Payment for drug therapy.

Payment for Drug Therapy

This regular column of Physician Executive deals with the issues surrounding expanding technology in the delivery of health care services. Although technology is most commonly viewed in terms of equipment and procedures, the growing cost and complexity of drug therapy has made even this technology the target of assessment. The following report details the positions taken by the buyers of health care services on payment for drug therapy.

The 1980s have witnessed a move away from a cost-based health care payment system under which almost everything was paid for to one in which explicit determinations are made about the appropriateness of the application of specific health care technologies for specific indications. Third-party payers, self-insurers, and HMOs are evaluating ever more closely the specific technologies that they will be paying for. A clear illustration of this point is the technology of magnetic resonance imaging (MRI). The first MRI units were approved for marketing by the FDA on March 29, 1984. National Blue Cross/Blue Shield did not render an affirmative coverage recommendation until June 1985, and HCFA's affirmative coverage decision did not come until November 1985. This scenario clearly illustrates that considerations of coverage and levels of reimbursement can affect the availability of technology and, thus, clinical decision-making. Buyers have focused in their decision-making on the utilization of devices, procedures, and techniques. However, in very recent years, they have paid increasing attention to appropriate utilization of drug therapy, mainly because of the advent of more expensive drugs. Cancer chemotherapy and AIDS have become focal points in this issue, as new drugs or biologicals can be quite expensive and much of the drug therapy can be categorized as "investigational," a buzzword that signals negative coverage decisions by third-party payers. This issue of what is established and what is investigational underlies two increasingly controversial issues that relate to payment for drug therapy--use beyond FDA-approved labeling and use of Treatment Investigational New Drugs (INDs).

Payers' Views

In a proposed rule (January 30, 1989) explaining its criteria and procedures for Medicare coverage decision making, the Health Care Financing Administration stated its position on the use of a drug used beyond FDA-approved labeling: "FDA-approved drugs may be covered when used for indications other than those specified in the FDA-approved label as long as FDA has not specified such use as not approved." Coverage of such nonlabeled uses is determined by the local contractors taking into consideration what is generally accepted medical practice in the community. Treatment IND drugs are drugs that are not yet approved by the FDA for final marketing but that are made available by the FDA for the treatment of the desperately ill. The most important of the several criteria for approval of a Treatment IND for a drug are that: * The drug be intended to treat a

serious or life-threatening disease. * There be no comparable satisfactory

alternative drug or therapy available

to treat that stage of the disease in the

intended population. HCFA's view in its proposed rule is, "Treatment Investigational New Drugs (INDs) are approved by the FDA but are still considered experimental and not covered by Medicare." On October 25, 1989, in testimony before the National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS (also known as the Lasagna Commission), the Health Insurance Association of America (HIAA) and the National Blue Cross and Blue Shield Association (BCBS) presented their views. HIAA concluded that for drugs for immediate life-threatening conditions in FDA-sanctioned clinical trials, none should be considered ineligible for coverage on the basis of involvement in those trials. Additionally, Treatment IND drugs should not be considered categorically ineligible. Rather, each agent should be evaluated to determine its demonstrated benefit. For drugs used beyong FDA-approved labeling, HIAA recommends that the AMA Drug Evaluations, the U.S. Pharmacopeia Drug Information, and the American Hospital Formulary Service Drug Information be used as reference sources in decision making. The peer reviewed literature and the appropriate medical specialty societies should also be viewed as sources of information. In decisions involving immediately life-threatening conditions, "the review and approval process for drugs should be more flexible from a scientific standpoint, if no other reasonable alternative therapy exists." BCBS took a more conservative stance and concluded that Treatment IND drugs should not be routinely covered as subscriber benefits. "We consider Treatment INDs to be investigational and therefore ineligible for coverage as a subscriber benefit because investigational treatments are contractually excluded. Coverage of Treatment IND is inconsistent with our principle of providing coverage for effective treatments." BCBS agreed with the Lasagna Commission "that lack of specific FDA drug approval for a particular indication did not mean that such use is unsafe or ineffective. Rather, the guiding principle should be whether the off label use has been demonstrated to be an effective treatment." The position of the American Medical Association is that when use of a drug beyond FDA-approved labeling is based upon sound scientific evidence and sound medical opinion, the use is indeed appropriate. Such use constitutes safe and effective therapy. Thus, third-party payers should consider the use of the drug as reasonable and necessary care, irrespective of the labeling, and should fulfill their obligation to beneficiaries by covering such therapy. With respect to Treatment IND drugs, the AMA believes that such drugs, as evaluated by the FDA and the prescribing physician, represent safe and effective therapy and, in many cases, the only alternative for desperately ill patients. As such, the AMA believes, these drugs should be covered.

William T. McGivney, PhD, is Director, Division of Health Care Technology, American Medical Association, Chicago, III.