PRACTICE RESOURCES > Regulation/AUA Positions, Letters, and Talking Points > AUA Comments to CMS about Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B

AUA Comments to CMS about Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B

April 26, 2005

Mark McClellan, MD, PhD
Department of Health and Human Services
Centers for Medicare & Medicaid Services
Attention: CMS-1325-P
P.O. Box 8010
Baltimore, MD 21244-8010

Re: CMS-1325-P - Medicare Program; Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B.

Dear Dr. McClellan:

On behalf of the American Urological Association (AUA), representing 10,000 practicing urologists in the United States, I am pleased to submit comments on the March 4, 2005 proposed rule on Medicare's competitive acquisition program (CAP) for outpatient drugs. We realize that CMS faces a difficult task in implementing the CAP, which is a new and complex competitive bidding program that must to a large degree fit within existing Medicare program rules and processes.

We appreciate CMS's efforts to develop rules that would be as simple as possible for physicians and Medicare beneficiaries while still fitting within Medicare's current laws and claims processing capabilities. However, this rule as proposed falls far short of those stated goals. The AUA believes that most urology practices will not choose to participate in the CAP as currently proposed, as is it too confusing for beneficiaries and physicians, it is burdensome and it creates significant administrative expenses that are simply not reimbursed. Therefore, our comments offer suggestions for improvements to the proposed CAP process that may increase the likelihood of greater physician participation in the CAP.

Also, many parts of the proposed rule were not actual proposals, but rather a list of possible options along with the advantages and disadvantages for choosing those options. In addition, there are still many unanswered questions about this complex new program, and there is a very short time frame between the comment due date and the implementation of the CAP. Because of this, in response to proposed rule comments, we urge CMS to publish an interim final rule instead of a final rule.



As CMS points out in the general overview of the CAP, there are many tasks to be completed prior to implementation of the program on January 1, 2006. CMS also initiated several activities prior to issuing the proposed rule, including awarding a contract to Research Triangle Institute (RTI) to obtain information and develop alternatives regarding CAP implementation, conducting a Special Open Door Listening Session on April 1, 2004, establishing an electronic mailbox for comments on the CAP program and issuing a Request for Information (RFI) on December 13, 2004.

As part of its contract, RTI consulted with groups, including the AUA, to obtain input on CAP implementation, and we appreciated the opportunity to work with RTI and to provide input early in the process. However, given the tight time frame for implementing this new and very complex program, and given that CMS has already initiated many activities surrounding the CAP, we implore CMS to give serious consideration to proposed rule comments by affected specialties. While the RTI discussions and other activities that took place before the rule's publication were helpful, many concepts in the proposed rule were unknown at that time. Therefore, we expect that proposed rule comments will be weighted equally with discussions based on these previous activities.

It is somewhat alarming that CMS only received 15 responses to its December 13, 2004 RFI to assess the public's interest in bidding on contracts to supply drugs for the CAP. CMS stated in the proposed rule that "most responders indicated a willingness to provide selected Part B drugs on a national basis" and that "In the specialty areas of oncology, hematology, internal medicine, infectious disease, urology, rheumatology and obstetrics/gynecology, several responders indicated a willingness to provide the most costly and the most frequently used drugs in these areas." However, no definition was given of what constitutes the most costly and most frequently used drugs and no examples were given for urology.

This is concerning because there are some urology drugs that are used less frequently than others but are nevertheless vital in the treatment of urological conditions such as interstitial cystitis and bladder cancer. We are hopeful that the CAP will offer a viable option for acquiring the drugs used to treat these debilitating and deadly diseases, as urologists are not able to purchase these drugs for 106 percent of the average sales price (ASP), which is the Medicare payment under the ASP payment methodology. However, if the drugs are not used frequently enough for vendors to be interested in bidding on them, then the CAP program may not offer a solution to this problem after all.


CMS should implement the CAP for all part B drugs that are furnished incident to a physician's service at the onset of the program on January 1, 2006. As CMS points out in the proposed rule, "A potential disadvantage of singling out drugs typically administered by one physician specialty for the initial stages of phasing in the CAP is that the scope of the CAP in the early years may be too narrow to effectively identify issues or concerns for specialties that typically administer drugs not initially included. In addition, the CAP would not initially provide an alternative for physicians in other specialties."

Because each specialty is so different in terms of the drugs used and the patterns of use, all Part B drugs should be included at the onset to learn the most from the introductory year(s) of the CAP. Also, because this is a voluntary program, the number of participants is likely to be limited in the first few years anyway, so limiting the number of drugs included might seriously affect the ability to identify and fix problems during a phase in. Restricting the list of drugs could also reduce the number of bidders if they believe that the market is too limited.

If CMS does not choose to include all Part B drugs in the CAP for 2006, we urge CMS to include at the very minimum any drugs that urologists and other physicians are currently not able to buy at or less than the Medicare payment based on the ASP payment methodology. For urology, these drugs are:


Bladder Cancer Drugs: Urologists Costs vs. Medicare Payment




1st quarter 2005 pymt.

2nd quarter 2005 pymt.

Avg. Cost for Urology Offices



per instillation





Interferon alfa-2b inj

1 million units





Mitomycin 40 mg inj

40 mg





Thiotepa injection

15 mg





*The Medicare payment for J9214 is based on 1 million units. For treatment of bladder cancer, J9214 is usually administered in 50 million units, so that total Medicare payment for the typical dose is $649 and the typical cost is $673.

The CMS Physicians Regulatory Issues Team (PRIT) is maintaining a list of "problem" drugs, or drugs that physicians are unable to purchase at or less than the Medicare payment. We urge CMS staff working on the CAP rule to coordinate with the PRIT to ensure that these drugs are covered under the CAP in 2006. Otherwise, patients who need these drugs will have to pay for them out of their pocket, will be sent to the hospital outpatient department which is inconvenient and more costly or, worst of all-will not receive the treatments they need. Urologists must not be expected to suffer a financial loss to provide these drugs to Medicare patients any longer.

The AUA has forwarded information about the cost of bladder cancer drugs to CMS on several occasions and the AUA also met with CMS last December to discuss possible options for addressing urology offices' inability to cover their costs under the ASP payment system for bladder cancer drugs that are administered in the office. CMS has encouraged specialty societies to help their members identify alternate sources for buying drugs and also to educate their members about how to become better purchasers of drugs. The AUA is currently investigating different possibilities for doing this, and we are attempting to help our members achieve these goals to the degree possible.

Also, the MMA mandates that the Inspector General report to Congress by October 1, 2005 on the adequacy of reimbursement rates under the ASP methodology. The OIG is required to conduct a study on the ability of physician practices in the specialties of hematology, hematology/oncology, and medical oncology of different sizes, especially large practices, to obtain drugs and biologicals for the treatment of cancer patients at 106 percent of the ASP for the drugs and biologicals.

The AUA contacted OIG staff working on this report to inquire about whether bladder cancer drugs were being included in their study. We were disappointed to find that the OIG is basing its study on a very strict interpretation of the MMA and is not including urologists in its study, even though urologists provide oncology services to their cancer patients. Nevertheless, we did forward information to the OIG about the prices that urology offices are paying for bladder cancer drugs, and urged them to at least acknowledge in their report that specialties other than hematology, hematology/oncology and medical oncology are having trouble purchasing drugs at 106 percent of ASP.

Because there are no other immediate solutions to this problem, we urge CMS to structure the CAP so that it could be a viable solution for physicians who are not able to purchase bladder cancer drugs at 106 percent of ASP.

It is evident by the design of the CAP that physicians are likely to favor narrow drug categories while CAP vendors are likely to favor broad drug categories. Therefore, CMS has the difficult job of striking a balance that will allow maximum benefit and encourage participation by both physicians and CAP vendors. For the urology practices that do choose to participate in the CAP, some of them will prefer to acquire all of their office-administered drugs through the CAP. However, some practices will prefer to acquire certain drug categories through the CAP while they continue to buy and bill certain other drug categories under the ASP payment methodology. Therefore, to give the largest number of urology practices the option of using the CAP if they so desire, we urge CMS to place urology drugs in categories that are as narrow as possible.

However the drug categories are ultimately structured, to ensure that all Part B drugs are available to Medicare beneficiaries in the physician office setting, the CAP should provide a safety net for drugs on which physicians are suffering financial loss under the ASP payment system. Again, CMS could address this by creating a separate category of problem drugs for each specialty or a large category of problem drugs that includes the problem drugs of all specialties, as vendors are likely to be able to negotiate lower prices than physicians can negotiate for these drugs because they will be buying in larger quantities. As mentioned above, CMS could begin by using the list of drugs that the CMS PRIT has identified as problem drugs.

CMS gives one example in the rule of a possible CAP drug category, which is the Most Commonly Used HCPCS by Oncologists Defined by Specialty Code 90 (Table 1 in the proposed rule, page 10751). By default, many of the drugs that are used by urologists to treat prostate and bladder cancer are included in this example category, as urologists use oncology drugs to treat urological cancers. However, one of the cancer drugs (J9291, Mitomycin 40) that urologists are not able to purchase at 106 percent of ASP is not included in the example, while other drugs that urologists can't purchase at 106 percent of ASP are included in the example, because they are also billed frequently by oncologists (J9031, BCG; J9214, Interferon; and J9340, Thiotepa). Therefore, we urge CMS not to limit the CAP drug categories in 2006 to the example shown in Table 1.


Competitive acquisition areas should be structured to maximize vendor competition and minimize administrative burden while at the same time addressing concerns over timely delivery and proper storage and shipment of drugs to physician offices. Therefore, regional competitive acquisition areas are probably the best compromise, even though that would require national vendors to submit multiple bids, because, as CMS points out, there are existing regional areas that could be transferred to the CAP. For example, multi-state acquisition areas could be established based on existing markets, areas could be structured so that they coincide with the prescription drug plan regions or areas could be structured to coincide with Part B Medicare Carrier regions.

CMS should determine the appropriate phase-in for competitive acquisition areas that are included in the CAP based on the initial vendor response. However, in any phase-in scenario, CMS should work to ensure that patients in rural areas have access to the problem drugs that were discussed above and are being researched by the CMS PRIT.


CMS says "it is not our intention to restrict the physician's flexibility when ordering drugs from a CAP vendor, or to require that a physician participating in the CAP would order drugs differently from a CAP vendor then he or she would a non-CAP vendor." We realize that CMS is constrained by the requirements of the statute as well as the existing Medicare claims processing rules. However, the CAP claims process as proposed would require physicians to order drugs differently than they currently do and could also have negative implications for patient care and practice flow. The current proposal would also add significant administrative expense for physicians who elect to participate in the CAP.

We urge CMS to reconsider many of the elements it has proposed for claims processing and to simplify the process as much as possible to alleviate the administrative burden on physicians. Otherwise, the excessive administrative costs will discourage participation in the CAP both in the short term and the long term.

For example, urologists currently order drugs in bulk, e.g. 20 or more doses at a time with one phone call, fax or email. Under the proposed CAP rules, physicians will have to order separately for each patient and be responsible for informing the CAP vendor each time a drug is not administered on the expected date of administration. There is no way under the rules that a physician can keep a supply of the drug without each dose being connected to a specific patient. The program creates a substantial administrative burden when patients show up without appointments, cancel appointments or reschedule appointments and for situations where a physician must change drug therapy for a patient during the course of the treatment.


CMS proposes that physicians who elect to participate in the CAP should continue to bill their local carrier for drug administration and that, for those drugs that are not included in the CAP, and for drug categories that the physician does not select, the physician would continue to bill and be paid under the ASP methodology. Also, CMS solicits comments on whether physicians must obtain all categories of drugs that a particular CAP vendor provides from the vendor, or whether physicians should be allowed to choose which drug categories to obtain from the vendor.

The AUA agrees that physicians who elect to participate in the CAP should bill their local carrier for drug administration for CAP drugs and continue to be paid for other drugs under the ASP methodology. Also, CMS should not require physicians to obtain from a CAP vendor all categories of drugs that the particular CAP vendor provides, but should allow physicians to choose which drug categories to obtain from their vendor.

Also, the prices that CAP vendors pay for drugs should be excluded from drug manufacturers' quarterly reporting of average sales price (ASP) data. Including vendor prices is counter to the intent of the statute because it gives disproportionate weight to the drugs purchased at volume discounts only attainable by CAP vendors. This would punish physicians who wish to continue buying and billing Medicare for drugs under the ASP payment methodology. This would also undermine the voluntary nature of the CAP and the hybrid drug payment system, as it would eventually force all physicians to choose to participate in a costly and burdensome CAP or to stop administering drugs in the office.

For the CAP, the law requires that the vendor can't collect any applicable deductible and coinsurance from Medicare beneficiaries unless the drug was administered to the beneficiary, and that Medicare can make drug payments only to the vendor and the drug payments are also conditioned on the administration of the drug. However, CMS is proposing that payment to the vendor would be dependent not only upon drug administration, but also upon filing and payment of the drug administration claim. This creates a situation where the physician could be facing pressure from the CAP vendor to file their drug administration claims extremely quickly and even possibly to appeal drug administration claim denials that a physician normally would not pursue based on a cost/benefit analysis. For most drugs, the drug administration payments are much lower than the payment for the drug itself, meaning that the CAP vendor is much more likely to have more incentive to push the physicians to appeal intermittent denials.

CMS's proposed claims processing methodology would verify drug administration to the beneficiary by means of a prescription number that would be placed on the physician claim for drug administration and the drug vendor claim for the drug. CMS's claims processing system would then use the prescription number to match the two claims and authorize payment to the vendor. According to CMS, the electronic version of the Medicare carrier claim form has space for a series of prescription numbers, which has not been utilized previously for Part B drugs. As part of implementing the CAP program, CMS would require that vendors and physicians who elect to participate in CAP have the capability of submitting these prescription numbers to CMS in their claims processing systems.

For physician practices not already using prescription numbers, they will incur additional costs that are not reimbursed to work with their internal information systems staff or practice management software vendors to make the necessary changes to submit these data elements to Medicare in a manner consistent with HIPAA transaction guidelines for capturing prescription numbers. CMS must explore efficient alternative methods that are not linked to drug administration claims by which providers can verify drug administration to vendors. For example, hospital systems use barcoding technology to quickly and accurately account for drug administration. CAP vendors should be required to provide such technology as part of the bid qualification.

CMS's proposal that physicians must identify an expected date of administration and then notify the CAP vendor if the drug is not administered on that date is very burdensome, especially because patients frequently change appointments. Under the proposed rule, the CAP vendor would wait until the expected date of administration to submit a claim for the drug, which could become very confusing when, for any number of reasons, the drug is not administered on that expected date. Instead, if the physician could verify drug administration to the vendor after the drug has been administered, the vendor could submit their claim knowing that the drug had been administered and the burden would not be on the physician to inform the CAP vendor every time a drug was not administered on an exact expected date.

CMS solicits comments on whether there are demonstrable, compelling reasons why CMS should consider making a partial payment to the vendor and what the appropriate percentage of the partial payment should be in cases where the drug administration claim is not received by the CMS claims processing system within 28 calendar days of the anticipated date of administration. If the verification of the drug administration is done more efficiently, the vendor could bill CMS for the covered amount for the drug more quickly and thereby alleviate the need for partial payments. The amount of payment delayed would only be the patient's co-payment amount and deductible. In cases where this could cause an undue burden on the vendor (for example, a predominant secondary insurer goes bankrupt), CMS should consider making partial payments to CAP vendors and should work with vendors to determine the appropriate percentage on a case-by-case basis.

CMS proposes that in emergency situations drugs acquired under the CAP could be used to resupply inventories of drugs administered by physicians as long as the physician could demonstrate that:

  1. The drugs were required immediately
  2. The physician could not have anticipated the need for the drugs
  3. The vendor could not have delivered the drugs in a timely manner
  4. The drugs were administered in an emergency situation

CMS proposes that in emergency situations that meet these criteria, a physician could treat a Medicare beneficiary with a drug from his or her own stock and then order the drug from the CAP vendor, identifying the drug as an emergency replacement. Then, once the drug is received by the vendor, the physician would return it to their own stock. Assuming that a physician has their own stock outside of what has been ordered from the CAP vendor, this process would be useful to physicians as long as CMS defines emergency situations broadly enough to incorporate unanticipated situations such as changing a patient's course of treatment during an office visit or patients who reschedule appointments for an earlier time.

There must be some bright line guidance on the exact method of accounting for this substitution process that alleviates the fears of physicians who would worry about being accused of filing false claims as a result of inadvertent errors in inventory accounting that could result. In addition, clear instructions must be developed about alternatives should the substitute drug not be in the physician's stock. Emergency situations do occur and CMS is correct in trying to find a way for such occurrences to be addressed, but such an exception must not make an already cumbersome process even more so.

According to CMS, "We do not believe that the clerical and inventory resources associated with participation in the CAP exceed the clerical and inventory resources associated with buying and billing drugs under the ASP system." The AUA has gathered evidence to the contrary. The CAP by its very nature adds an additional level of bureaucracy by establishing an extra point of contact that physicians currently do not have for acquiring drugs. The physician's administrative responsibilities and costs under this program should only be ones that are accounted for within the practice expense portion of the drug administration service for which the physician is receiving payment. The bidding vendor should be responsible for all other administrative costs involved with inventory tracking, maintaining administration logs, and billing for and collection of patient cost sharing amounts. Unless some mechanism is established to reimburse physicians for extra administrative costs associated with the CAP, physicians will have no incentive to participate.

CMS's proposal that physicians who elect to participate in the CAP will be required to agree to bill their drug administration claims within 14 calendar days of the date the drug was administered to the beneficiary is wholly unreasonable. We reiterate our contention that the vendor payment should not be driven by the filing or payment of a provider's claim for administration. Claim filing could serve as a useful function to cross-check the administration and to pass on secondary insurance filing information to the vendor, but it should not be the primary vehicle to alert vendors that drug administration has occurred.

CMS should expand this to 30 business days to allow for extenuating circumstances that may be outside the control of the physician and also to minimize the potential for CAP vendors to hassle physicians about submitting their claims. Physicians currently pay up front for drugs that are ordered monthly or even quarterly and are at risk for that money until their claims are approved. There is no reason why CAP vendors can't be at risk for drug payments for 30 days or more. In addition, if CMS does decide to allow partial payments to vendors, it would alleviate this problem.

CMS says that the order transmitted between the physician and the drug vendor may occur in a variety of HIPAA-compliant formats, such as by telephone with a follow-up written order. We discussed above that extra administrative costs should be covered for physicians, but it is also important that the process for ordering drugs and submitting information back to CAP contractors (so that contractors can bill Medicare and collect copays) be user-friendly and include phone, fax and internet. CAP vendors should allow internet ordering and should provide bar-code scanning software to make the process as easy as possible. The process should be structured to be as similar as possible to the way a physician currently issues a prescription.

CMS proposes to require that physicians transmit the following data elements to the CAP drug vendor and that abbreviated information could be sent for repeat patients. The AUA believes that many of these data elements are unnecessary. Including all of these data elements on a prescription is burdensome, duplicative and unnecessary. The requirements should be limited to what is necessary for a regular prescription. Our comments are included in the table below:


Data Element


Date of order


Beneficiary name


Physician identifying information: Name, practice location, group practice information (if applicable), PIN and UPIN

Physician name and PIN should be sufficient. If the physician has already signed a contract with the CAP vendor, the vendor should have the other information already in their computer.

Drug name




Quantity ordered






Anticipated date of administration

A range should be required rather than an exact date. A 30-day range would be acceptable to account for rescheduled appointments, etc.

Beneficiary Medicare information /Health insurance (HIC) number


Beneficiary Medicare information /Health insurance (HIC) number


Supplementary Insurance info (if applicable)

The physician should not be responsible for supplying this information to the vendor, as the physician is already required to fill it out once on the drug administration claim form. The Medicare central claims office should supply this information to the vendor once the prescription numbers have been matched.

Medicaid info (if applicable)

The physician should not be responsible for supplying this information to the vendor, as the physician is already required to fill it out once on the drug administration claim form. The Medicare central claims office should supply this information to the vendor once the prescription numbers have been matched.

Shipping address

This should be supplied to the selected vendor in the initial contract and is not necessary on every order.

Additional Patient Info: date of birth, allergies, Ht/Wt/ICD-9, etc.

This should not be required on the order.


Also, clarification on the ordering process for drugs that come in multi-use vials is very important for urology. For example, testosterone cypionate (J1080), which is frequently used by urologists, typically comes in a 10 cc vial, which equates to about 10 injections. It would be a logistical nightmare to order one vial from the vendor and then have to track all the different patients that are given injections from that vial so that you could properly bill Medicare. A process must be developed to handle such drugs or CMS may want to consider these types of drugs as eligible for exclusion from the CAP.

Although CMS is not requiring separate physical storage of CAP drugs, they are proposing that physicians participating in the CAP be required to maintain a separate electronic or paper inventory for each CAP drug obtained. These are contradictory positions in that the requirement to maintain separate inventory accounting can only be effectively accomplished by maintaining separate physical storage. Otherwise, verification of physical inventory against inventory accounting becomes a logistical nightmare. The CAP vendor should supply a separate storage unit to each contracted provider as is currently done in the commercial drug vending market.

The MMA requires that the vendor bill Medicare and the beneficiary, and that the beneficiary not be billed until after the drug has been administered to the beneficiary. CMS is proposing also that the vendor be allowed to bill the beneficiary and his or her third-party insurance after drug administration has been verified by matching the physician claim with the vendor claim using the prescription number, and final payment is made by the Medicare program. Although we argue that the vendor should NOT have to wait to bill Medicare until the administration claim is processed, we do agree that beneficiaries should be the last link in the chain, and that vendors should not be allowed to bill beneficiaries until after final payment is made by the Medicare program.

However, we are concerned that beneficiaries are going to be confused by receiving two separate co-payment bills from two separate entities for the drug administration (physician bill) and for the drug itself (vendor bill). We are also concerned about how vendors will handle delivering drugs for patients who are not able to make co-payments and we urge CMS to develop clear rules to govern these situations. Currently, many physicians absorb the cost of copes for indigent patients or guide their patients into charitable Patient Assistance Programs for drugs. CAP vendors should not be able to deny drugs for specific patients based on their historical inability to pay.

If the drug could not be administered to the beneficiary on the expected date of administration, CMS proposes that the physician would notify the vendor and reach an agreement on how to handle the unused drug, consistent with applicable State and Federal law. The notification would also serve to inform the vendor not to submit a claim for the drug. If the vendor and the physician agree that the drug could be maintained in the physician's inventory for administration to another Medicare beneficiary at a later time, the physician would generate a new order form at that time. This process is particularly burdensome and will be a major hindrance for physicians who want to participate in the program, and it should be simplified.


CMS's proposed rule is largely silent on resolution of physicians' drug quality and service complaints, but it does say that a physicians' first point of contact for quality related issues will be the vendor and that if the issue is not satisfactorily resolved through the vendor's grievance process, the physician may escalate the matter to the designated carrier immediately. For service related issues, CMS proposes that a physician be allowed to request intervention from the designated carrier, which will attempt to develop solutions that will satisfy both parties. Physicians will certainly need more details about this process to be able to make informed decisions about whether to participate in the CAP. Physicians should not be forced to spend their time trying to resolve such issues through a dispute resolution or grievance process that may or may not be resolved to their satisfaction.


Physicians should be able to choose to opt out of the CAP at any time during their annual election if there are egregious service-related issues. If the objective of CMS in accordance with MMA statutes is to foster physician participation in the CAP program, then certain concessions should be made during the early years of this new and exceedingly complex program. The AUA believes that a one year commitment to the CAP program will serve as a deterrent to urologists considering participation. This has been verified by feedback from our members. We urge CMS to consider a shorter commitment or a 90-day dropout period for new enrollees in the CAP program. We realize this may be challenging for vendors in estimating their financial liabilities as a contractor, but it also encourages them to provide better customer service to the physicians and the patients that is program is intended to benefit.

Thank you for considering our comments. If you have any questions or need additional information, please contact Robin Hudson, AUA Manager of Regulatory Affairs, at 410-689-3762 or



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