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HOPPS and Physician Fee Schedule Proposed Rules: What Pharmaceutical and Device Manufacturers Need to Know

CMS is soliciting comments on whether future payments for devices that may have been impacted by the COVID-19 PHE should be adjusted.

The Centers for Medicare & Medicaid Services (CMS) issued its annual proposed rule related to the Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems (HOPPS) (the HOPPS Proposed Rule) on August 12, 2020. Comments on the HOPPS Proposed Rule are due to CMS no later than October 5, 2020.
CMS also released its annual proposed rule setting forth Payment Policies under the Physician Fee Schedule (PFS) and Medicare Part B (the PFS Proposed Rule) on August 17, 2020. Comments on the PFS Proposed Rule are also due to CMS no later than October 5, 2020.

This alert summarizes proposed changes that are most relevant to pharmaceutical and device manufacturers and other participants in the supply chain.

HOPPS Proposed Rule


  • CMS is soliciting comments on whether future payments for devices currently eligible to receive transitional pass-through payments that may have been impacted by the current COVID-19 public health emergency (PHE) should be adjusted and, if so, how any such adjustment should be implemented and for how long the adjustment should apply.
  • In response to concerns regarding reduced utilization of procedures that include pass-through devices during the PHE, CMS is also requesting public comment on whether they should utilize equitable adjustment authority to provide separate payment for some period of time after pass-through status ends for these devices in order to account for the period of time that utilization for the devices was reduced due to the PHE. Any rulemaking on this issue in response to this comment solicitation would be included in the CY 2022 OPPS/ASC proposed rule.

Payment for Drugs, Biologicals, and Radiopharmaceuticals

  • The proposed packaging threshold (in order to establish a separate payment amount for certain drugs and biologicals) for calendar year 2021 would be set at $130 per day.
  • For CY 2021, CMS proposes to continue the payment policy that has been in effect since CY 2013 to pay for separately payable drugs, biologicals and therapeutic radiopharmaceuticals, with the exception of drugs purchased at 340B price, at Average Sales Price (ASP) +6 percent. If a drug, biological or radiopharmaceutical does not have an established ASP reimbursement, will default to Wholesale Acquisition Cost (WAC) +3%. All biosimilar biological products would continue to be eligible for pass-through status not just the first biosimilar biological for a reference product (guaranteeing separate reimbursement for a period of time regardless of whether under the packaging threshold).
  • For drugs acquired at or below the 340B Ceiling Price, CMS proposes for CY 2021 and subsequent years to pay for such drugs (including non-pass-through biosimilars) at ASP minus 28.7 percent. Rural Sole Community Hospitals, freestanding cancer hospitals, and children’s hospitals would be exempted from the 340B payment policy for CY 2021 and subsequent years.

PFS Proposed Rule

Scope of Practice Issues

  • CMS clarifies in the PFS Proposed Rule that pharmacists can provide services incident to the professional services of a physician or other non-physician practitioner just as other clinical staff may do, particularly with respect to the provision of medication management services. CMS restated that pharmacists fall within the regulatory definition of auxiliary personnel under regulations at 42 CFR § 410.26 and as such, may provide services incident to the services, and under the appropriate level of supervision, of a billing physician or non-physician practitioner, if payment for the services is not made under the Medicare Part D benefit. This includes providing the services incident to the services of the billing physician or non-physician practitioner and in accordance with the pharmacist’s state scope of practice and applicable state law.
  • CMS states that they hope the clarification – while not a change in any current policy - may encourage pharmacists to work with physicians and non-physician practitioners in new ways and to free up the time of physicians and non-physician practitioners for other work and increase access to medication management services for individuals with chronic conditions and other conditions.

Home Infusion Therapy

  • The 21st Century Cures Act expanded Medicare coverage for home infusion for certain drugs and biologics, including limited chemotherapy agents. CMS addresses the requirement for home infusion therapy established under the 21st Century Cures Act that, prior to the furnishing of home infusion therapy to an individual, the physician who establishes the plan of care must provide notification of the options available (such as home, physician’s office, hospital outpatient department) for the furnishing of infusion therapy in the PFS Proposed Rule.
    For home infusion therapy services effective beginning CY 2021, CMS clarifies that physicians are to continue with the current practice of discussing options available for furnishing infusion therapy and annotating these discussions in their patients’ medical records prior to establishing a home infusion therapy plan of care. CMS does not propose any mandatory form or requirement of a specific manner or frequency of notification of options. However, if current practice is later found to be insufficient in providing appropriate notification to patients of the available infusion options under Part B, CMS reserved the right to add additional requirements regarding this notification in future rulemaking.
  • CMS clearly states in the PFS Proposed Rule that it is not making permanent the Medicare coverage of home infusion in response to the COVID-19 PHE published on March 13, 2020 in the Interim Final Rule to Amend Policy for COVID-19. Under the Interim Final Rule, physicians can partner with home health agencies/home infusion companies to administer drugs in beneficiaries’ homes and then bill for the administered Medicare Part B drugs and their administration as “incident-to” physicians’ services.

CMS Proposes Some NDA Products May No Longer be Reimbursed as Single Source Under Their Own J Code

  • CMS has proposed to “codify” at least one payment policy regarding drugs that are approved under the Section 505(b)(2) pathway of the Federal Food, Drug and Cosmetic Act (FFDCA) (currently meeting the definition of single-source drug) that appears to be at odds with applicable law found in the Social Security Act. CMS couches their proposal as necessary to address their “concern[] about high payments for section 505(b)(2) drug products if they are assigned to unique separate HCPCS codes despite being described by existing multiple source drug codes” and “concern[] about the effect of high payment amounts on individual beneficiaries’ cost-sharing payments for these products.”
    CMS proposes to assign certain section 505(b)(2) drug products to existing multiple source drug codes if the section 505(b)(2) products are described by existing multiple source drug codes consistent with CMS’ interpretation of the definition of multiple source drug in section 1847A(c)(6)(C) of the Social Security Act. They also propose to revise the definition of multiple source drug in the regulation text at 42 CFR 414.902 by amending the regulation text to state that multiple source drugs may include drug products described under section 505(b)(2) of the FFDCA and adding § 414.904(k) that describes the framework for such determination. CMS couches the proposal as a mere “codification” in regulation of the current practice of the Healthcare Common Procedure Coding System (“HCPCS”) Committee.
  • However, the proposal is in direct conflict with the statutory definition of “single source drug or biological” which requires single-source drugs to be reimbursed solely based on the drug’s ASP +6% rather than the weighted average ASPs of all therapeutically equivalent drugs. CMS operationalizes this statutory requirement by assigning separate reimbursement codes (or “J-codes”) to single-source drugs and biologicals. Under CMS’ proposal, certain drugs approved under Section 505(b)(2) of the FFDCA would no longer receive a separate reimbursement code but rather would be lumped into an existing J-code for drug products that may not be therapeutically equivalent per Food and Drug Administration (FDA) standards but that would have the same Active Pharmaceutical Ingredient. CMS’ proposal suggests that the standard will be applied not only prospectively but that CMS may also re-visit reimbursement and coding for existing Medicare Part B drugs. This is an area not only ripe for comment by the industry but legal challenges.

Members of the industry should take advantage of the public comment periods associated with these proposed rules.


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