Article Date: 9/1/2007

Is It a Great Treatment if Nobody Gets It?

Is It a Great Treatment if Nobody Gets It?

The conflict between patients and payments in the treatment of neovascular AMD.


The advent of ranibizumab has redefined the expectations of patients and retinal physicians for the treatment of neovascular age-related macular degeneration (AMD). We now expect that for nearly all patients presenting with new onset neovascular AMD, we will be able to prevent moderate and severe visual loss. Perhaps more importantly, we now anticipate moderate visual gain in 30% to 40% of patients over at least 2 years of treatment. Compared to the futility of our preceding treatments, such therapeutic outcomes are remarkable. Despite these clinical benefits, many questions remain concerning ranibizumab. The most clinically important questions involve the optimal dosing, duration of treatment, and the comparison of ranibizumab to bevacizumab or other therapies. The clarification of these issues requires the rigor of well-designed, randomized, clinical trials — several of which are already under way. Until these trials are completed, retinal physicians will continue to use ranibizumab within the context of the available data and their clinical judgment. Unfortunately, there are increasingly difficult economic issues concerning ranibizumab, which may impact patient access. A discussion of these issues and how to resolve them requires a review of the current regulatory environment in which Medicare Part B drugs, such as ranibizumab, are administered.

George A. Williams, MD, is chair of the Department of Ophthalmology at Williams Beaumont Hospital and director at Beaumont Eye Institute in Royal Oak, MI. Dr. Williams has no financial interest in the information contained in this article. He can be reached by e-mail at


From 1997 to 2003, Medicare spending for physician-administered (Part B) drugs grew from $2.8 billion to $10.3 billion. Many policymakers believed this growth was, at least in part, driven by the payment mechanism for these drugs, which reimbursed physicians at 85% to 95% of the average wholesale price (AWP) of Part B drugs. Despite the name, AWP had little to do with wholesale cost and actually was more a manufacturer's suggested retail price. The actual transaction price typically reflected large discounts that afforded some physicians, such as oncologists and urologists, substantial profits on the spread between their true cost and the reimbursement from Medicare. However, for drugs with a single provider and no competition such as verteporfin, the AWP actually was the cost to the physician, and reimbursement at less than AWP created problems.

The Medicare Modernization Act of 2003 revamped the payment mechanism for physician-administered drugs. In 2005, Medicare began paying for Part B drugs based on 106% of the average sales price (ASP). The 6% margin was expected to "…cover the costs of an efficient provider but not so high that it contributes to pharmaceutical price increases" (Medicare Payment Advisory Commission, January 2007). It was believed that beneficiary access would not be affected as long as the payment rate was set high enough to meet the costs of efficient providers. ASP is based on data submitted quarterly by drug companies and is the weighted average of manufacturer sales price in the United States, reflecting any price concessions such as rebates or discounts. The ASP payment rate is based on these transaction prices from the 2 quarters prior and payment is adjusted accordingly. Therefore, ASP is determined by the net payments manufacturers receive for their products. When manufacturers sell directly to physicians (as with oncology drugs) the average amount they receive should be the average cost to physicians. However, drugs often pass through a distribution chain and each link in the chain receives payments for shipping, storing, handling, and price negotiation. For example, manufacturers may give prompt pay discounts to wholesalers, or wholesalers may charge physicians for additional fees. The net effect is that ASP may not accurately reflect the actual cost physicians pay. Also, in some states or locales, physicians pay taxes on the cost of Part B drugs, a scenario that creates further challenges even for the most efficient providers. Despite or perhaps because of these issues, the ASP plus 6% system has succeeded in lowering the growth of Part B spending. In fact, spending decreased from $10.9 billion in 2004 to $10.1 billion in 2005 despite increased drug utilization. Based on this success, it is likely the ASP system is here to stay.


Although the Medicare allowable reimbursement for a Part B drug is based on ASP, Medicare pays for only 80% of ASP plus 6%. The patient is responsible for the other 20%, and this is where things become complicated. If physicians do not collect the 20% copayment but still incur the full cost of the drug, they lose money on each treatment. The good news is that approximately 75% of Medicare beneficiaries have supplemental insurance to cover the 20% copay and there are foundations to support financially eligible patients without secondary insurance coverage. The bad news is that payment by these secondary sources is often inconsistent and delayed.

With the above understanding of the mechanism of payment for Part B drugs, we can now discuss how these issues may impact the treatment of neovascular AMD with ranibizumab. Since FDA approval in June 2006 through June 2007, total ranibizumab sales were approximately $800 million, suggesting approximately 410 000 sold, and presumably delivered, doses of ranibizumab. It is therefore reasonable to ask ourselves what issues have arisen with ranibizumab over this first year. Based on my personal clinical experience and my discussions with colleagues around the country, I conclude the drug clearly works as demonstrated in the MARINA and ANCHOR trials. For most patients, the despair and depression that characterized treatment of neovascular AMD have been replaced by optimism and hope. However, there are 2 major problems in the near future that raise the very real possibility that retinal physicians may be unable to continue to provide access to ranibizumab for many patients.

The first problem is the effect of the ASP plus 6% payment system on ranibizumab reimbursement. In the first year, there have been 3 decreases in Medicare allowable payment from $2067 to $2030. This has cut the 6% margin to 4%. These cuts are due to discounts paid to the wholesalers to cover their costs and profits, but which are not reflected in the $1950 cost paid by retinal physicians, who are thus subsidizing the distribution of ranibizumab. The Medicare Payment Advisory Commission has recognized this as unfair to physicians and suggested some possible fixes, which Congress has not yet accepted. Therefore, additional reductions in ASP are likely, further decreasing the actual margin designed to cover the costs of the "efficient" provider. Costs include considerable administrative and personnel expenses for tracking ranibizumab-related expenses and payments.

The second problem directly involves the tracking of ranibizumab-related accounts payable and receivable. This issue is primarily related to the correlation between payment of the 20% copay (accounts receivable) and the need to pay the distributor for the drug (accounts payable). Unfortunately, this correlation is often poor and the recent announcement of a decrease in the terms for accounts payable for ranibizumab from 120 days to 55 days will exacerbate the problem. The payment record for many secondary insurance payers is inconsistent at best. The excuses for nonpayment or delayed payment are many but typically involve the lack of a J-code for ranibizumab, failure to update software, clean claims violations, and even questions of medical necessity. Amazingly, some Medicare Advantage plans (which are paid a premium to enroll Medicare beneficiaries) have failed to pay for patients dating back to July 2006. Retinal physicians who acted in good faith to provide the only FDA-approved therapy proven to improve vision are now faced with substantial losses on drug payments.


So, how is this likely to play out? In my opinion, not well. Retinal physicians and their offices will now need to know and track the payment record of every individual secondary payer. For patients with secondary carriers with poor payment histories, the economic risk of treatment with ranibizumab may become prohibitive. Since the final responsibility for payment lies with the patient, we must be certain that our patients understand the substantial financial implications of ranibizumab treatment. Unfortunately, regardless of how hard we try to explain the insanity of this system to our patients, we will look like money-grubbing collection agents and risk considerable damage to the physician-patient relationship.

In aggregate, the above issues may create a scenario in which both patients and retinal physicians will consider alternative therapies. It is a sad commentary on the state of our healthcare system when treatment decisions are predicated on economic imperatives rather than clinical judgment and evidence-based medicine. RP

Retinal Physician, Issue: September 2007