Medicare could cut PET payment rates just as physicians begin to adopt the modality

-- by Jennifer S. Keppler

After years of slow progress, PET advocates are breaking through the regulatory logjam that has impeded broad-based clinical acceptance. Simultaneously, proposed Medicare payment reforms could present another set of regulatory challenges for the modality.

The Health Care Financing Administration expanded Medicare coverage of PET in 1999 and additional indications may be approved this year. Medicare outpatient payments for PET have been increased from the levels published in draft rulings. The FDA has published safety and efficacy findings for two PET compounds in clinical use and has simplified the methods by which producers/manufacturers can apply for approvals of three investigative PET radiopharmaceuticals.

The three new indications for whole-body PET scans using fluorine-18 fluorodeoxyglucose (FDG) that were approved by HCFA last July are evaluation of recurrent colorectal cancer in patients with rising levels of carcinoembryonic antigen (CEA), staging and characterization of lymphoma (both Hodgkin's and non-Hodgkin's lymphoma, when done as an alternative to a gallium scan), and detection of recurrent or metastatic melanoma prior to surgery.

Efforts are under way by the leadership of the Institute for Clinical PET to continue this expansion of the coverage policy. Comprehensive data and decision analysis information on additional uses of PET were presented to HCFA this spring and it is anticipated that PET coverage may be further broadened in July in response to these data submissions.

FDA approval of the radiopharmaceutical used in PET has always been a prerequisite for public-sector reimbursement. The FDA approved rubidium-82, a generator-produced PET radiotracer, as a cardiac perfusion agent in 1989, and HCFA afforded coverage for Medicare patients in 1994. The first Medicare coverage statement restricted coverage to only these Rb-82 applications and noted that all other drugs and indications for PET were to be considered experimental. Efforts to work with HCFA to change this stance were unsuccessful for many years. The absence of FDA approval for other PET drugs was cited as the primary reason for the lack of expansion.

The FDA Modernization and Accountability Act of 1997 (FDAMA) provided the basis for the federal agency to develop new regulatory mechanisms for PET and, equally important, for HCFA to expand public-sector reimbursement. FDAMA contained specific language requiring that appropriate procedures for approval of new drug applications (NDAs) and abbreviated NDAs (ANDAs) for PET radiopharmaceuticals, as well as appropriate current good manufacturing practices (CGMPs) for the production of PET compounds be developed. FDAMA also stated that PET drugs could be produced legally in the interim until final FDA approval methods were in place, opening the way for expansion of Medicare reimbursement. Shortly thereafter, HCFA revised its national coverage policy, providing coverage as of Jan. 1, 1998 to Medicare beneficiaries for PET scans to characterize solitary pulmonary nodules and to initially stage certain types of lung cancer. HCFA developed several temporary HCFA procedure codes (HCPC) for payment. This was the first of several steps HCFA has taken toward a careful expansion of PET reimbursement.

PAYMENT RATES

Payment rate is a critical component of coverage and has been the subject of much attention in the last year. In 1998 HCFA accorded 53.96 relative value units (RVUs) for FDG PET studies, which equates to an average payment rate of $1980. This RVU assignment was to reflect the total technical reimbursement for the procedure, including both the actual scan fee and the radiopharmaceutical charge. The level of reimbursement for Rb-82 cardiac perfusion procedures was set by local Medicare providers, and is estimated by the manufacturer of Rb-82 generators to average between $1600 and $2000 for a rest/stress procedure. While these are acceptable payment rates, hospitals will soon experience a change in the way they are reimbursed for outpatient procedures performed on Medicare beneficiaries, and that change threatens to erode payment levels. Freestanding imaging centers will continue to be reimbursed through the RVU payment system.

HCFA published its final rule regarding the hospital outpatient prospective payment system in the April 7 Federal Register. The final rule details procedure payments based on ambulatory pricing category (APC) assignments. Data to set the payment rate for the APCs were collected in 1996. The final rule reflects several important changes from the proposed versions issued last summer, including a supplemental payment for the radiopharmaceutical used in a procedure and the provision that emerging techniques will be assigned to one of several "new technology" categories, rather than to existing APC categories. As for the current rule, one APC code has been assigned specifically to PET (APC 285). It will be used by hospitals to charge for Rb-82 cardiac perfusion imaging studies and has been given a national rate of $730.22. In addition, the 1999 Balanced Budget Reconciliation Act stipulates that payments for these procedures will be supplemented with an add-on payment equal to 95% of the average wholesale price of the radiopharmaceuticals used in the procedure. All procedures using radiopharmaceuticals are eligible for this add-on payment, which will be billed using drug-specific HCPC. Over the next several years, data on costs of isotopes will be collected and ultimately merged into the APC system.

FDG-PET imaging studies that are billed to Medicare using G-codes were not approved by Medicare when the payment level data were collected. Since these procedures were not adequately represented in the data collection period, they will fall under one of the new technology APCs, per provisions of the 1999 Budget Reconciliation Act. The FDG-PET oncology studies fall into new technology category XI (APC 981) and will be paid at a rate of $2250. This is a correction from the $1875 erroneously noted in an earlier report. It is believed that procedures done under APC 980 will also be eligible for recouping radiopharmaceutical expenses at 95% of the average wholesale price as described above. HCFA will collect data on costs of FDG PET and will merge these procedures into the APC groups sometime in the future.

Details of the new policy can be downloaded from HCFA. Recent modifications of the hospital outpatient payment systems for PET and nuclear medicine will be instrumental to the continued growth of these fields, as the costs of providing these services will be adequately compensated under the new prospective payment system.

REGULATORY UPDATE

A PET radiopharmaceutical committee, formed under the initiative of the ICP and composed of representatives of the Society of Nuclear Medicine and other organizations, has been assisting the FDA with the development of the regulations mandated by FDAMA. FDA efforts have focused on completing safety and efficacy evaluation of PET radiopharmaceuticals in clinical use, developing chemistry guidelines for NDAs, and formulating good manufacturing practices for PET production sites.

The FDA published the initial results of these activities in the March 10 Federal Register, including a notice of its findings on the safety and effectiveness of certain PET drugs, invitations to submit NDAs for these compounds, and a notice of the availability of a draft guidance for PET drug applications.

The FDA found that FDG is safe and effective in PET imaging for assessment of abnormal glucose metabolism in the evaluation of malignancy in patients with known or suspected abnormalities found by other testing modalities, and in patients with an existing diagnosis of cancer. According to the FDA, FDG is safe and effective in PET imaging in patients with coronary artery disease and left ventricular dysfunction, when used with a myocardial perfusion imaging, to examine myocardial glucose metabolism and to identify myocardium with reversible loss of systolic function. The agency also found that ammonia is safe and effective in PET imaging of the myocardium under rest or pharmacological stress conditions to evaluate myocardial perfusion in patients with suspected or existing coronary artery disease.

This notice means that applicants who want to produce these compounds for sale or use will need only to reference this Federal Register notice in their NDAs and ANDAs for proof of safety and efficacy.

The FDA also invited ANDAs for two PET drugs it had previously approved, based on the findings that FDG is indicated for identification of regions of abnormal glucose metabolism associated with foci of epileptic seizures and that sodium fluoride (F-18) is indicated as a bone imaging agent to define areas of altered osteogenic activity.

The FDA is expected to hold a public meeting soon to discuss the ongoing safety and efficacy evaluations of F-18-DOPA and O-15-water. Once these analyses are complete, the FDA's Medical Imaging Drug Advisory Committee will review the results, and if the agents are found to be safe and effective, the findings will be published in a future Federal Register. This same process, managed in the future by the PET community, will remain a mechanism for obtaining clinical approvals of new PET radiopharmaceuticals.

The draft guidance, also published in March, outlines a simplified process for filing PET drug applications. The FDA has developed "fill in the blank" templates for the community to use in applying for PET NDAs/ANDAs. Since the safety and efficacy of PET drugs was established through the Federal Register announcement described above, NDAs and ANDAs will be composed primarily of these templates for chemistry, manufacturing, and controls. The FDA held a public meeting on March 22 to discuss these documents and additional public comment was accepted through June 8. The documents can be found on the FDA Web site under the subheading "Procedural Draft" and at http://www.fda.gov/cder/regulatory/pet.

MANUFACTURING PRACTICES

Establishing the safety and efficacy of PET compounds and providing simplified methods for marketing applications are just part of the process of bringing PET into regulatory compliance. The FDA also sees its role as assuring that the sites manufacturing these drugs produce high-quality compounds on a continual basis. Typically, this is done through registration of manufacturing sites and enforcement of standard manufacturing practices.

At present, the FDA asserts that all PET production sites will need to register as drug establishments and list the drugs in clinical use (for which there is an exchange of value for their use). This would require that sites follow CGMPs for PET and be open to FDA inspection. The FDA has presented several draft versions of PET CGMPs, the most recent distributed at a public meeting in September 1999. Discussions were held at that meeting to suggest modifications. The FDA is expected to hold further public meetings to discuss revisions and associated guidance during the summer. The PET production community will have two years after publication of the final rules and guidance to come into compliance.

Developing an appropriate regulatory paradigm for PET is another essential component of the long-term growth of the field. It is clear that legal availability of the drugs will remain a prerequisite to Medicare coverage and payments, not only for the drugs in use today but also for those that will be developed in the future. The leadership of the PET community will remain focused on the development of production and approval systems that will continue to nurture the field of clinical PET.

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