environment.

Medicare coverage: Refers to the health care benefits

available to eligible Medicare beneficiaries.
50 ● Outpatient Immunosuppressive Drugs Under Medicare

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 transplant

patients, this means a return to dialysis until another

organ is available. For other transplant patients, organ

failure could mean death unless another organ is

available for transplantation.

Organ rejection: A condition caused by the incompatibility between an organ recipient’s genetic makeup and

the donor’s genetic makeup, leading the recipient’s

immune system to act against the transplanted organ. If

untreated, organ rejection leads to organ failure.

Parenteral drug administration: Any non-oral means

of introducing a drug into the body (e.g., by injection).

Prophylactic therapy: Preventive measures to inhibit

disease. For transplant recipients, prophylactic immunosuppressive therapy is that which prevents or inhibits

organ rejection.

Protocol: A standard course of therapy, designed to

achieve certain ends.

Reasonable charge (Medicare): Payment on the basis of

customary, prevailing, and reasonable charges.

Reasonable cost-based reimbursement (Medicare): A

method of payment for health care services in which

hospitals (or other providers) are paid their incurred

costs of treating patients after the treatment has

Occurred.

Regimen: Any plan of therapy designed to achieve

certain 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 identical genetic makeups.

Traditional immunosuppressive therapy: Drug therapy to prevent organ rejection using azathioprine and

prednisone.
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