PRACTICE RESOURCES > Regulation/AUA Positions, Letters, and Talking Points > AWP


June 2003

House of Representatives and Senate Pass Medicare Legislation Differing Bills Head to Conference
From AUA President, Martin I. Resnick, MD

On June 27, 2003, both the House of Representatives and the Senate passed their own versions of the "Medicare Prescription Drug and Modernization Act" (H.R. 1 and S. 1). By a vote of 216-215, the House narrowly passed the legislation after last minute lobbying by President Bush and Vice President Cheney. The Senate passed its bill by a vote of 76-21. The bills will be reconciled in a conference committee following the Fourth of July recess.

Along with a $400 billion prescription drug benefit and regulatory relief, the House bill contains a two-year temporary fix to the physician payment update formula. Both bills make significant changes in how outpatient drugs administered in physician's offices would be paid.

The issue of outpatient drug payments has been on the horizon for years, and the AUA has been monitoring any possible changes to the current system as part of Medicare reform. However, 2003 marks the first year where Medicare reform has achieved the necessary bipartisan support to pass. The AUA has been actively lobbying to try to lessen the blow to doctors by achieving amendments that would give physicians choices as to how they wish to be reimbursed for outpatient drugs administered in their office.

In the House Bill HR 1: Effective January 1, 2005, physicians would select a reimbursement methodology, either average sales price (ASP) or a stock replacement structure through a Medicare-contracted entity. If the stock replacement were chosen, Medicare would reimburse the supplier, not the physician. The supplier would also be responsible for collection of the 20 percent co-pay on the drug payment, lowering the bad debt exposure for physicians' practices.

Because of concerns raised specifically by the AUA over removing physicians from the equation, the decision to add a choice of systems was factored into the final House bill, which at one point only contained the contractual arrangements. AUA strongly asserted that physician outpatient office-based administration of such outpatient drugs and biologicals optimizes quality and provides safer care because it affords to Medicare patients direct communication with their own physician in a familiar setting.

Additionally, the AUA was successful in inserting an amendment into both the House and Senate bills that directs the Centers for Medicare & Medicaid Services (CMS) to expedite consideration of practice expense payments for codes used by any specialties administering drugs affected by the changes to AWP.

In S. 1, the Senate drug bill: Provisions in the Senate bill while similar to the House would retain an average wholesale price (AWP) system for 2004 but reduce the payment from 95% to 85%. Beginning in 2005, there will be a transition to an average market price (AMP) that will decrease by 15 percent each year until reaching the amount CMS has determined is the AMP. The HHS Secretary will set the process for determining AMP which will include using manufacturers, insurers, health plan, group purchasing, MD and other data.

Another important feature of the House prescription drug bill is language that would give physicians no less than a 1.5 percent Medicare payment update for 2004 and 2005 and changes the payment formula so that it would be based on a 10-year rolling average of the gross domestic product (GDP). Currently, the formula uses an estimated annual GDP that causes severe volatility in the payment updates. The Senate bill, however, does not contain a physician payment update provision. The AUA and the Alliance of Specialty Medicine supported the House provision as an interim solution and expressed concerns with the temporary fix and is urging the Senate to address this issue during conference.

On behalf of the AUA and the Alliance of Specialty Medicine, Senator Arlen Specter (R-PA) introduced a Sense of the Senate resolution that recognizes the need for a permanent solution to the Medicare physician payment formula problem and calls on CMS and Congress to make the needed adjustments and changes to the sustainable growth rate (SGR) formula to prevent further payment reductions. He also engaged in a colloquy with Senator Charles Grassley (R-IA), Chairman of the Senate Finance Committee, on the issue whereby Senator Grassley committed to working on the formula as the prescription drug bill moves forward in the conference.

Senator Specter's remarks included:

The resolution and colloquy are not binding, but it puts Senators on record — most importantly, Chairman Grassley — as supporting an eventual fix to the formula.

The conference will begin after the Fourth of July recess and could continue through October, as there are many issues that have to be resolved between the two bills. The AUA will continue to advocate for appropriate reimbursement for drugs administered in the office to ensure that urologists can provide proper care for their cancer patients as the two bills move into the final conference. And, we will fight to stave ensure that negative Medicare payment updates are not implemented next year and that Congress and the Administration take the steps necessary to fix the flawed Medicare payment formula.

Thanks to each and every one of you that responded to the various alerts on both of these important issues. And, stay tuned for more information and requests for grassroots action as we move to the next phase of considerations.


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