United States: CMS Finalizes Several Changes For Skin Substitutes In CY 2015 Outpatient Prospective Payment System Final Rule

On October 31, 2014, the Centers for Medicare & Medicaid Services (CMS) released its annual final rule (Final Rule) setting the payment rates and coverage policies for items and services reimbursed under the Outpatient Prospective Payment System in Calendar Year (CY) 2015.  Within the Final Rule, CMS confirmed several important changes for skin substitutes, including how established products are placed into appropriate reimbursement groups and how new products may be paid when first entering the market.  Manufacturers, providers and other interested stakeholders should take note of these changes and the significant implications they may have for coverage and reimbursement of these products.  The Final Rule was published in the Federal Register on November 10, 2014.

Setting the High-Cost/Low-Cost Threshold

In the CY 2014 Final Rule, CMS finalized a proposal to unconditionally package skin substitutes as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure.  In implementing the packaging policy, CMS created separate high-cost and low-cost groups for skin substitutes so as to maintain resource homogeneity within the Ambulatory Payment Classifications, the groups by which CMS organizes procedures for purposes of setting reimbursement.  To accomplish this, CMS compared the Average Sales Price (ASP) plus 6 percent payment (as of July 2013) for each product to the weighted average payment per unit for all skin substitutes, and assigned each skin substitute to the high-cost or low-cost group based on this analysis.  The threshold for 2014 is $32 per cm2.

In the CY 2015 Proposed Rule published earlier this year, CMS articulated several stakeholder concerns regarding the use of ASP data in assigning products to certain groups, including:

  • Using the ASP may disadvantage those products that are sold in large sizes
  • Using a weighted average ASP to establish the high-cost/low-cost threshold, combined with the existing drug pass-through policy, will lead to unstable high-cost/low-cost skin substitute categories in the future

In response to these concerns, CMS proposed to use the weighted average mean unit cost (MUC) instead of ASP data to establish the threshold for the high-cost and low-cost groups.  MUC data are based on costs from outpatient claims data rather than sales data.  Based on its analysis, CMS proposed to set the threshold for CY 2015 at $27 per cm2.  New skin substitutes without pricing information would be assigned to the low-cost category, and those skin substitutes with pass-through status would be placed in the high-cost category (with an offset applied).

In the CY 2015 Final Rule, CMS finalized its proposal to use the MUC methodology to set the threshold for packaging of skin substitutes, stating that this methodology "will better promote stability."  CMS finalized the threshold for CY 2015 at $25 per cm2, explaining that the $2 decrease was the result of updated final rule claims data.  If there are no claims data to calculate the MUC, CMS will assign skin substitutes to the high-cost or low-cost group based on the ASP plus 6 percent data.  If ASP data are not available, CMS will use Wholesale Acquisition Cost plus 6 percent or 95 percent of the Average Wholesale Price.

Some stakeholders raised concerns with the MUC methodology, arguing that ASP data are more accurate because they represent actual sales data reported by the manufacturer.  CMS disagreed, however, explaining that ASP data blend sales prices to hospital and non-hospital entities.  Reiterating comments made in 2013, some commenters voiced concerns regarding the breadth of products CMS included in the skin substitute packaging policies, including Class III medical devices, Class II medical devices, biologicals approved under Section 351 of the Public Health Service Act and tissue-based products approved under Section 361 of the Public Health Service Act.  In response to these comments, CMS reiterated its position that the Food and Drug Administration's (FDA's) treatment of skin substitutes does not affect how they are categorized under the Medicare packaging policy. 

Pass-through Evaluation Process for Skin Substitutes

Separately, CMS also proposed to transition skin substitutes from the drugs and biologicals pass-through evaluation process to the separate and distinct pass-through procedures in place for medical devices.  Pass-through payments are designed to provide additional reimbursement for certain new drugs, biologicals and devices for a period of two to three years.  Although recognizing that skin substitutes have attributes of both biologicals and devices, CMS took the position that these products are "best characterized as surgical supplies or devices" as a result of their required surgical application and their similarity to other surgical supplies.  In fact, CMS drew a direct comparison between skin substitutes and implantable biologicals that are surgically inserted or implanted, the latter of which CMS began to package in CY 2009 and to evaluate under the medical device pass-through process in CY 2010.

CMS acknowledges that several commenters opposed this transition, but it ultimately finalized its proposal for all applications for pass-through payment status that would begin on or after April 1, 2015.  As a result, any new skin substitute must now demonstrate "a substantial clinical improvement over current wound treatments" in order to receive pass-through payment.  For instance, "If a new skin substitute demonstrated improved wound healing compared to existing wound treatments, it could potentially qualify ... assuming that the skin substitute is not described by an expired pass-through payment device category."  The latter part of this criterion will be driven largely by how narrowly or broadly CMS defines the payment device category for skin substitutes.  Notwithstanding the foregoing concern, CMS explains that only 30 percent of skin substitutes have qualified for, currently have or will have pass-through payments, which it interprets as evidence that these payments may not be necessary for successful commercialization of these products.

In responding to the Proposed Rule, commenters generally questioned CMS's authority to evaluate products approved by the FDA under biologics license applications as medical devices.  In response, CMS stated that it is appropriate to treat skin substitutes as devices because these products can meet the definition of a supply or device or a biological, and the FDA's categorization of a product should not influence which pass-through evaluation process is used. 

In an interesting reference to future skin substitutes that may come onto the market, CMS pointed out that there may be instances in which certain products might have a wound healing indication, but may not necessarily meet the definition of "skin substitutes and similar products that aid wound healing."  Any such product would potentially fall outside the current packaging policy for skin substitutes, and, moreover, might not be subject to the medical device pass-through evaluation process finalized in the Final Rule.  This comment creates some uncertainty as to how rigidly the device pass-through process for skin substitutes and similar products will be applied, and may allow for an opportunity for some products to apply for drug pass-through status in the future.

CMS Finalizes Several Changes for Skin Substitutes in CY 2015 Outpatient Prospective Payment System Final Rule

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions