Off-label use and Medicare

January 27, 2009

The New York Times released another salvo in the debate over off-label prescription drug use and Medicare payments today.  Its article (available here) discusses a rule change that took effect this past November, opening the so-called “compendium pipeline” for Medicare covered drugs that are used off-label to treat cancer.  The article scants on the issue of costs and focuses primarily on the hoary, ‘actual effectiveness versus patient hope’ debate of off-label use drugs.  I would like to look at the cost effect, but before I head down that rabbit-hole, a brief background may be in order.

Off-Label Use Background

Prescription drugs are approved for specific uses, dosages and combinations by the Food and Drug Administration.  The approval process can have multiple steps, independent verifications of trials, and take anywhere from a long time to a very long time depending on the nature of the drug-use seeking approval and the number of researchers providing data. Physicians and other prescribers are free to issue prescriptions for uses outside of those the FDA specifically approves, and do, mostly to very good effect for the patients involved.  Indeed, the cost and time involved prevent many legitimate uses from gaining FDA approval, so the off-label use mechanism acts as a kind of release valve for the strictures of the FDA approval process.

Medicare and private insurance companies are not always willing to pay for these off-label uses, especially if they are experimental.  Since the mid 1980s, however, CMS has authorized payment for off-label treatments so long as they exist in the compendium pipeline – – off-label uses described in collected reference guides which are put together by independent, private non-profits that compile drug research in the medical literature.  So, if an off-label use is described in one of these compendiums (all things being equal – – and there are complicating factors), Medicare will pay for it.  

Cost Analysis

What the New York Times was reporting on was a change in CMS policy that effectively increased the number of compendiums Medicare would look to for approved (i.e. paid for) off-label uses.  Because of the not-for-profit nature of the groups writing these reference guides, the number had dwindled down to only one in 2007.  The new rule increases that to (probably) five, once CMS approves the compendiums seeking inclusion.

What does this mean in terms of the cost of Medicare?  It is going to climb, and maybe drastically.  Many drugs are approved for only one or two uses.  The demand for them, therefore, is lower than drugs approved for multiple uses (or with multiple therapies).  Opening up the compendium pipeline will see more prescribing off-label for uses that are not as well-proven to work as approved uses.  

Of course, this effect will probably be ameliorated by private insurance companies following suit and agreeing to pay for the same uses that Medicare pays for (thus increasing off-label use and driving down cost), but the issue is not without controversy.  

In terms of the law, I see a potential dispute arising from CMS’s action here.  Medicare is essentially obliged to pay for an off-label use if a compendium lists it  unless one of the other guides specifically advises against it.  Medicare recipients are allowed to challenge CMS actions (including decisions to pay or not pay) through the administrative adjudication.  If an off-label use is disputed by two approved compendiums, a Medicare recipient seeking to have that use paid for has standing to bring such an adjudication.

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