Impact of the Medicare Modernization Act of 2003 on utilization and spending for medicare part B-covered biologics in rheumatoid arthritis.

The Medicare Prescription Drug Improvement and Modernization Act (MMA) of 2003 not only established an outpatient prescription benefit or Part D program but significantly changed the reimbursement of physician dispensed outpatient drugs already covered under Part B. Before 2004, Medicare reimbursed physicians for Part B drugs at the lesser of the billed charge or 95 percent of the average wholesale price (AWP) of the drug. However, several government investigations revealed that physicians purchased these drugs at prices significantly lower than the AWP.1–4 In order to address this overpayment issue, the MMA established a new methodology for Medicare Part B reimbursement of most covered drugs.5 Starting in January 1, 2004, reimbursement for most Part B drugs was reduced from 95% of their AWP to 85% of their AWP (Table 1). Beginning in January 1, 2005, reimbursement was further reduced to 106% of the average sale price (ASP) or wholesale acquisition cost (WAC), whichever is lower. To partially offset these reductions, the MMA increased physician reimbursement for Part B drug administration service.6 Yet, the mark-up on Part B drugs that physicians could earn prior to 2004 has significantly been reduced over time. Table 1 Changes Introduced by the Medicare Modernization Act (MMA) of 2003 These new reimbursement methods directly reduced physician payments for infliximab, the only Medicare covered biological agent for the management of rheumatoid arthritis (RA) available prior to the MMA. This tumor necrosis factor alpha biologic agent covered under Medicare Part B soon after its introduction on the market in late 1999 was the predominant RA biological used in the Medicare population and ranked 8th in terms of percent share of Medicare Part B drug expenditures by 2002.7 In addition to directly reducing infliximab spending, it is likely that lower Medicare reimbursement rates might have made some rheumatologists reluctant to see Medicare patients or administer infliximab less often in their clinic, thus further reducing total infliximab payments. On the other hand, previous literature on other types of services suggests that as Medicare payment rates decline the treatment rates increase (i.e. there may be physician induced demand to compensate for the physician’s loss of income due to the reduction in reimbursement rates).8–18 Hence, it is difficult to predict how these Part B drug reimbursement changes affected infliximab use and spending. Furthermore, the new Medicare Part D program implemented by the MMA on January 1, 2006 started covering self-administered RA biologic agents, which were not covered under Medicare Part B since they do not require administration by or under supervision of physicians (Table 1). In addition, two newly FDA approved physician-administered infusible biologics, abatacept and rituximab, became competing alternatives for infliximab under Part B in 2006. It is unknown whether availability of alternative choices of otherwise expensive biologics further influenced infliximab use and spending. The objective of this study was to examine the changes in utilization and expenditures for infliximab in RA patients associated with (a) the reductions in physician reimbursement for Part B drugs between 2003 and 2005 and (b) the availability of alternative RA biologicals in 2006.