Providence Issues Public Comment on Centers for Medicare & Medicaid Services Rule

WASHINGTON, Feb. 3 -- Rod Hochman, president and CEO of Providence has issued a public comment on the Centers for Medicare and Medicaid Services rule entitled "Most Favored Nation Model". The comment was written on Jan. 26, 2021, and posted on Feb. 1, 2021:

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On behalf of Providence we thank you for the opportunity to provide feedback to the Centers for Medicare & Medicaid Services (CMS) regarding the interim final rule with comment period implementing the Most Favored Nation model. Although we understand that this rule is currently subject to a 60-day review because it did not go into effect by January 1, 2021 due to pending nationwide injunctions issued by multiple courts,/1 we still believe it is critically important for the new Administration to understand our concerns about the rule.

At Providence we are committed to providing for the needs of the communities we serve, with a special focus on ensuring access to care for those who are poor and vulnerable. We are dedicated to high-quality, compassionate health care for everyone - regardless of coverage or ability to pay. Together, we share a singular commitment to improve the health of our communities through digital innovation, population health and clinical quality strategies, mental health, specialty institutes, research and education. Our diverse family of organizations employ 120,000 people who serve in 51 hospitals, 1,085 clinics, a health plan, senior services and housing, and many other health and educational services across seven western states. We operate in both urban and rural communities within our seven-state footprint. Each year we work to provide care and services where they are needed most, including investments in community benefit that in 2019 totaled $1.5 billion.

The Most Favored Nation (MFN) model would implement a new payment model for 50 of the highest cost Medicare Part B drugs, many of which are oncology drugs used to treat and alleviate the suffering of patients diagnosed with cancer. The model has been challenged in at least four courts around the country. Although a court has already issued a nationwide preliminary injunction to stop the immediate implementation of this rule and MFN model, for a number of reasons articulated below, including negative impacts on providers and patients, Providence urges CMS to rescind this rule immediately. We look forward to working with the Biden Administration on alternative solutions to high drug pricing and spending that do not potentially restrict access to care for vulnerable and sick patients in the Medicare program.

MFN model is flawed

Although the MFN model is intended to control Medicare Part B drug prices, it is not clear that this rule will have any impact drug prices at all. Nowhere in the rule does CMS require that manufacturers lower the prices at which they offer drugs to providers for treatment of Medicare beneficiaries. Any savings in the model is derived from a series of assumptions related to how manufacturers will alter their behavior by increasing or decreasing prices across domestic and international markets and across different federal and private programs. Those assumptions have not been tested before, and as noted by at least two courts would cause irreparable harm to providers and Medicare beneficiaries.

The rule places the burden on the provider to influence drug pricing. In the rule, CMS states, In general, these assumptions represent the proposition that manufacturers prefer to sell their products, even at lower prices, as long as net revenues (net sales prices minus production and distribution costs) remain positive; and that providers and suppliers are committed to maintaining effective treatments for beneficiaries either by negotiating lower prices, accepting reduced revenue, or finding effective Medicare Part B or Part D alternative treatments./11

CMS goes even further by suggesting that some non-340B providers may be willing to provide the drugs at a reduced rate, or even below their actual costs, in order to retain utilization on other associated services. CMS acknowledges that eligible providers and suppliers will need to decide if the difference between the amount that Medicare will pay and the price that they must pay to purchase the drugs would allow them to continue offering the drugs./2

CMS does not address the loss of access to care and disruption in ongoing treatment that beneficiaries with cancer would face should providers decide they can no longer afford to offer these critically needed treatments. CMS also highlights that providers will be reliant on the behavior of manufacturers to avoid financial loss: "...in order for MFN participants to purchase MFN Model drugs at prices that do not lead to financial loss, the manufacturer will need to make available prices that are competitive with the MFN Drug Payment Amounts."

Providence believes it is unreasonable, arbitrary, and capricious for CMS to shift the burden of lowering drug prices to providers through this policy change, without any consideration for how it would negatively impact beneficiaries, instead of offering real drug pricing reform proposals that require drug manufacturers to lower prices. CMS has made no attempt in this rule to directly address the source or cause of high drug prices. Instead, the agency is betting the care and lives of Medicare beneficiaries on an untested theory that drug prices will shift because it reimburses providers for drugs at an artificially low rate that bears no relationship to the actual market price that providers pay.

If drug manufacturers do not lower prices, but the MFN model is implemented with lower Part B drug reimbursement to providers, it will come at a time when our hospitals are still trying to recover financially due to the COVID-19 emergency, as well as continue to be dealing with COVID outbreaks and surges of cases. The model will also come at a time when Medicare beneficiaries and other individuals are delaying obtaining critically needed medical care, including cancer treatments, due to fear of COVID19.3 This rule will further threaten our hospitals serving the most vulnerable patients, who are already beginning to avoid obtaining critically needed care.

MFN model disproportionately impacts cancer care

The MFN model includes 50 Medicare Part B drugs and biologicals that comprise 75 percent of Medicare Part B charges for separately payable drugs. Of those 50 drugs, 38 are used to treat cancer. Providence is very concerned that the MFN model will have a discriminatory and disproportionately negative impact on cancer care and treatment for Medicare beneficiaries, including those who are treated by our own Cancer Institute. Imposing such an extreme barrier to access to care for some of our most vulnerable and elderly patients puts them at serious risk of adverse outcomes and inability to maintain critically needed treatments.

In addition to financial harms associated with providers and physicians unable to acquire cancer drugs below MFN amounts, oncology providers will also be disproportionately harmed by the proposed alternative add-on payment. While CMS estimates that, in aggregate, all but nine of the top 35 specialties (in terms of overall 2019 allowed dollars) impacted by the MFN model will on average see increases in add-on revenue compared to 4.3% of the applicable ASP with a single payment amount, the agency notes that the exceptions to this increase include hematology/oncology, medical oncology, hematology, gynecological oncology, and hematopoietic cell transplantation and cellular therapy. CMS estimates decreases of between 6% and 33% for these types of cancer care providers, putting at significant risk their ability to maintain financially viable service lines.

As a result of these critical aspects of the model, our Cancer Institute clinics and physicians and their Medicare patients will bear the brunt of the negative impacts of this model.

MFN model will limit access to care

Due to the great uncertainty regarding behavioral responses to this mandatory model, in determining the impacts of the rule, CMS relies on several analyses from the CMS Office of the Actuary (OACT) and the Assistant Secretary for Planning and Evaluation (ASPE)--each with different underlying assumptions - to forecast cost savings and barriers to access. CMS states "should an eligible provider or supplier be unable to offer access to the included drugs, beneficiaries will be left with several options. They could seek access to the drugs by traveling to an excluded provider or supplier, access the drugs through a 340B provider in the model, or forgo access." To determine cost savings, the CMS Office of the Actuary predicts that in 2021, for non-340B providers, 9 percent of beneficiaries will have no access. This number increases to 14 percent in 2022 and 19 percent for the years 2023-2027.

These proposals ignore the fact that many Medicare beneficiaries are located in rural areas or lack access to reliable transportation that could allow them to seek care from distant providers other than their primary providers. Perhaps most concerning, the rule would most seriously impact those Medicare beneficiaries already facing access barriers to care due to lack of financial resources or other social determinants of health. CMS also fails to consider that rural hospitals have been disproportionately impacted by the pandemic - many of which do not fall into the MFN exclusions for critical access hospitals and rural health clinics - and are closing at record rates due to other financial stresses occurring across the U.S. healthcare system./4

Although the analyses predict that 340B providers will see less of an impact than other providers, in recent months, drug manufacturers and vertically integrated insurers have placed restrictions on providing drugs through the 340B program and continue to do so. Providence is very concerned that this rule will restrict beneficiary access to care and necessary drugs, especially to cancer patients, with a disproportionate impact on beneficiaries already facing access barriers and those in rural areas.

MFN model exceeds CMS' authority

CMS issued the MFN interim final rule with comment, using its authority to implement demonstration projects granted to the Centers for Medicare and Medicaid Innovation (CMMI) established through the Affordable Care Act (ACA). However, the MFN model has made changes beyond the scope of traditional demonstration projects and Providence and other industry organizations believe the Administration has exceeded its demonstration authority. Because this model exceeds the agency's authority, Providence urges CMS to withdraw this rule.

Through CMMI, and Section 1115A of the Social Security Act, the Administration can "test innovative payment and service delivery models to reduce program expenditures under the applicable titles while preserving or enhancing the quality of care furnished to individuals...." If the rule were a valid exercise of CMMI authority, which it is not, by CMS' own analysis this model would not meet the statutory criteria of preserving or enhancing the quality of care for Medicare beneficiaries for the reasons outlined earlier in this letter. The rule is an unprecedented attempt by CMS to put cost savings over the health and welfare of some of the most vulnerable among Medicare beneficiaries at a time when the U.S. health care system is facing unprecedented financial and access demands caused by the COVID-19 pandemic.

Furthermore, this IFC is goes significantly beyond CMS's and CMMI's authority. The MFN model is not just testing a payment model but replacing an existing Part B drug payment methodology that is dictated by statute. The MFN model is both permanent and is mandatory for a large number of providers - hospital outpatient departments, group practices, individual Medicare physicians, ASCs. It will affect an estimated 95% of all Medicare Part B fee-for-service beneficiaries and nearly 80% of Part B spending. Therefore, it is too far-reaching to be a true test or demonstration. The Administration does not have the authority to supersede previously enacted statutes established by Congress through rulemaking. The intent and purpose of regulations are to provide a pathway to implement the statute, not to rewrite established laws. Yet, this rule and model impermissibly attempts to rewrite the Medicare statute and far exceeds the agency's authority.

The final rule also violates a number of other federal and state laws prohibiting discrimination against protected classes, because it discriminatorily targets individuals who are predominantly over 65 years of age, who are disabled, and who have been diagnosed with cancer. Protections from such discrimination are set forth in Section 1557 of the Affordable Care Act, the Americans With Disabilities Act, and the Rehabilitation Act of 1973, and the Age Discrimination Act of 1975.

By stating that eligible providers and suppliers will need to decide if the price they pay for these drugs, in light of the reduced reimbursement, may impact their willingness to continue offering the drugs to Medicare beneficiaries, CMS is acknowledging that the rule is likely to impact fee-for-service beneficiaries' access to medically necessary treatments. Ironically, CMS appears to be telling hospitals that they may choose to discriminate against Medicare fee-for-service beneficiaries and disregard those patients' rights based on this rule, despite hospitals' conflicting obligations under Medicare's Conditions of Participation to comply with all applicable Federal laws related to the health and safety of patients./5

The rule is simply untenable and arbitrarily and capriciously puts patients' health and safety at risk.

MFN model violates the Administrative Procedures Act

Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), the agency is required to publish a notice of the proposed rule in the Federal Register before the provisions of a rule take effect. Similarly, section 1871(b)(1) of the Social Security Act requires the Secretary to provide for notice of the proposed rule in the Federal Register and provide a period of not less than 60 days for public comment. Section 553(b)(B) of the APA provides for exceptions from the notice and comment requirements; in cases in which these exceptions apply, section 1871(b)(2)(C) of the Act, 42 U.S.C. 1395hh, provides for exceptions from the notice and 60-day comment period requirements of the Act as well. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act authorize an agency to dispense with normal rulemaking requirements for good cause if the agency makes a finding that the notice and comment process is impracticable, unnecessary, or contrary to the public interest.

CMS cites the current surge in COVID-19 cases as a basis for requiring immediate action on drug pricing and finds that there is good cause to waive the notice and comment requirements under sections 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act "because of the particularly acute need for affordable Medicare Part B drugs now, in the midst of the COVID-19 pandemic," despite acknowledging that the rule might actually negatively impact beneficiaries' access to the drugs at issue. CMS's stated rationale ignores all other facts available to the agency, including industry data demonstrating that Medicare beneficiaries are foregoing medically necessary cancer treatments at an alarming rate during the pandemic, and that the U.S. hospital system as a whole is under enormous financial strains due to the pandemic./6

CMS also states that the agency also usually provides for a delay in effective date under section 553(d) of the APA and section 1871(e)(1)(B) of the Act. However, such delay in effective date may be waived for good cause, when such delay is impracticable, unnecessary, or contrary to the public interest, and the agency incorporates a statement of the finding and a brief statement of the reasons therefore in the notice. CMS states in the MFN rule that delaying implementation of the IFC is contrary to the public interest for the same reasons that that agency finds good cause to waive prior notice and comment, described above.

Given the unusual path of this rule, including that the rule was issued on the last possible day under the outgoing administration, Providence believes that CMS' reasoning is flawed and not consistent with the exceptions under the APA and the Medicare statute for notice and comment rulemaking. As noted below, the history behind this rule demonstrates that the impetus for abandoning the APA requirements stems from other motivations rather than an urgency due to the COVID-19 pandemic and a desire to protect the public interest.

The origins of this rule lie in the International Pricing Index (IPI) Model for Medicare Part B Drugs, which was released as an Advanced Notice of Proposed Rulemaking (ANPRM) in 2018. After taking comments on this ANPRM, CMS submitted a proposed rule to OMB on June 20, 2019, a step required by the APA.

The rule remained at OMB for a year and five months until its recent clearance on November 19, 2020.

This timeline does not reflect a sense of urgency. Stakeholders were never given an opportunity to review or comment on the proposed rule before it transformed into a final rule with major consequences for the care of Medicare beneficiaries. The MFN model detailed in the interim final rule is very different from the IPI model advanced in 2018, which was not a nationwide model and did not rely on drug manufacturers voluntarily lowering drug prices.

We also strongly disagree with CMS' stated basis for waiving the usual notice and comment rulemaking process. While we certainly understand that CMS might want to use its emergency waiver authority to increase access to COVID-19-related treatments during a COVID-19 pandemic, CMS specifically excludes these drugs from the MFN model and this rule has no bearing on those treatments. Instead, the rule focuses primarily on cancer-related drugs that that beneficiaries are already foregoing at an alarming rate. This rule has no bearing on the pandemic, it did not need to be rushed through the rulemaking process, and it has enormous potential for harm to Medicare beneficiaries and the general public.

For all these reasons, Providence asks CMS to rescind the MFN model interim final rule immediately.

We look forward to working with the Biden Administration and the new 117th Congress effectuate real and meaningful drug pricing reform that does not restrict patient access to critical drugs or hurt providers.

Thank you for the opportunity to provide information on these important issues. We hope that you find our input informative. For more information, please contact Sarabeth Zemel, manager, federal regulatory affairs and engagement, at (202) 492-5132 or via email at [email protected].

Sincerely,

Rod Hochman, MD

President and CEO

Providence

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1/ See, e.g., Order Granting Motion for Preliminary Injunction, Cal. Life Sciences Ass'n v. Azar, No. 20-cv-08603-VC (N.D. Cal. Dec. 28, 2020) (concluding that the rule violated the Administrative Procedure Act and vacating the rule pending notice and comment rulemaking); Order, Assoc. Comm. Cancer Ctrs. V. Azar, No. 20-cv-03531 (D. Md. Dec. 23, 2020) (imposing a nationwide temporary restraining order on the rule through January 15, 2021).

2/ Although this rule technically only applies to Medicare fee-for-service, we anticipate that many Medicare managed care plans will attempt to follow suit and significantly restrict their payment for the MFN-targeted drugs. In addition, because Medicare prohibits participating hospitals from discriminating against Medicare beneficiaries, there would be no lawful way for a hospital subject to the MFN rule to offer the 50 impacted drugs to nonMedicare beneficiaries but withhold them from Medicare beneficiaries. See, e.g., 42 C.F.R. Secs. 482.11, 482.13. As a result, this rule will have the unintended consequence of making those drugs unavailable to a much broader portion of the U.S. population.

3/ See, e.g., Patt, Debra, et al., "Impact of COVID-19 on Cancer Care: How the Pandemic is Delaying Cancer Diagnosis and Treatment for American Seniors," DOI: 10.1200/CCI.20.00134, JCO Clinical Cancer Informatics, No. 4 (2020) 1059-1071, published online Nov. 20, 2020, available at: https://ascopubs.org/doi/10.1200/CCI.20.00134. The authors note that at the peak of the pandemic, a decrease in Medicare fee-for-service billing frequency was observed for the top physician-administered oncology products, dropping in both April by negative 26% and in July by negative 31%, cancer screening dropped by between 56-85%, and mastectomies and prostatectomies dipped significantly.

4/ See, e.g., GAO, "Rural Hospital Closures: Affected Residents Had Reduced Access to Health Care Services," GAO21-93 (publicly released 01/21/21), copy available at: https://www.gao.gov/products/gao-21-93 (noting that Medicare fee-for-service beneficiaries in service areas with rural hospital closures were less healthy than those in areas without closures and that even open rural hospitals are showing patterns of financial distress).

5/ See, e.g., 42 C.F.R. Secs. 482.11, 482.13.

6/ See fn. 2; AHA, "Hospitals and Health Systems Continue to Face Unprecedented Financial Challenges Due to COVID-19," June 2020, copy available: https://www.aha.org/issue-brief/2020-06-30-new-aha-report-finds-lossesdeepenhospitals-and-health-systems-due-covid-19 (estimating total losses for the nation's hospitals and health systems in 2020 as at least $323.1 billion).

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The rule can be viewed at: https://www.regulations.gov/document?D=CMS-2018-0132-2750

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