[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
              EXAMINING REFORMS TO IMPROVE THE 
           MEDICARE PART B DRUG PROGRAM FOR SENIORS

=======================================================================


                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 28, 2013

                               __________

                           Serial No. 113-64


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          JIM MATHESON, Utah
PHIL GINGREY, Georgia                GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            JOHN BARROW, Georgia
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky                  Islands
H. MORGAN GRIFFITH, Virginia         KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida            JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    83
Hon. Mike Rogers, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    83
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, prepared statement........................    84

                               Witnesses

Cliff Binder, Health Care Financing Analyst, Congressional 
  Research Service...............................................     9
    Prepared statement...........................................    12
Barry Brooks, M.D., Partner, Texas Oncology, on Behalf of the 
  U.S. Oncology Network..........................................    21
    Prepared statement...........................................    23
    Answers to submitted questions...............................   107
Nancy Davenport-Ennis, CEO and President, National Patient 
  Advocate Foundation............................................    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................   111
Larry B. Melton, M.D., Ph.D., FACP, Medical Director, Kidney/
  Pancreas Transplantation, Baylor Medical Center................    45
    Prepared statement...........................................    47
James Cosgrove, Director, Government Accountability Office.......    50
    Prepared statement...........................................    52

                           Submitted Material

Materials submitted by Mr. Burgess
    Article entitled, ``Penny Wise, Pound Foolish? Coverage 
      Limits on Imunosuppression after Kidney Transplantation,'' 
      New England Journal of Medicine, 10.156/NEJMp1114394.......    85
    Statement of the National Kidney Foundation..................    89
    Statement of the American Society of Nephrology..............    91
    Letter of March 25, 2013, from the American Society of 
      Transplant Surgeons to Hon. Michael C. Burgess and Hon. Ron 
      Kind.......................................................    93
H.R. 460, submitted by Mrs. Capps................................    95
Statement of the California Healthcare Institute, submitted by 
  Mr. Pitts......................................................   100
Statement of the American Society of Clinical Oncology, submitted 
  by Mr. Pitts...................................................   102
Statement of the American College of Rheumatology, submitted by 
  Mrs. Ellmers...................................................   105


   EXAMINING REFORMS TO IMPROVE THE MEDICARE PART B DRUG PROGRAM FOR 
                                SENIORS

                              ----------                              


                         FRIDAY, JUNE 28, 2013

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Burgess, Whitfield, Lance, 
Cassidy, Griffith, Bilirakis, Ellmers, Engel, Capps, Green, 
Barrow, Caster, and Waxman (ex officio).
    Staff Present: Clay Alspach, Chief Counsel, Health; Gary 
Andres, Staff Director; Sean Bonyun, Communications Director; 
Matt Bravo, Professional Staff Member; Julie Goon, Health 
Policy Advisor; Sydne Harwick, Legislative Clerk; Robert Horne, 
Professional Staff Member, Health; Carly McWilliams, 
Professional Staff Member, Health; Monica Popp, Professional 
Staff Member, Health; Andrew Powaleny, Deputy Press Secretary; 
Heidi Stirrup, Health Policy Coordinator; Brian Cohen, Staff 
Director, Oversight and Investigations, Minority Senior Policy 
Advisor; Alli Corr, Minority Policy Analyst; Elizabeth Letter, 
Minority Assistant Press Secretary; Karen Lightfoot, Minority 
Professional Staff Member; and Stephen Salisbury, Minority 
Special Assistant.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. The time of 10:00 o'clock having arrived, the 
subcommittee will come to order. The chair will recognize 
himself for an opening statement.
    Today's hearing is an opportunity for us to examine 
Medicare's part B drug benefit and to assess how well it is 
working for both seniors and providers. While most prescription 
drugs are covered under Medicare part D, certain outpatient 
prescription drugs and biologics are covered under part B. 
Covered part B drugs are usually those administered in a 
physician's office or hospital outpatient setting, including 
injectable and infused drugs, drugs used in conjunction with 
durable medical equipment, oral drugs for cancer or end stage 
renal disease, and some self-administered drugs in the hospital 
outpatient setting. As a result of the 2003 Medicare 
Modernization Act, MMA, Medicare reimburses providers for the 
cost of part B drugs and their administration at what is known 
as the average sales price, ASP, plus 6 percent, with Medicare 
paying 80 percent of that amount and beneficiaries paying the 
remaining 20 percent. I would like to commend members on both 
sides of the aisle for their work on the part B drug benefit. 
And I will highlight a few pieces of legislation.
    H.R. 800 by Congressmen Whitfield and Green, which seeks to 
exclude prompt pay discounts from manufacturers to wholesalers 
from the calculation of ASP; H.R. 1416 by Congresswoman 
Ellmers, which would terminate application of sequestration to 
certain physician-administered part B drugs; and H.R. 1428 by 
Dr. Burgess and Representative Kind which seeks to provide 
coverage for immunosuppressive drugs for kidney transplant 
recipients.
    And there are other issues as well. For example, 
reimbursement rates have caused a shift of some patient 
populations, such as those with primary immune deficiency 
diseases and other rare diseases, from treatment in the 
physician's office, treatment in the hospital outpatient 
department, arguably the worst setting for someone with a 
compromised immune system. We should also examine the variation 
in reimbursement rates for the same drugs and services across 
various settings to ensure that patients are being treated at 
the most clinically appropriate and cost effective site. While 
some drugs and biologics must be administered in the hospital 
outpatient setting, it is also the most expensive site of care 
for the Medicare program itself and for the beneficiary, who 
pays a 20 percent copayment.
    I would like to welcome our witnesses today. They represent 
perspectives from the Federal Government, providers, and 
patients. And I look forward to their testimony. Thank you.
    I yield the remainder of my time to Dr. Burgess.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chair will recognize himself for an opening statement.
    Today's hearing is an opportunity for us to examine 
Medicare's Part B drug benefit and to assess how well it is 
working for both seniors and providers.
    While most prescription drugs are covered under Medicare 
Part D, certain outpatient prescription drugs and biologics are 
covered under Part B.
    Covered Part B drugs are usually those administered in a 
physician's office or hospital outpatient setting, including 
injectable and infused drugs, drugs used in conjunction with 
durable medical equipment, oral drugs for cancer or End-Stage 
Renal Disease, and some self-administered drugs in the hospital 
outpatient setting.
    As a result of the 2003 Medicare Modernization Act (MMA), 
Medicare reimburses providers for the cost of Part B drugs and 
their administration at what is known as the Average Sales 
Price (ASP), plus 6%, with Medicare paying 80% of that amount 
and beneficiaries paying the remaining 20%.
    I'd like to commend Members on both sides of the aisle for 
their work on the Part B drug benefit, and I'll highlight a few 
pieces of legislation:
     H.R. 800, by Reps. Whitfield and Green, which 
seeks to exclude prompt-pay discounts from manufacturers to 
wholesalers from the calculation of ASP;
     H.R. 1416, by Rep. Ellmers, which would terminate 
application of sequestration to certain physician-administered 
Part B drugs; and
     H.R. 1428, by Dr. Burgess and Rep. Kind, which 
seeks to provide coverage for immunosuppressive drugs for 
kidney transplant recipients.
    There are other issues, as well.
    For example, reimbursement rates have caused the shift of 
some patient populations, such as those with primary immune 
deficiency diseases and other rare diseases, from treatment in 
the physician office to treatment in the hospital outpatient 
department - arguably the worst setting for someone with a 
compromised immune system.
    We should also examine the variation in reimbursement rates 
for the same drugs and services across various settings, to 
ensure that patients are being treated at the most clinically 
appropriate and cost-effective site.
    While some drugs and biologics must be administered in the 
hospital outpatient setting, it is also the most expensive site 
of care for the Medicare program itself, and for the 
beneficiary, who pays a 20% copayment.
    I'd like to welcome our witnesses today. They represent 
perspectives from the federal government, providers, and 
patients, and I look forward to their testimony.
    Thank you, and I yield the remainder of my time to Rep. --
--------------------------------.

    Mr. Burgess. I thank the chairman for the recognition.
    So there is no question the part B drug coverage has 
improved the lives of patients. But Federal regulations can 
really stand in the way of compassionate patient care and 
common sense. After the Medicare Modernization Act, now nearly 
10 years ago, we saw dramatic consolidations in the oncology 
space such that now the purchase and storage of drugs is 
regarded as physician service for the purposes of 
sequestration. Well, this ruling does not serve patients well. 
In fact, it is contrary to the statute itself, I believe. It is 
contrary certainly to any flexibility the agencies are supposed 
to have. And it is contrary to basic math.
    Mr. Chairman, thank you for working with myself and others 
on both sides of the dais here to pursue answers from the 
Centers for Medicare & Medicaid Services on this important 
issue.
    The math is also problematic and doesn't add up in how we 
pay for patient care after kidney transplantation. Medicare 
pays for 50,000 kidney transplants each year at a cost per 
patient of well over $125,000. So do the math on that, and it 
is over $60 billion a year. Kidney transplantation offered end 
stage renal disease patients an alternative to a lifetime of 
costly, time consuming, and sometimes painfully dialysis 
treatment. However, the government's protection of its 
investment arbitrarily ceases after 36 months, when Medicare 
suddenly refuses to pay for the life-sustaining 
immunosuppressant drug coverage needed to keep a transplanted 
kidney alive and functioning. So oddly, it is Federal policy--
not the disease itself--that is the greatest threat to these 
patients. So instead of ensuring the investment, the government 
would rather lose patients or rather patients lose their graft, 
lose their kidney, return to dialysis, and get back in line for 
another transplant, taking another organ out of circulation for 
someone else. Instead of protecting the transplant, we further 
limited supply of donors' organs, and we burden the Federal 
budget while jeopardizing patient lives.
    I challenge every member on this committee to support the 
bipartisan H.R. 1428 to correct this irrational and arbitrary 
policy. Our patients are waiting. I think they have waited long 
enough. It is time for us to put common sense in front of 
arcane policy.
    Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    Now filling in for the ranking member of the subcommittee 
Mr. Pallone, we have Mr. Green from Texas, who is recognized 
for 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Chairman Pitts, for holding this 
important hearing. And thank you to the witnesses for taking 
the time to be with us, particularly Dr. Brooks and Dr. Melton. 
And we have so many Texans on here, you will hear we are from 
the great State of Texas many times, although sometimes that is 
redundant.
    The part B drug program, which helps pay for chemotherapy 
and other services, is an important piece of Medicare. I have 
had a long interest in preserving seniors' access to quality 
care by ensuring Medicare pay at a rate that will retain a 
robust network of providers. This is what we are trying to do 
with the SGR reform. And I think part B rates are part of this 
larger discussion.
    Today we are discussing at least three bills. The first, a 
bipartisan bill offered by my colleague from Texas Dr. Burgess, 
will provide Medicare coverage for immunosuppressive drugs for 
kidney transplant recipients. This bill has earned support from 
both sides of this committee. And it is my hope we can act on 
it and move to the full House for a vote.
    The next bill offered by Mrs. Ellmers has earned support 
from both sides of this committee. Also it is imperative that 
we examine the impact of sequestration on cancer patients. And 
I am pleased this bill has been introduced because it 
highlights the shortcomings of using sequestration as a tool to 
accomplish our much needed goal of balancing the Federal 
budget. I am proud to lead the letter to CMS with my colleague 
from Texas, Congressman Pete Sessions, that was signed by 124 
Members of Congress expressing concerns that cuts resulting 
from sequestration to critical cancer medications are forcing 
oncologists to turn cancer patients away. We asked CMS to do 
something about this problem with their existing authority but 
haven't gotten the answer we wanted. I should point out that I 
do not believe Mrs. Ellmers' bill goes far enough as part of 
the discussion around restoring the reimbursement rates. It 
must also be restoring funding for after-school lunches, 
medical research, education funding, Corps of Engineers, and 
other critical funding.
    Finally, H.R. 800 is also known as the prompt pay bill that 
is being discussed today. I am proud to have introduced this 
bill in past sessions of Congress. I am pleased my colleague 
and friend Chairman Whitfield decided to introduce it most 
recently. We have worked together over the years to move this 
issue forward. The bill simply excludes the prompt pay 
discounts offered by manufacturers to wholesalers for the 
average sales price for drugs and biologics covered under 
Medicare part B. This became an issue when the Medicare 
Modernization Act was enacted. It reduces the amount doctors 
are reimbursed, sometimes below the amount they actually pay 
for administering cancer treatment and the result is fewer 
doctors participating in Medicare. Reducing the number of 
options for cancer patients reduces access, and that is just 
bad policy.
    While some of my colleagues have pointed out that 
sequestration has also done this--and they are right--this is a 
separate issue. The prompt pay discount has negatively affected 
cancer patients for many years before sequestration. Whether we 
adopt legislation, repealing it, replacing it or otherwise 
altering sequestration, without adopting H.R. 800, the 
underlying issue will still exist. H.R. 800 is noncontroversial 
and has been supported by virtually every member of this 
committee. In fact it was adopted by this committee during the 
consideration of the Affordable Care Act by a voice vote, only 
to be unfortunately left out in the bicameral negotiations. The 
prompt pay bill deserves this committee's support. And I ask 
that Chairman Pitts move forward by marking up this legislation 
in the near future. Moving this bill or including it in a 
larger package makes sense.
    And now, Mr. Chairman, I would like to yield my remaining 
time to my colleague, Congressman Engel.
    Mr. Engel. Thank you. Thank you very much. I appreciate it.
    As Wednesday's hearing highlighted, the current Medicare 
benefit structure is very complicated. It is particularly true 
with the drug benefit, where some drugs are covered if infused 
by an infusion pump under the part B benefit while others are 
covered under the part D benefit. Unfortunately, the part D 
benefit does not cover the supplies, equipment, and 
professional services necessary to deliver infusion drugs 
safely in the house. The nursing component for infusion therapy 
can only be performed under part A through a certified home 
health agency if the patient meets the definition of 
``homebound.'' As a result of this fractured benefit, many 
beneficiaries that could safely receive treatment at home are 
relegated to being served in a skilled nursing facility or 
hospital which adds unnecessary costs to the health care system 
and exposes patients to hospital-acquired infections. 
Unfortunately, Medicare stands virtually alone in denying 
coverage for home infusion even though the private sector has 
proven for decades that infusion in the home can be cost 
effective as well as done in a setting that best meets the 
patient's wishes. While Medicaid covers the drugs used in home 
infusion therapy and while that payment is important, we cannot 
continue to look only at the silo of drug payment without also 
looking at the need for full coverage of the associated 
equipment, supplies, and services for infusion therapy provided 
in the home or other alternate site settings. In the past, I 
have included legislation to make sure that the least costly 
clinically appropriate environment for infusion services is 
covered rather than forcing individuals to obtain these 
services in the hospital or nursing homes. And it is my hope 
that the committee and Congress work with me in that effort.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    We are voting on the floor. We have 11 minutes left. We 
will try to finish the opening statements of members at this 
time.
    The chair yields to Mr. Whitfield for 5 minutes.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Well, Chairman Pitts, thanks very much. And 
I really appreciate the witnesses being with us today as we 
discuss these important topics. I certainly want to thank Gene 
Green and others who have been involved in our efforts to 
resolve the so-called prompt pay issue. As many of you know, 
manufacturers give discounts to distributors that help offset 
costs of shipping, handling, and reflects the time value of 
money and risk incurred in the distribution process. But when 
Medicare calculates how much a physician will be reimbursed for 
drugs under the part B program, it includes them in the sales 
price. And doing this artificially reduces the reimbursement to 
the physician, the oncologist, which places even more stress on 
these practices. In cancer, for instance, we know that four out 
of five patients that are treated are treated outside of a 
hospital, within a physician's practice. And over the past few 
years, there has been a trend of closings and consolidation of 
these practices. And any time I meet with an oncologist today--
it makes no difference where they are from--they all cite 
reimbursement as one of the primary reasons for this 
consolidation and closing. But it is ultimately the patient 
that suffers the consequence of this problem, as clinics close 
or consolidate, access to care for the treatment of cancer is 
diminished, and patients are shifted into the hospital which we 
all know is the most expensive type of treatment. So I hope 
that as we work on this physician payment reform that we also 
take a serious look and solve the so-called prompt pay issue.
    So I look forward to working with you, Mr. Chairman, and 
others as we try to resolve this very serious problem. And at 
this time, I would like to yield whatever time she may consume 
to Mrs. Ellmers of North Carolina.
    Mrs. Ellmers. Thank you to my colleague and thank you, Mr. 
Chairman, for holding this subcommittee hearing on these very 
important pieces of legislation. I have sponsored H.R. 1416, 
which is the Cancer Patient Protection Act. This benefit to our 
seniors, our Medicare recipients, is essential. We all know 
sequester went into effect. We needed those funding cuts at the 
Federal level. However, I believe wholeheartedly that as an 
unintended consequence of this, we have now harmed one of our 
most vulnerable populations, Medicare patients who have now 
received the diagnosis of cancer. You know we have wonderful 
cancer treatment centers in our communities. And I would like 
to point out also that it isn't just about cancer patients. It 
is also about patients with rheumatoid arthritis, osteoporosis, 
lupus, any autoimmune disease that medication has to be given 
under the direction of a physician.
    We have to restore this sequester cut because it is the 
drugs that have been cut. And these drugs are very, very 
expensive. The physicians have received their 2 percent cut in 
reimbursement. But we have to restore that drug cut because we 
will not be able to continue to provide that benefit to them 
within their communities.
    I can't imagine a family in crisis finding out about cancer 
to their loved one and then knowing that they are going to have 
to travel 20 miles outside of their community to go to a 
hospital. Many of these individuals are on fixed incomes. They 
are low income. They will not have the ability to be 
transported to those facilities where the cost actually 
increases which, as we all know, defeats the purpose of the 
sequester to begin with.
    So I feel very strongly we need to pass this piece of 
legislation. We have a bipartisan list of cosponsors. I am very 
proud of that. And we will continue in this effort, again, to 
protect those seniors in this way. It is very important.
    And I yield back the remainder of my time.
    Mr. Pitts. The chair thanks the gentlelady.
    We have a little over 6 minutes left. At this time, the 
chair recognizes the ranking member of the full committee, Mr. 
Waxman, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman. I want to thank our 
witnesses for coming here today. And I want to thank you for 
holding this hearing. It is our first time in quite a while 
that we have looked at the Medicare part B drugs. And this is a 
worthwhile focus because we spend, according to the GAO, almost 
$20 billion for these drugs each year, including some of the 
most expensive drugs on the market. We should be looking 
carefully at where the money goes.
    We will be hearing about several pieces of legislation. We 
have already heard about them. And I know for several years 
oncologists and other providers have raised concerns about 
whether payments under the part B program are adequate. Their 
focus has been on legislation that would increase the Medicare 
average sales price and part B reimbursements by excluding 
prompt pay discounts. The Obama administration has a different 
view. Its budget proposes cuts in reimbursement rates. And I 
hope our witnesses can give us some insight on both the 
adequacy of part B drug reimbursement rates and whether there 
are opportunities to save money for taxpayers by modifying 
these rates.
    We have already heard a little bit about Congresswoman 
Ellmers' bill. It would exempt part B drug reimbursement from 
the effects of the sequester. As part of the broad sequestered 
Medicare payments, part B drug reimbursement rates were reduced 
by 2 percent. We are going to hear from other witnesses today 
that will say that this cut will have a disproportionate impact 
on administrative reimbursements. Cancer clinics have reported 
that due to these payment cuts, they will have to turn patients 
away. Well, that would be a terrible outcome. These drugs are 
essential to cancer patients, and the arbitrary payment cuts 
undermine patient health and the entire Medicare program. This 
illustrates once again why an arbitrary and automatic sequester 
is such a bad policy.
    My concern with Mrs. Ellmers' bill is that it only 
addresses one problem. We need a comprehensive and balanced 
sequester fix, not a piecemeal fix that increases payments for 
cancer drugs and ignores cuts to Head Start or Pell Grants or 
physician reimbursements or vaccines for children or vital 
defense programs. Sequestration was supposed to never happen. 
It was supposed to be so ridiculous that we were to avoid it. 
And now it is in place, and we ought to correct it.
    Mr. Chairman, we shouldn't pretend the consequences of the 
part B payment cuts are an isolated example. They highlight the 
broader reality. When you take the hatchet to the Federal 
budget, there are going to be serious consequences. This is not 
an unintended, unforeseeable consequence. I also hope we can 
learn about other ways to cut part B drug spending. As I said 
earlier, part B drugs pay for $20 billion worth of drugs 
annually, including many expensive biological and specialty 
drugs. In some cases, these drugs can cost tens and even 
hundreds of thousands of dollars per patient per year. The 
Medicare program is the primary purchaser of these expensive 
drugs. Drugs save lives. We need these drugs, and we need to 
keep developing new ones. But we should also make sure that 
Medicare is getting a good deal.
    I supported legislation in the past that ends the pay for 
delay abuses and brings generic biologics to market faster. My 
legislation, requiring part D drug manufacturing rebates, would 
save over $140 billion in the next decade, and we should be 
looking to see if there are other ways, like negotiations or 
rebates, that would help make sure taxpayers are getting their 
money's worth on part B drugs.
    Let me give an example: For those people who are on 
Medicare and Medicaid, the dual eligibles, we used to pay for 
their drugs under Medicaid and we got a rebate. When the 
prescription drug part D bill was adopted, they said, let's 
take them out of Medicaid and put them under Medicare. Suddenly 
we are paying a higher rate for the same drugs, often for the 
same people. The drug companies love it. But why should we be 
spending that extra money when we can be using that for 
worthwhile purposes by making sure that the cancer drugs and 
the physicians who deal with those cancer drugs get adequately 
reimbursed. It is very frustrating to see people wanting to 
protect the drug companies' profits, wanting to protect every 
special interest group until they find one that they are 
sympathetic to. And we all are sympathetic to this issue 
because it deals with the most vulnerable people who have 
cancer.
    I look forward to the hearing and am looking for some 
solutions.
    Mr. Pitts. The chairman thanks members. That concludes the 
members' opening statements.
    For information of the members, I am looking at the screen 
here, we have 1 \1/2\ minutes left in the first vote but still 
314 Members haven't voted. So we will have time to get over. We 
have a series of votes. We will reconvene after the last vote, 
which should be around 11:00. So at this point, the 
subcommittee stands in recess.
    [Recess.]
    Mr. Pitts. The recess having expired, we will reconvene.
    On our panel today, we have five witnesses. Mr. Cliff 
Binder, Health Care Financing Analyst, Congressional Research 
Service; Dr. Barry Brooks, Partner at Texas Oncology on behalf 
of the U.S. Oncology Network; Ms. Nancy Davenport-Ennis, 
President and CEO of the National Patient Advocate Foundation; 
Dr. Larry Melton, Medical Director of Kidney/Pancreas 
Transplantation from Baylor Medical Center; James Cosgrove, 
Director of the Government Accountability Office.
    Thank you for coming. Thank you for your patience as we 
were interrupted by votes on the floor.
    Your written testimony will be entered into the record. You 
will each be given 5 minutes to summarize your testimony. And 
so at this time the chair recognizes Mr. Binder for 5 minutes 
for his opening statement.

  STATEMENTS OF CLIFF BINDER, HEALTH CARE FINANCING ANALYST, 
 CONGRESSIONAL RESEARCH SERVICE; BARRY BROOKS, M.D., PARTNER, 
 TEXAS ONCOLOGY, ON BEHALF OF THE U.S. ONCOLOGY NETWORK; LARRY 
B. MELTON, M.D., PH.D., FACP, MEDICAL DIRECTOR, KIDNEY/PANCREAS 
TRANSPLANTATION, BAYLOR MEDICAL CENTER; NANCY DAVENPORT-ENNIS, 
 CEO AND PRESIDENT, NATIONAL PATIENT ADVOCATE FOUNDATION; AND 
   JAMES COSGROVE, DIRECTOR, GOVERNMENT ACCOUNTABILITY OFFICE

                   STATEMENT OF CLIFF BINDER

    Mr. Binder. Chairman Pitts, Congressman Green, and 
distinguished subcommittee members, I appreciate the 
opportunity to be here today. My name is Cliff Binder. I am a 
Health Care Financing Analyst at the Congressional Research 
Service. I was asked to provide an overview----
    Mr. Pitts. Pull the mic a little closer, if you could.
    Mr. Binder. I was asked to provide an overview of Medicare 
part B prescription drug payments. In 2010, Medicare spent 
about $81 billion on most prescription drugs; and about a 
quarter of these expenditures, $19 billion, were for part B 
drugs. There are two broad principles that determine if a drug 
is covered under part B. The drug is furnished incident to 
physician services, and it is usually not self-administered. 
Most part B drugs are administered to patients by injection or 
infusion, but there are exceptions. Cancer drugs account for a 
large portion of part B drug expenditures. Providers--mostly 
physicians--but also hospital outpatient departments, clinics, 
and durable medical clinic suppliers buy part B drugs, then 
bill Medicare when they administer the drugs to patients. 
Physicians and other providers receive two payments from 
Medicare for part B drugs, one payment for administering the 
drug and the second payment for purchasing and supplying the 
drug. The Balanced Budget Act of 1997, BBA, set the payment 
rate for Medicare part B drugs at 95 percent of the average 
wholesale price, AWP. In spite of BBA changes, however, 
Medicare drug payments increased rapidly between 1999 and 2003, 
rising nearly 25 percent a year. In response to the part B drug 
price escalation, Congress modified the payment methodology in 
the Medicare Prescription Drug Modernization Act, MMA. MMA 
changed part B reimbursement in two ways. It increased the 
amount physicians received for part B drug administration and 
it decreased the amount physicians were paid for supplying part 
B drugs. Beginning in 2005, Medicare began paying for the 
majority of part B drugs based on a formula of 106 percent of 
the drug's average sales price, ASP. ASP includes most price 
concessions, such as volume and prompt pay discounts and 
rebates. When manufacturers factor price concessions into ASP 
data, the effect is to lower a drug's ASP. Drug manufacturers 
are required to submit data to CMS on ASP and the companion 
price used mostly for Medicaid rebates average manufacturer 
price, AMP. CMS sets the part B drug prices for each quarter 
based on sales data submitted by drug manufacturers from two 
previous quarters. If drug manufacturers raised prices in the 
two quarters after they submitted their ASP data, providers 
might be unable to purchase drugs below what Medicare pays. 
When prices decline after manufacturers submitted their ASP 
data, such as when generic products are introduced, providers 
often are able to purchase these drugs for prices significantly 
below Medicare's payment rate. Medicare part B drug payments 
have increased at a slower pace since 2004, posting average 
increases of less than 5 percent a year. MMA also required the 
Inspector General to conduct drug price monitoring to determine 
if ASP is more than 5 percent higher than AMP. If Medicare part 
B drug payments exceed ASP by 5 percent or more, the Secretary 
has authority to substitute a different payment methodology 
that would reduce Medicare drug reimbursement. OIG has reported 
that there was at least a 5 percent difference between ASP and 
AMP for some part B drugs. There has been concern that part B 
drug reimbursement may be inadequate for some providers. 
Provider groups contend that discounts manufacturers give drug 
wholesalers have the effect of reducing ASP, making it 
difficult for these providers to cover the cost of purchasing 
some drugs. In addition, some in Congress and other groups have 
questioned whether drug shortages have been complicated by the 
part B drug pricing methodology and whether these, along with 
manufacturers' production problems, speculation, industry 
consolidation, and other factors have contributed to drug 
shortages, particularly for sterile injectable drugs, a part B 
drug category. Moreover, questions have been raised whether the 
two-quarter lag between the time when manufacturers report ASP 
and the time when CMS releases Medicare part B drug prices make 
it difficult for some providers to purchase drugs at 
competitive prices. Most recently, some providers have raised 
concerns that the effect of applying the mandatory Budget 
Control Act of 2011, BCA, reductions to Medicare part B drug 
reimbursement will further reduce payments to providers, 
potentially reducing Medicare beneficiaries' access to 
services.
    In general, sequestration is the permanent cancelation of 
budgetary resources by a uniform percentage, but certain 
programs and activities are exempt from sequestration, and 
special rules may be applied to programs such as Medicare.
    Even though there are special Medicare rules that would 
limit a reduction in program benefit spending to 4 percent, BCA 
limits the Medicare program benefits reduction to 2 percent; 
thus beginning April 1, 2013, Medicare payments for covered 
services, including physician services and part B drug 
payments, are subject to 2 percent reductions. According to 
CMS, the 2 percent reduction applicable to Medicare only 
applies to Medicare's provider payments. Beneficiary cost 
sharing amounts and amounts paid by other health insurance are 
not reduced.
    This concludes my statement. I would be happy to answer 
questions.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Binder follows:]

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    Mr. Pitts. I now recognize Dr. Brooks for 5 minutes for an 
opening statement.

                STATEMENT OF BARRY BROOKS, M.D.

    Dr. Brooks. Chairman Pitts, Congressman Green, members of 
the committee, thank you for the opportunity to testify on 
behalf of the U.S. Oncology Network and community oncology in 
general on the Medicare part B drug program.
    I am Barry Brooks. For 31 years, I have been taking care of 
cancer patients. Being an oncologist is intellectually and 
emotionally challenging, but I think it is the best job in the 
world, and I love it. As a community oncologist, I feel I am 
part of a dying breed. Our way of life and practice is being 
squeezed out of existence. We are struggling to make ends meet 
and continue to care for our beloved cancer patients in the 
private practice setting. But the way red ink is spreading over 
our ledgers, there won't be many of us left in a few years. 
Instead, we will all be employed in arrangements we don't like 
in institutions where doing the right thing requires executive 
approval. But I am not here to complain about my job prospects. 
I am here to talk about demographics and math.
    Medicare covers over 60 percent of cancer patients and the 
Medicare population is growing every day. And worse, the 
expensive care these patients need are shifting from my low 
cost realm into higher cost arenas. You all know the problem, 
cancer care costs more in the hospital outpatient department. 
And hospital-based care is growing by leaps and bounds. The 
root of the problem has two parts. One, Medicare doesn't 
adequately cover the cost of community oncology practice care; 
and, two, Medicare payments and rules are tilted in favor of 
the hospital. Since 2005, community oncologists have been 
slowly bleeding to death. After MMA, Medicare pays us for 
cancer patients an average sales price plus a 6 percent service 
payment for the costs and risks associated with purchasing, 
storing, mixing, administering, disposing these drugs. The 6 
percent is the only Medicare payment for the significant work 
to prepare chemotherapy for administration. And even if the 
drugs are ready for infusion on arrival to our practice, paying 
acquisition costs would not reflect the cost of inventory and 
the systems needed to manage it.
    Even prior to sequestration, Medicare drug reimbursement 
did not cover our costs. Due to technical flaws in the ASP 
formula plus six in theory does not equal plus six in reality. 
Wholesaler prompt pay discounts reduce ASP values that are not 
extended to our clinics. ASP values always take 6 to 8 months 
to be reflected in our price. We cannot collect the entire 
copay allowable and Medicare does not reimburse us for 
uncollectible beneficiary coinsurance.
    These issues are not new. As far back as 2007, MedPAC 
reported the reimbursement for some drugs was below market 
price. This means that we have to give away our services for 
free or, worse, we have to pay for seniors' cancer drugs out of 
our own pockets. Since April 1, we are living under ASP plus 
4.3 percent. While controlling deficit spending is important, 
the Administration's decision to apply the sequester both to 
our 6 percent payment services part and to the entire drug 
costs has effectively cut our services payment by 28 percent. 
It forces us to subsidize Medicare patients or send them 
elsewhere for care.
    Oncologists around the country are making these difficult 
decisions, and I respect each practice's choice. But one thing 
is certain, operating at a loss on more than half your patients 
is not a sustainable model. While tweaks to the Medicare 
reimbursement rates would go a long way towards shoring up 
community cancer care, variations in reimbursement for the same 
services in different outpatient services tilt the competitive 
landscape in favor of the hospital and encourage inefficiency. 
One-third of U.S. hospitals purchase chemotherapy drugs through 
the 340(b) program and enjoy margins of over 30 percent on 
their Medicare cancer drugs. It is no wonder drug spending in 
hospitals is increasing so rapidly and patients and oncologists 
alike are migrating to these settings. Pushing patients with 
expensive to treat conditions into more expensive settings to 
get the same care and the same result makes as much sense as 
adding a trap door to a canoe. The patients get lost in this 
setting. The hospitals get lower drug costs. They get higher 
reimbursements. The patients have to travel further. They have 
to wait longer. They have to pay more out of pocket. This is 
just not right, and it is not necessary.
    I know I am preaching to the choir here. Members of this 
committee have introduced and supported legislation like that 
from Congressmen Green and Whitfield to help with prompt pay; 
Congresswoman Ellmers' H.R. 1416; 30 members of the committee 
have signed a letter questioning how the Administration handles 
sequester cuts on Medicare part B for oncology; and others have 
just signed a recent leadership letter to the so-called Lance-
Pascrell. We also want to thank Congressman Rogers and others 
working with him to implement site-neutral payment, as 
recommended recently by MedPAC. The world's best cancer care 
delivery system is struggling to take care of our patients. We 
and they need your help.
    Thank you for letting me talk today.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Dr. Brooks follows:]
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    Mr. Pitts. I now recognize Ms. Davenport-Ennis for 5 
minutes for an opening statement.

               STATEMENT OF NANCY DAVENPORT-ENNIS

    Ms. Davenport-Ennis. Thank you, Chairman Pitts, and thank 
you, Congressman Green, and thank you also, members of the 
committee. I have submitted previously written testimony to the 
committee. And so what I would like to do now is to simply have 
a conversation with you and share with you what we see 
happening to the Medicare patients in the United States that we 
have been taking care of for the past 17 years.
    To date, we have closed over 750,000 cases dealing with 
Medicare and Medicaid patients in the United States. And what 
we see is that since the passage of MMA, when we stripped away 
the reimbursement between the drug margin and the services with 
the commitment that there would be additional codes put in 
place in 2004 to bring the reimbursement for physicians up to 
where they had been so they can maintain their practices, we 
have seen a waterfall of changes and reductions to 
reimbursement to physicians. And why do our patients care? Why 
is that our battle? It is our battle because the number one 
asset we have in winning our individual war on cancer or any 
other chronic disease is a physician who is there to treat us. 
What I can say to you is that we look at the destabilization of 
the workforce today as a result of things like a prompt pay 
discount which loses a 2 percent or the imposition of 
sequestration which is a 2 percent cost cut across both the 
drug and the service. We look at the continued threat of ASP 
reduction. So there is no stability when a practice is trying 
to plan for the future. And the result to the patients that we 
serve is really simple. They are now facing a reduction in 
actual practices available in their community to see them. And 
when we lose a practice in the community, not only does the 
senior or the disabled lose it, so does every man, woman, and 
child living in that community. We are seeing patients being 
shifted to hospitals for site of care. It may mean longer 
distances for them to travel. It may mean longer wait times for 
them. We have had it documented that it means an additional 
cost of $6,000 to the system for each patient that is shifted 
to the hospital outpatient setting for care. And because the 
patient is responsible for a 10 percent copayment, it means 
$600 to $650 for the patient.
    We have seen the formularies change within Medicare part B 
and we have seen many of our newer drugs that our patients need 
are now being put out on a specialty tier. And at that level 
when we did an analysis of 996 of our Medicare patients, what 
we found is that they were paying on average out of pocket for 
specialty tier drugs through Medicare $684 per prescription 
that represented 50.2 percent of the cost of the drug.
    Let me describe to you the Medicare patients that we 
handle. Traditionally, their household incomes are under 
$23,000. They are very proud people, many of whom have worked 
their entire lives to save and to live independently throughout 
the final years of their lives. The seniors that we treat come 
to their diagnosis and seek support through copay even though 
for them to do that it is such a transgression against their 
independent living. We had $447.6 million donated to nine copay 
programs in the United States of America over the past year, 
and it was not sufficient to meet the demands. As your 
committee has looked at remedies for the prompt pay issue and 
you are looking at remedies to solve many of the Medicare part 
B reimbursement issues, I want to thank you on behalf of the 
Medicare patients that we represent. And I want to also commit 
to you that our foundations are here to work by your side to 
see that these bills that have been introduced through your 
committee are passed.
    I am pleased to answer in great detail what is happening 
with our patients going through shifts in site of care. But as 
my closing remark, I would like you to note that since April 1, 
we have started tracking the number of patients being shifted 
from a community practice to a hospital outpatient setting. In 
90 days, we have had 10 States that have reported shifting 
patients from the community practice setting into the hospital 
setting. So I would urge the committee to do what you do best, 
and that is to look at how do we minimize financial devastation 
for Medicare part B beneficiaries?
    I thank you for the opportunity to answer questions.
    Mr. Pitts. The chair thanks the gentlelady.
    [The prepared statement of Ms. Davenport-Ennis follows:]
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    Mr. Pitts. And now recognizes Dr. Melton for 5 minutes for 
an opening statement.

        STATEMENT OF LARRY B. MELTON, M.D., PH.D., FACP

    Dr. Melton. Thank you, Chairman Pitts, Congressman Green, 
and Congressman Burgess, for this opportunity to briefly 
address the Energy and Commerce Committee as it examines 
reforms to improve the Medicare part B drug program. I applaud 
this committee for its leadership and ongoing commitment to 
strengthening our Nation's health care system. I am Dr. Larry 
Melton, Medical Director of Kidney and Pancreas Transplantation 
at Baylor University Medical Center. In my many years of 
practice and work at Dallas, Texas, I have become familiar with 
a variety of Medicare program challenges and policy 
imperfections that could be improved to save both lives and 
Federal resources. Within my field of organ transplantation, 
the most obvious and flawed Medicare policy is the program's 
arbitrary 36-month coverage restriction for patients' 
immunosuppressive drugs post-transplantation. As you may know, 
organ transplant recipients must take immunosuppressive 
medications for the lifetime of the transplanted organ. If 
immunosuppressive medications are discontinued, rejection and 
loss of the transplanted organ are almost certain to occur.
    Since 1972, Medicare has covered people with end stage 
renal disease without regard to age or SSDI status. There is no 
Medicare coverage limit for a dialysis patient. By contrast, 
kidney transplant recipients lose Medicare coverage at an 
arbitrary 36 months after transplant. In 1972, it was estimated 
that the ESRD program would cost $250 million. Today the 
program costs in excess of $250 billion. These figures are 
staggering, and there is no question that a functioning 
transplant with immunosuppressive drug coverage is vastly less 
expensive than the cost of dialysis. When renal transplants 
fail, patients again require dialysis, and may even be 
candidates for retransplantation, both of which would be 
covered by Medicare. Extending immunosuppressive coverage 
beyond the 36-month limit would decrease the risk of organ 
failure due to patients not taking their immunosuppression.
    The New England Journal of Medicine highlighted a survey 
conducted by the American Society of Transplantation that found 
70 percent of U.S. kidney transplantation programs reported 
that their patients had an extremely serious or very serious 
problem paying for immunosuppressive medications and 68 percent 
reported deaths and graft losses attributable to cost-related 
nonadherence. The study further found that since patients with 
kidney failure need either long-term dialysis or a functioning 
renal transplant to survive, failing to pay for ongoing 
immunosuppression ensures that Medicare's initial investment in 
kidney transplantation is squandered, that patients die 
prematurely, and the U.S. Taxpayers pay for more expensive but 
inferior therapy after some transplants fail unnecessarily. At 
present, Medicare spends approximately $70,000 to $80,000 per 
year on a dialysis patient, which Medicare covers indefinitely. 
However, Medicare on average spends less than a quarter of that 
amount for a kidney transplant recipient after a year of the 
transplant. For more than a decade now, members of this 
committee have introduced and supported legislation, the 
Comprehensive Immunosuppressive Drug Coverage for Kidney 
Transplant Patients Act, to address Medicare's deficiencies in 
this area. Most recently, Congressman Michael Burgess and Ron 
Kind have led the bipartisan and bicameral effort to secure 
passage of this reform.
    I strongly encourage everyone on this committee to 
cosponsor, support, and pass H.R. 1428 during the 113th 
Congress. The legislation saves lives, preserves life-saving 
donor kidneys, and reduces the cost burden to the Federal 
Government, a win-win for patients and the U.S. Treasury. The 
bill would allow individuals who are eligible for 
immunosuppressive drugs whose insurance benefits under part B 
have ended due to their 36 months running out to remain in the 
program only for the purpose of receiving immunosuppressive 
drugs. If they have group health insurance, they would not 
qualify for coverage beyond the 36 months. The legislation is 
intended to be a coverage backstop only for those who otherwise 
have no coverage. The legislation ensures that Medicare would 
remain the payer of last resort and would not usurp coverage 
offered by private insurers. It is not sound public policy or 
cost effective for Medicare to cover the initial costs of a 
kidney transplant and then stop immunosuppressive drug coverage 
after 36 months. It is unfair to living donors and to those 
families who have donated organs of the deceased loved one for 
the Federal Government not to do everything possible to 
maintain the transplanted kidney and the gift of life that they 
have provided.
    On behalf of kidney patients, families, physicians, 
surgeons and all involved in the transplant process, I ask that 
this committee make the 113th session of Congress the last 
Congress in which many patients will lose Medicare coverage 
after only 36 months. The Burgess-Kind legislation simply 
corrects a costly policy inequity. It covers transplant anti-
rejection medicines only.
    I thank you for the opportunity to focus a few minutes on 
what we in the organ transplant community view as the necessary 
reform to the Medicare drug program. Thank you.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Mr. Cosgrove for 5 minutes for his opening 
statements.
    [The prepared statement of Dr. Melton follows:]
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                  STATEMENT OF JAMES COSGROVE

    Mr. Cosgrove. Chairman Pitts, Congressman Green, and 
members----
    Mr. Pitts. Did you push the button? Is the light on?
    Mr. Cosgrove. It is on.
    I am pleased to be here today as you discussed Medicare's 
payment for part B drugs and potential reforms. As you have 
heard, part B drugs are often an important part of treatment 
for cancer, autoimmune disorders, chronic kidney disease, and 
other serious conditions. In 2010, Medicare spent nearly $20 
billion for part B drugs in all settings, including physician 
offices and hospital outpatient departments. That was about 9 
percent of all part B expenditures that year. Last October, we 
issued a report that examined spending and utilization data for 
high expenditure part B drugs. Specifically, we analyzed the 55 
drugs with the highest Medicare expenditures in 2010. We also 
examined spending and utilization trends from 2008 to 2010 for 
the same drugs. And then finally we estimated national spending 
for the total U.S. insured population for these drugs and 
calculated the share attributed to Medicare. So in my statement 
today, I would like to highlight several findings from our 
October report.
    First, we found that Medicare expenditures were highly 
concentrated among relatively few drugs. In 2010, the 55 
highest expenditure drugs represented about 85 percent of all 
Medicare spending on part B drugs, or about $16.9 billion. Ten 
of those drugs accounted for approximately 45 percent of all 
part B drug spending. Most of the 55 drugs are under patent and 
can be purchased from only one manufacturer. At the time of our 
report, none of the 10 highest expenditure drugs and only nine 
of the 55 drugs we analyzed had a generic drug alternative. Of 
the 55 drugs in our analysis, 23 were used to treat cancer and 
its side effects. Others were used to treat various conditions, 
such as immune system disorders, cardiovascular disease, 
chronic kidney disease, and asthma or, as you have just heard, 
to prevent organ transplant rejection.
    Second, the number of Medicare beneficiaries who used each 
drug as well as the average cost per beneficiary varied widely. 
Some of the drugs were associated with high Medicare 
expenditures either because many beneficiaries used the drug or 
because the drug had a very high price. For example, Medicare 
spent about $193 million on influenza vaccines in 2010. The 
cost per beneficiary was only about $13. But more than 15 
million beneficiaries were vaccinated. Medicare spent about 
$143 million on Factor VIII recombinant used to treat 
hemophilia A. In contrast to the influenza vaccines, Factor 
VIII recombinant was only used by 660 beneficiaries but it cost 
nearly $217,000 per beneficiary. Among the 10 drugs with the 
highest cost per beneficiary, four cost more than $50,000 and 
five more than $20,000.
    Third, spending, utilization, and prices generally 
increased in the 2 years. Medicare expenditures increased for 
42 of the 55 drugs. The drugs with the greatest increases in 
expenditures also had the greatest increases in utilization. In 
particular, the four drugs with the largest in increases were 
new drugs that had been recently approved by the FDA. 
Expenditures for one of these drugs Lexiscan, a stress agent 
for beneficiaries who cannot take a stress test, grew by 
approximately 10,000 percent over the 2-year period because the 
utilization grew by 11,000 percent. Prices for most drugs 
increased between 2008 and 2010, although the price changes 
were not as dramatic as utilization changes. The price of 
Ventavis, a drug used to treat pulmonary arterial hypertension, 
increased by 52 percent, which was the largest price increase 
we observed. Because utilization of Ventavis also increased, 
expenditures for the drug rose by nearly 94 percent over the 
period. The price of the vaccine used to prevent pneumonia 
increased by 36 percent. Some drugs did decrease in price. The 
largest decline was 38 percent, and yet still remained among 
the highest expenditure part B drugs.
    Finally, our findings show that Medicare is an important 
part of the national market for many of these high expenditure 
drugs. Specifically, we found that Medicare spending accounted 
for the majority of estimated total national spending on 35 of 
the 55 highest expenditure part B drugs. Almost $17 billion 
Medicare spent for the highest expenditure part B drugs, $11 
billion, or 65 percent, was spent on drugs for which Medicare 
beneficiaries accounted for the majority of total U.S. 
spending. For 17 of the drugs, Medicare spending represented 
two-thirds or more of total spending. And for six part B drugs, 
Medicare's share of national spending exceeded 85 percent.
    This concludes my prepared remarks. I am certainly happy to 
respond to any questions.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Cosgrove follows:]
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    Mr. Pitts. That concludes the opening statements. We will 
now go to questioning. I will begin the questioning and 
recognize myself for 5 minutes for that purpose.
    Dr. Brooks, explain a little bit more what impact would 
removing the prompt pay discount from the Medicare formula have 
on patients and our overall health care system, if you would.
    Dr. Brooks. Well, sir, obviously the weight of the 
sequester would not be removed just by removing prompt way but 
it would help us a great deal. Prompt pay diminishes ASP for 
our offices by approximately 1 to 2 percent. It is a floating 
number. It is not consistent. But it decreases our 
reimbursement by about 1 to 2 percent. As I like to tell my 
colleagues, my income in 2012 was 102 percent from commercial 
insurance. And what that means is that we lost 2 percent on our 
Medicare patients in our office. So if we were to get rid of 
the prompt pay discount, that would restore us to baseline if 
the weight of sequester were also treated more uniformly in our 
space.
    Mr. Pitts. Now the President has proposed a 3 percent cut 
to the SP formula. What would happen to your practice if that 
were to go into effect?
    Dr. Brooks. Well, sir, I don't know whether to answer you 
seriously or with some humor. But we did not include in any of 
my remarks anything about disruption or drama or threats or 
anything of that sort. But I can assure you that if ASP plus 3 
percent were to ever be enacted, that disruption and drama 
would occur. We would not be able to take care of our Medicare 
patients at that rate. We would immediately have to discontinue 
that because the losses would be enormous. The hospital 
outpatient departments that are currently taking our patients 
do not have the capacity to overnight take those patients in. 
And there would be an enormous access problem.
    Mr. Pitts. All right. Mr. Cosgrove, page 2 of your 
testimony states that ``Medicare expenditures for part B drugs 
in 2010 were concentrated among relatively few drugs.''
    Is it fair to conclude then that the majority of drug 
expenditures under part B should not be considered high 
expenditure drugs?
    Mr. Cosgrove. Under part B, Medicare covers hundreds of 
drugs. So yes. I think the problem is just complex and it may 
not be a one-size-fits-all because you have some drugs that 
either because a lot of people use them or few people use them 
and they are very expensive or some combination are very 
expensive. And that is probably where the attention should be 
focused.
    Mr. Pitts. Ms. Davenport-Ennis, in reviewing the GAO 
testimony, I noticed that a number of the high expenditure 
drugs on the list under part B are drugs used to treat cancer 
and various autoimmune diseases. And I am reminded of the new 
lupus drug that was recently released, representing the first 
new treatment for patients with this disease in over 50 years. 
How important is it for patients with diseases like cancer to 
have access to new and ground-breaking treatments in your 
opinion?
    Ms. Davenport-Ennis. Thank you for the question.
    So from a patient's point of view, often the traditional 
drugs that are in the marketplace are not going to continue to 
work for cancer patients that have been in therapies for years 
and years. If there is a cancer patient that has a very 
advanced cancer, often you have to move them to the newer drugs 
in the marketplace that will stop that disease where it is. And 
whether it is cancer or whether it is another chronic 
debilitating or life-threatening condition, the new drugs hold 
the promise of independent living. They hold the promise that 
people can stay at work. They hold the promise that they can 
maintain their role as a parent, as a spouse, and as a member 
of society. So each time we create a regulatory hurdle that 
puts that new drug further away from the patient, the more 
likely we are to see earlier debilitation due to disease and 
less independent living and, therefore, additional cost to the 
system and other places.
    Mr. Pitts. Dr. Brooks, please describe for us some of the 
differences patients experience between being treated in a 
community-based oncology practice and receiving cancer 
treatment in a hospital outpatient department.
    Dr. Brooks. Well, I briefly described the differences in 
convenience and financial commitments in my testimony. But just 
to review, patients often have to travel a bit further to get 
to a hospital outpatient department. They often have to wait a 
bit longer. And CMS' costs in a hospital outpatient department 
are higher by at least 50 percent. Those are the superficial 
aspects of the problem. But, in fact, they are greater. I told 
my colleagues about a husband and wife pair that I used to take 
care of years ago and I ran into recently. And they told me 
about their follow-up care in another State. The husband goes 
to a private practice for his follow-up and he goes in for his 
appointment at 10:00 o'clock in the morning. He gets to the 
laboratory, sees his physician, and he is home by 11:00 
o'clock. His wife chooses to go to a nearby tertiary hospital 
outpatient department. And it is a very well run and well 
respected institution. She has an appointment for a laboratory 
at 10:00 o'clock and an appointment for an x-ray at 11:00 
o'clock, an appointment for a physician at 1:00 o'clock and 
outpatient counseling at 3:00 o'clock. And she is home by 4:00 
o'clock. And she gets basically the same services as her 
husband does in a local community oncology office.
    Those are just--that is just an anecdote for you to 
understand that while they give good care in hospital 
outpatient departments, and we never say otherwise, it is just 
different.
    Mr. Pitts. Did you want to add anything, Ms. Davenport-
Ennis?
    Ms. Davenport-Ennis. I would. I would like to add the human 
element to that. So when we have a Medicare patient that 
contacts us and says, I am now being moved from the community 
setting with my doctor, and I am going to need to travel 28 
miles to get to the hospital, I am going to be in an infusion 
chair, and I may be there for an hour, I may be there for 6 or 
8 hours, the journey when you leave that chair to return to 
home is indescribable. So if I may be personal with this body, 
I would like to.
    My husband is a stage 4 cancer survivor. We had to move him 
from a local oncologist, and we had him in a hospital setting. 
The simple 28-mile journey resulted in such acute emesis that 
we had to be rescued by an ambulance roadside. We are not a 
rare exception. The side effects for cancer treatment are 
serious, and they are not simply managed, and so when we move 
you to a community hospital setting, you may indeed be able to 
handle that transfer no problem whatsoever, but we have many 
cases that document otherwise.
    We think that the hospital cost is something that is 
important to us. We have worked for 17 years to try to work 
with patients to handle the cost of care in a financially sound 
manner, and to exert the full limits of their insurance 
benefits, and to encourage them to get Medigap policies so 
that, indeed, they are protected as they move forward, and even 
though they play by the rules, the system is failing them.
    Mr. Pitts. The chair thanks the gentlelady.
    I now recognize the gentleman from Texas Mr. Green, 5 
minutes for questions.
    Mr. Green. Thank you, Mr. Chairman.
    Ms. Davenport-Ennis, can you expand on Dr. Brooks' 
testimony and share the patient's point of view how the prompt 
pay discount would affect access to Medicare beneficiaries?
    Ms. Davenport-Ennis. So as we have talked to many of the 
patients who have had their sites of care shifted, and as we 
have worked with the doctors that are handling them, what we 
know is that many of the practices started operating on reduced 
margins in 2004 because we never got the codes back up to where 
they needed to be, and ASP has been unstable at best. So if we 
could, indeed, restore a 2 percent prompt pay discount to many 
of these practices, it would be the difference between adding 
back another oncology nurse case manager or not having one. It 
would be the difference between being able to have after-hours 
support for the patient and sending them to the hospital phone 
line for after-hours support.
    So there are many services that we think could be restored, 
and you could maintain practices. And for the record, I would 
like to report that to this point we have had 1,200 practices 
in the United States that have either closed completely or 
compressed their services into hospital settings in which we 
lost capacity because the number of chairs available for chemo 
at the hospital were not commensurate with what they had before 
the compression and equal to the practice as well.
    Mr. Green. OK. Dr. Brooks, can you walk through the 
importance of that 6 percent additional service fee and what 
has it accounted for? And I know cancer-treating drugs can be 
very expensive. For example, if it was a $100,000 treatment, 
that would be $6,000 that would be part of the service fee. Can 
you walk us through that?
    Dr. Brooks. I would be delighted to, Congressman.
    Obviously, the sequester has definitely removed any 
incentive we have for prescribing expensive drugs, because a 
small percent on a large number cuts both ways. But the prompt 
pay discount takes that 6 percent of ASP and attenuates it by 1 
to 2 percent, in our opinion. We have to have working capital 
for inventory, administration, storage, inventory management, 
systems for transport, pharmacy costs, clean room, equipment, 
waste disposal. We have to deal with the problem of inadequate 
copay collection from Medicare beneficiaries--that runs about 5 
percent in most of our practices--drug denials. And then there 
is the problem of price increases which are not reflected in 
ASP for about 6 months.
    This results in pretty much taking away our 6 percent 
service margin that we previously had, but with sequester we 
have attenuated that ASP by an additional 1.7 percent, or 28 
percent of our services payment that we have gotten before. So 
now we are, as we say, breathing through a straw because we are 
under water.
    Mr. Green. OK. With prompt pay, now sequestration, what is 
the effective percentage? It is lower than the 6 percent?
    Dr. Brooks. I am not sure I understand your question, but, 
yes, sir, if we were to restore both of those, we would be back 
to very close to break even on our cancer--Medicare cancer part 
B drugs, and we would be able to go back to life as we had it 
in 2012. Not great, it was a lot of migration into the 
hospitals, but it would be much better than we currently have.
    Mr. Green. And I know Ms. Davenport-Ennis talked about the 
impact on patients. In your practice have you seen the same 
situation that she talked about?
    Dr. Brooks. Yes, sir. I thought that she was very eloquent 
describing the patient problems of the frail cancer patient 
having to travel great distances to a site of care. We see that 
a lot in our State of Texas, where people have to travel. When 
community practices close, my Texas oncology, if we were to 
lose our ability to take care of Medicare patients in rural, 
small-town, and in medium-sized Texas, cancer patients, 
Medicare beneficiaries would be traveling, 100, 200 miles each 
day for site of care that would take----
    Mr. Green. I only have about 20 seconds.
    Mr. Binder, obviously Congressman Whitfield and I have 
introduced legislation on the prompt pay discount and the 
calculation. Isn't it true that this was fixed within the 
Medicaid program, the prompt pay issue?
    Mr. Binder. I am sorry, could you repeat that?
    Mr. Green. Was the prompt pay issue fixed within the 
Medicaid program?
    Mr. Binder. The prompt pay----
    Mr. Green. Is your mike on?
    Mr. Binder. It doesn't--to my knowledge, the prompt pay 
discount that is proposed in the legislation wouldn't impact 
the Medicaid program directly. Medicaid prices, the Medicaid 
rebate is determined off of average manufacturer price, and 
that price excludes all discounts already.
    Mr. Green. OK. OK. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognize the vice chairman of the subcommittee Dr. 
Burgess, 5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman. Before I get to 
questions, I would like to submit for the record a few things. 
The article from the New England Journal of Medicine from, I 
think, February of last year that Dr. Melton referenced on the 
impact of coverage limits on immunosuppression. I also have 
statements from the National Kidney Foundation, the American 
Society of Nephrology, and the American Society of Transplant 
Surgeons, and I would like to make those all part of our 
proceedings today.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Burgess. Dr. Melton, frequently here on this committee 
we hear people talk about, you know, we only want sound 
science; we want to make our decisions based on sound science. 
So tell me, is there a good scientific rationale for the 36-
month interval for covering immunosuppression after a renal 
transplant and then stopping that activity?
    Dr. Melton. There is no rationale that that is based on at 
all that I am aware of. The patients that we transplant are 
required to take immunosuppressant medications for the life of 
the transplant. And it is true that many times they require 
more medications early on in their transplant course, and those 
can be reduced later on, but the need to take those medications 
continues to exist forever.
    Mr. Burgess. So there is not some point at which a 
patient's immune system just kind of accepts life as it is with 
this new graft that is sitting in the body, and the immune 
system just kind of turns off its recognition of this as a 
foreign object? That doesn't happen, does it?
    Dr. Melton. No, sir, that doesn't happen.
    Mr. Burgess. So since it doesn't happen, then what happens 
to the graft when you run out of the immunosuppressive 
activity?
    Dr. Melton. The body begins reacting against the graft, the 
immune system begins to reject that graft, and over a period of 
time the patient will lose the kidney transplant and will 
return to dialysis therapy.
    Mr. Burgess. So you as a physician would see what, that the 
ability--the filtration rate of that grafted kidney would begin 
to diminish, so tests that you do or blood work that you do 
would begin to reflect a lower functionality of that 
transplanted kidney?
    Dr. Melton. Yes, sir, that is correct.
    Mr. Burgess. So what is the patient going to experience 
during that time?
    Dr. Melton. The patient begins to develop symptoms of 
kidney failure: tiredness, loss of appetite, inability to 
concentrate. They will begin to have some pain over and around 
the kidney transplant itself, indicating that there is an 
inflammatory rejection process going on there, and many times 
that results in us having to remove that kidney transplant 
because of the discomfort and pain that the patient is 
developing.
    Mr. Burgess. So it is not a silent activity as far as the 
patient is concerned; they are aware that there is a problem?
    Dr. Melton. Yes, sir, they are.
    Mr. Burgess. Well, let me ask you this: OK, 36 months go 
by, we stop immunosuppressive drugs because we think that is 
good Federal policy. The patient begins to reject their kidney. 
You do the right thing, which is bring that patient back in to 
the dialysis clinic or refer them back to the dialysis clinic. 
Does that take care of the problem?
    Dr. Melton. Well, that keeps them alive. It doesn't keep 
them healthy as they were, and it certainly doesn't correct the 
problem of losing the drug coverage after 36 months.
    Mr. Burgess. So what about the quality of life for that 
individual, does it get affected at that point?
    Dr. Melton. Oh, absolutely. Quality of life on dialysis is 
nothing compared to transplantation. Transplantation 
essentially makes someone a normal individual, if you will; 
they are able to work, they are able to travel, they are able 
to participate in sports activities, they can have families. 
Many patients who are on dialysis are, frankly, beat up by the 
procedure and are unable to hold a job, and they suffer a lot 
of complications from kidney failure and dialysis therapy that 
shortens their life span.
    Mr. Burgess. Well, as I seem to recall, this is back in the 
1970s, so it is probably much more frequent now that a patient 
could even successfully carry a pregnancy who has gone through 
a transplant.
    Dr. Melton. Oh, absolutely. We have--at our institution we 
have about 40 patients now, 40 women, who have successfully had 
pregnancies with their transplants, most recent--well, not most 
recently, but recently a young woman with a combined kidney and 
pancreas transplant that delivered twins successfully.
    Mr. Burgess. That is a remarkable story.
    So what about the--immunosuppressive drugs have been around 
for a while, cyclosporine, I guess. Is that still the main one?
    Dr. Melton. Cyclosporine has been around since the mid-
1980s. There are several others that have come into play since 
that time.
    Mr. Burgess. So do we have generic--the availability of 
generics for those?
    Dr. Melton. We do have generics for some of the drugs, not 
for all of them.
    Mr. Burgess. Does the ability of generics reduce the 
overall price tag for providing immunosuppressant drugs?
    Dr. Melton. Some of the generic drugs are less expensive, 
particularly if they are covered through some insurance plans. 
I had our social workers actually run a pro forma on that for 
me about a year ago, and surprisingly--cyclosporine was one of 
the drugs that you mentioned, and surprisingly the generic 
forms of cyclosporine came in only about a third less than the 
brand-name drug. So there was not a substantial--well, a third 
is a substantial reduction, but it was still a pricey drug for 
the patients.
    Mr. Burgess. I guess the point would be the last time--you 
know, we have got to do stuff that the Congressional Budget 
Office tells us we can afford to do, so the last time the 
Congressional Budget Office scored this particular piece of 
legislation, they gave it a dollar score. Would it be fair to 
say that rescoring this with this information about the use of 
generic medications might result in a lower score?
    Dr. Melton. I don't know how they go about their scoring 
process.
    Mr. Burgess. I don't, either.
    Dr. Melton. It is a mystery to me. The only comment I can 
make about that is it is--certainly relooking at these drug 
costs would be of benefit, I think, to our patients.
    Mr. Burgess. It would also be a benefit if we could look 
longer than a 10-year window, because if you add the cost of 
dialysis in perpetuity to a patient who lost their graft after 
3 or 4 years, clearly it is going to come down on the right 
side of the cost curve.
    Thank you, Mr. Chairman. I am going to yield back my time. 
If we have time for a second round, I will be willing to 
participate.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognize the gentlelady from Florida Ms. Castor, 5 
minutes for questions.
    Ms. Castor. Well, Mr. Chairman, I appreciate you holding 
today's hearing and all of the very insightful testimony from 
our witnesses. Thank you very much for being here.
    I want to talk about one fixable issue, the two-quarter 
price lag on the part B price calculations.
    Mr. Binder, one issue you discuss in your testimony is that 
two-quarter lag in part B price calculations for provider 
reimbursement. Can you elaborate on the issue? How does this 
come into play?
    Mr. Binder. Well, manufacturers report their data, their 
ASP prices, to CMS, and then CMS has a period of time to 
process the information and apply it to the prices they are 
going to pay for those drugs. And it is done on a billing-code 
basis, so there is--for some billing codes there is a number of 
drugs included, and for some there is just one drug when it is 
a sole-source drug. But that process takes some time, and there 
is analysis involved, and so it is 6 months before the prices--
--
    Ms. Castor. Six months?
    Mr. Binder [continuing]. Are applied.
    Ms. Castor. What are some of the impacts of that 6-month 
lag?
    Mr. Binder. Well, it varies. You know, if the drug price 
goes up, and, you know, certain buyers, say, for instance, 
buyers who don't buy in very large volume, are more likely to 
be affected by this than large-volume buyers or purchasers, 
they could, you know, have to pay more for the drug than they 
can get from Medicare in payment. If the price goes down, 
purchasers, providers are more likely to have it--to buy it at 
a lower price than they are getting.
    Ms. Castor. Dr. Brooks, you discussed this in your 
testimony. Give us the real--what is happening in the real 
world with a 6-month lag?
    Dr. Brooks. Well, the 6-month lag is a problem. There are a 
lot of the pharmaceutical and biologic firms that have a 
business model whereby they raise prices about once a year, and 
they put us under water for 6 months. And then before we quit 
prescribing their drugs, they allow 6 months where we can more 
or less hold when ASP comes back to respectability, and then 
they have another price increase again the next year.
    This is what we see, this up-and-down price sequences where 
we have 6 months under water, then 6 months to try to catch up, 
and then 6 months down again. It is a relentless process, and a 
more rapid reconciliation of those price increases that we have 
to pay with what we are actually reimbursed would be most 
helpful to our ability to deliver cancer care to our Medicare 
patients.
    Ms. Castor. That is consistent with what I am hearing from 
doctors back in Florida. And I know it seems like an arcane 
detail, but I think it is having big impacts. And sometimes in 
Congress we hear about problems that are difficult to solve, 
and sometimes we hear about problems that are easier to solve, 
and it seems like one that, Mr. Chairman, would fall into the 
easier category. In this day and age, when you can communicate 
with anybody anywhere in the world in seconds, and we can pull 
up any piece of data on our iPads that we have here or our 
iPhones, it certainly seems to me like we should be able to 
determine accurate Medicare drug prices without a 6-month lag 
in time.
    The two-quarter lag is written into Medicare law, so this 
is a problem for Congress to solve. And, Mr. Chairman, I hope 
we can work together to find a solution on this.
    I would also like to talk about the impact of the 
sequester. It has been in place for several months now, but it 
is no longer front-page news, but that doesn't mean that it is 
not causing real harm. One area where it has hit hard is in 
reimbursements for Medicare providers, including the part B 
drug providers.
    The sequester required a 2 percent cut in reimbursements. 
Earlier this year The Washington Post had quite an article on 
it identifying one cancer clinic that said that due to the 
sequester, they would have to stop treating as many as one-
third of their 16,000 patients. And this is consistent with the 
testimony here this morning.
    Dr. Brooks, can you tell us what--put us in the real world 
here. What is this 2 percent cut having--what impact is it 
having on patients that you see?
    Dr. Brooks. Well, Congresswoman, thank you for the 
question. I only alluded to it briefly, but it is not a 2 
percent cut for Medicare part B drugs in oncology. CMS has 
interpreted the rule perversely, in our view. They have cut not 
only our 6 percent services payment, but also the entire 100 
percent drug acquisition costs that we do for CMS. So they cut 
us on all of Medicare's expenditure so that it results in a 28 
percent reduction in our services payment, and this has put us 
under water and has cost those of us----
    Ms. Castor. It is so irrational. I mean, it really 
highlights the irrationality of the sequester, just across-the-
board cuts that are not based on the real needs of the American 
people. And it is not just Medicare part B, it is cuts to NIH, 
and medical research funding, Head Start, Meals on Wheels. And 
I think the solution--I know that legislation has been filed 
particularly on this point, but the real solution are both 
sides of the aisle coming together to replace the sequester.
    Now, yesterday the--my side of the aisle, the Democrats, we 
appointed budget conferees. We are ready to go negotiate, and I 
would ask my friends on the other side of the aisle to please 
do not be afraid to come together and negotiate. We are seeing 
a real-world impact of the sequester.
    Thank you, Mr. Chairman.
    Mr. Pitts. The gentlelady's time has expired.
    The chair recognizes the gentleman from Louisiana Dr. 
Cassidy, 5 minutes for questions.
    Mr. Cassidy. Dr. Brooks, Ms. Davenport-Ennis, I am struck, 
it seems like we have a trifecta of bad things driven by 
government policy. One, 340B program or something else is, 
among other things, driving community oncologists to go into a 
hospital outpatient network, that that hospital outpatient 
network charges Medicare more, that the patient pays more, and 
that they are less convenient.
    For folks who don't know what emesis is, Ms. Davenport, 
vomiting. Your husband was so sick, he was vomiting on the way 
back that he dehydrated in a half-hour drive and had to get an 
ambulance. This is like a quadrifecta of bad things. Did I hear 
that right, or am I misstating what the two of you said?
    Ms. Davenport-Ennis. So from my point of view, you have 
heard it exactly right. And I would like to comment, if I may, 
on 340B.
    Mr. Cassidy. OK. You may want to elaborate what the program 
is for those who may not be familiar.
    Ms. Davenport-Ennis. So when we look at 340B, the intention 
of the program was well intended. We were phasing out Hill-
Burton hospitals that were supplying support to the at-risk 
populations. We introduced 340B concept so that hospitals 
serving at-risk populations could buy drugs at a reduced price, 
could bill them at a standard price; the margin could therefore 
be used for that hospital to make certain they could continue 
to serve the at-risk populations.
    Initially the intent was to have 600 to 900 hospitals in 
the country as part of 340B. Today we have over 6,000 hospitals 
in the 340B program, and the margins are not necessarily 
consistently offering support to the at-risk population. The 
margins are being used to recruit community oncologists to come 
into that hospital setting.
    Mr. Cassidy. Now, is that allegedly, or do you have 
evidence of that?
    Ms. Davenport-Ennis. No, we have evidence of that, in 
talking with a number of the practices. We work with 
oncologists in 50 States in the United States who work with us 
in case management services and in our copay relief services, 
and so it is not alleged, it is documented, and we--I would 
like to ask----
    Mr. Cassidy. So just to be sure, I am sorry to interrupt, 
but the program that supposedly is the subsidized care for the 
uninsured and for the Medicaid and Medicare patient to bring a 
set of services that otherwise they would not be able to have, 
you are saying that there is evidence that it is not being used 
for that, but rather to subsidize the purchase of community 
practices, bringing them into the hospital outpatient 
department, and in the meantime increasing costs to Medicare, 
to the patient, and decreasing convenience. Is that what you 
are saying?
    Ms. Davenport-Ennis. Yes. What I am saying is that indeed 
the 340B hospital structure now allows it to offer very 
attractive packages to oncologists for them to leave their 
practices and associate or to bring their entire practices to 
the hospital setting, yes, sir.
    Mr. Cassidy. Now, I will say that I work and I still see 
patients in the Louisiana public hospital system, and that 
there are some hospitals I will declare that are still doing 
the correct mission with the 340B program.
    Ms. Davenport-Ennis. You are exactly right.
    Mr. Cassidy. Yes. A lot of my patients would not have drugs 
otherwise.
    Mr. Cosgrove, I have been struck anecdotally there is 
evidence that the drug shortages, for whatever the etiology of 
the drug shortage is, is leading to the need to substitute more 
expensive drugs for much less expensive generic drugs; that the 
shortage of sterile injectables in the oncologic space, for 
example, is requiring the use of more expensive drugs. Now, 
that is anecdotes. I read it in the paper. Did you find 
evidence for that influencing utilization and cost?
    Mr. Cosgrove. We did not. We did not look at that 
specific----
    Mr. Cassidy. Did you look at that? Microphone, please. Did 
you specifically look at that, or you just--you looked at it 
and didn't find it?
    Mr. Cosgrove. We did not look at that. GAO has a report it 
issued in November of 2011, I believe, looking at shortages and 
their causes. There is follow-up work going on right now. It is 
a mandated study to try to get behind what is exactly causing 
those shortages and what the trends are.
    Mr. Cassidy. OK. Dr. Brooks, anecdotally are you seeing 
evidence for that or--because, again, I read about it in the 
paper, so that is why I am----
    Dr. Brooks. Well, sir, it is not anecdotal. We in US 
Oncology are--and with the help of our corporate partner, 
McKesson, we monitor the space extremely tightly, and I am 
actually involved in that monitoring. And your comment about 
steroids is spot on. We sent out an alert recently that 
methylprednisolone is in short supply. It costs pennies, but it 
is in very short supply because of the pressure of 
manufacturers.
    ASP plus 6, I believe--and I don't know that the office of 
MMA--but I believe it was designed to curtail expenditures 
around expensive products. They never understood that they were 
going to create a race to the bottom in generic market so that 
our generic oncology drugs get lower and lower and lower 
prices, and then eventually it becomes not worthwhile to make 
these drugs. It costs only 2 or $3. They are expensive, they 
are hard to store and all this other stuff. It just--the 
economic incentive vanishes.
    Mr. Cassidy. We are out of time, but if I may say, so Mr. 
Waxman at the outset saying that we are saving money by price 
controls, it may be that we are saving money in the short run, 
but long term penny wise, pound foolish, because we are having 
to substitute far more expensive drugs.
    I yield back. Thank you for your indulgence.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognize the gentlelady from California Mrs. Capps, 5 
minutes for questions.
    Mrs. Capps. Thank you, Mr. Chairman. I am very pleased we 
can come together for another bipartisan hearing to address 
some commonsense improvements to Medicare, including two 
important provisions that I have cosponsored.
    Medicare beneficiaries are a medically vulnerable 
population, and we have a responsibility to ensure that they 
have access to high-quality, community-based care and are not 
facing unreasonable financial burden. Unfortunately this isn't 
always the case, but I am pleased to see we have a lot of good 
bills from this committee to help address some of these 
shortcomings.
    I have heard a lot from my constituents about challenges 
with continuity of care, access to providers, and the 
prohibitive costs of treatments for cancer and other chronic 
conditions. Cuts as a result of sequestration are taking a real 
toll on providers and have serious implications for access. For 
one oncologist in my district who sees a patient base that is 
over 90 percent Medicare beneficiaries, this has meant letting 
staff go, the sequestration, making serious pay cuts, and 
taking out a home equity loan just to keep the doors open, 
because if she doesn't do this, patients will have to travel 
more than 30 miles to the next closest provider.
    While I do have serious concerns about piecemeal approach 
of easing the impact of only one part of sequestration, that 
doesn't mean that this issue isn't an incredibly important one 
and does deserve our attention. I hope we can find a solution 
that minimizes the harm to patients and providers, especially 
in the context of an overall sequestration fix. I know it is 
not going to be easy, but I believe we can do this if the House 
majority will let us.
    I also wanted to highlight that there are other 
improvements to Medicare part B that do not involve drug 
benefit, but are also critical to address gaps in care that 
many patients face. Navigating complicated treatment options 
for yourself or a loved one, especially with a cancer 
diagnosis, this can be a full-time job and more, and without a 
plan it can be really overwhelming. And that is why this week 
my colleague from the Ways and Means Committee Mr. Boustany and 
I introduced H.R. 2477, the Planning Actively for Cancer 
Treatment Act, or the PACT Act. This bill would improve the 
health of Medicare beneficiaries with a cancer diagnosis while 
reducing inefficiencies in the Medicare system.
    The Medicare program spends over $55 billion each year to 
treat patients diagnosed with cancer, and too many of those 
patients do not receive a written care plan that explains the 
diagnosis, the prognosis, the treatment, and the expected 
symptoms. This leads to poor coordination among providers, 
reduced adherence rates, and increased stress or pain for the 
patient and their family.
    However, a strong body of research shows that care planning 
coordinates care between numerous providers, and it also 
encourages shared decisionmaking between doctors and patients 
about how to best move forward based on both medical evidence 
and patient wishes. It addresses both the cancer treatment, but 
also the side effects from treatment, while addressing the 
patient's needs, and this can be done in a holistic way. 
Research has confirmed that this kind of coordinated care 
really does improve patient outcomes, increases patient 
satisfaction, reduces unnecessary utilization of healthcare 
resources.
    Ms. Davenport-Ennis, as someone who is very familiar with 
the challenges patients face--I know all of you are, but there 
is not much time--would you share how this bill could help 
patients as they navigate cancer care, something I have been 
advocating for for a very long time?
    Ms. Davenport-Ennis. You have, and on behalf of the cancer 
patients in the country, thank you for the work that you 
continue to do.
    What this would do is provide a road map to survival, and 
it would show them what the stops are going to be along the 
way, and it would identify to them what to do when you have 
reversals. It would also allow them to manage their resources 
and to plan accordingly. It would also allow us to have an 
opportunity for end-of-life discussions when we need to have 
end-of-life discussions as part of planning for the full 
continuum.
    It is, indeed, the beacon for the future, and it is 
something we have lobbied for in this city for more than 10 
years, and we are very hopeful that you are going to make it 
happen this time.
    Mrs. Capps. Well, I am going to need a lot of help, as you 
know, and maybe--Mr. Chairman, this is a request. I have 
another whole topic to bring up on restraining excessive cost 
sharing, the Patients' Access to Treatments Act, another bill 
that I have introduced with Mr. McKinley. I will just submit it 
for the record, and perhaps some of you may wish to comment on 
it.
    [The information appears at the conclusion of the hearing.]
    Mrs. Capps. But I kind of wanted to get just a nod from the 
rest of you about this kind of coordinated care plan that we 
are advocating to see if it fits your needs, yes or no, 
quickly. Thumbs up? Is that the verdict?
    I mean, it is kind of one of those no-brainers, isn't it, 
that we should just set ourselves around to doing, and I 
appreciate very much this opportunity to discuss it.
    I yield back.
    Mr. Pitts. Without objection that will be entered into the 
record, and I would also like to ask unanimous consent that the 
following documents be submitted for the record: a letter from 
the California Health Institute, a letter from the American 
Society of Clinical Oncology. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mrs. Capps. Mr. Chairman, I was just informed by staff that 
I should ask, because we had a lot of nods, and I don't think 
the recorder can----
    Mr. Pitts. All right. The witnesses will please respond 
verbally to----
    Mrs. Capps. Just really quickly yes or no.
    Dr. Brooks. It would be a great asset, and as long as it 
wasn't sort of an unfunded mandate, we would cherish it.
    Mrs. Capps. The question is whether there is agreement 
about the need for a coordinated care plan, a plan, a written 
plan.
    I guess one strong affirmative. We will note that.
    Dr. Melton. In support of my oncology colleagues, 
absolutely.
    Ms. Davenport-Ennis. And in support of the patients that we 
serve in the United States, absolutely.
    Mrs. Capps. Thank you.
    Ms. Davenport-Ennis. Yes.
    Mrs. Capps. Thank you.
    Mr. Pitts. All right. That concludes the first round. We 
will have one follow-up. We will go on each side. Dr. Burgess 
for follow-up.
    Mr. Burgess. Thank you, Mr. Chairman.
    You know, I know people watching these hearings sometimes 
get confused. We have got a representative from the 
Congressional Research Service here. We appreciate him being 
here. We also talk about the Congressional Budget Office, which 
does the scoring of legislation that is introduced in Congress. 
There is another budgetary body down at the White House called 
Office of Management and Budget. Certainly Center for Medicare 
and Medicaid Services makes its own determinations to some 
degree.
    But one of the main things, one of the main foci of today, 
has been the inclusion in the category of physician services 
the acquisition and storage of very expensive drugs. And I 
think, Mr. Binder--I don't want to put you on the spot, but I 
think even CRS would agree that you have a family practitioner 
who diagnoses pneumonia, writes a scrip, tears it off, hands it 
to the patient, says go down to the pharmacy and buy these 
penicillin tablets and take them, and you will get better. If 
you were--it would be wrong to say we are going to include that 
cost in the physician's service and then subtract 2 percent 
from that total bill and get that money back to the government. 
It just wouldn't make good sense.
    So the acquisition--and this was part of my opening 
statement, that the math function doesn't compute here. This is 
my beef with the Centers for Medicaid and Medicare Services. We 
sent them a letter signed by a lot of members of this 
committee; we got a nonresponsive response. Sorry, not good 
enough. We sent a follow-up letter to them that you really have 
to delineate to us how in the world that acquisition and 
storage requires a medical degree and a State license in order 
to do that, because otherwise it just opens the door for all 
other sorts of mischief. So I hope that we are able--Dr. 
Brooks, I hope that we are going to be able to get some 
sensibility surrounding that.
    More difficult aspect to undo the sequester. I mean, the 
sequester, after all, was bipartisan legislation, much more 
bipartisan than the Affordable Care Act; was signed by the 
President. Same President who signed the Affordable Care Act 
signed the sequester. So we are often told on this committee 
when we complain about the Affordable Care Act, hey, it is the 
law of the land, get over it. Well, the same statement could be 
made about the sequester: It is the law of the land.
    But we do need to be certain that it is administered 
properly, and in this case, I think Dr. Brooks is exactly on 
target, it is not being administered properly. And you may even 
want to address--you get some--I mean, your practice margin is 
pretty narrow, and there is lots of things that put pressure on 
your business model, but everyone on this dais would say it is 
a good business model. We want you to be focusing on what you 
do best, which is taking care of the cancer patient. A patient 
gets cancer, they want to go to a clinic where that is all they 
take care of. They don't want to go to a clinic where they are 
also delivering babies and treating kids with runny noses. They 
want a cancer specialist, and I don't blame them, and that is 
what you provide.
    But you are also, if I recall correctly, under State law 
and under our Texas law, with the franchise tax. This is 
something you also have to deal with with the acquisition and 
storage costs that also erodes your ability to take care of 
patients.
    But the big thing you brought up, and what I really want to 
perhaps ask you to comment on, you said 102 percent of your 
business is required to pay for all of your business, because 
the government doesn't carry its fair share. Did I understand 
you correctly when you made that statement?
    Dr. Brooks. Yes, sir. Those were numbers for 2012. That is 
our calculation. Our professional medical oncology payment for 
my salary is 102 percent from commercial payers, meaning that 
the Medicare and Medicaid are minus 2 percent. So we actually 
paid for the privilege of taking care of those patients, and 
that sounds like horrible or something, but we were oK with 
that. I mean, I hate to say it. Our mission is to take care of 
patients, and we are oK with a small loss to continue doing 
what we believe we should do.
    Now under sequester our incomes are falling like a stone, 
and I don't--I can't give you a number for how bad it is, but 
there is a multiplier effect going on here, and it is much 
worse than we--our accountants projected for us, the actual 
dollars coming in. And we are anticipating that the--everybody 
says, oh, there is no drama, nobody is losing access. We 
anticipate that there will be a two-stage approach here. The 
smaller practices that are not taking adjustments will begin to 
have to turn out their lights for the last time in August or 
September, in our calculations, and our complicated larger 
practices are working quietly behind the scenes to arrange for 
transfer of these patients to other venues because we will not 
be able to continue to subsidize our Medicare beneficiaries.
    Mr. Burgess. But I would just project that the entire--we 
also heard some discussion about consolidation of practices. 
Certainly cardiologists saw that with the consolidation of 
their practices moving to the hospital. The Affordable Care Act 
is going to put some pressure on practices of all sorts to 
consolidate. I mean, in fact, Zeke Emanuel, one of the 
principal architects of the Affordable Care Act over at the 
White House, said that he wanted doctors to work for a hospital 
or a health plan or the government; that was a better way, in 
fact, to practice; that you and I are dinosaurs in private 
practice.
    I do--we do need to keep a focus on this, because your 
comment that part of your practice pays for the other part, it 
is the government part that is not carrying its weight. As that 
level is expanded, and it will be, make no mistake about it, 
January 1st of this next year, by a year from now we will be 
seeing that in a big way, we won't be crying about just the 
sequester, we will be crying about what a significant negative 
impact that has had on your practice.
    I want you to know we are prepared--we are trying to 
prepare for that, we are trying to make sure we are on top of 
that, but it is, indeed, a difficult question. But both sides 
need to be involved in this discussion.
    I will yield back, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognizes the gentlelady Mrs. Capps, 5 minutes for 
follow-up.
    Mrs. Capps. Mr. Cosgrove, your testimony provides us a 
broad overview of key part B drug spending facts. If I could 
briefly go over some of these facts with you?
    First, about how much does Medicare part B pay for drugs 
each year?
    Mr. Cosgrove. In 2010, it was almost $20 billion, $19.5 
billion.
    Mrs. Capps. Your testimony indicates that many of these 
part B drugs can be particularly expensive, costing tens of 
thousands of dollars or more. Why is this? I know patients want 
to know.
    Mr. Cosgrove. Well, the price--I mean, Medicare is--working 
through physicians is accepting market prices, which are set by 
manufacturers.
    Mrs. Capps. OK. Am I correct, Mr. Cosgrove, that for many 
of these drugs, Medicare part B is the largest single--single 
largest purchaser?
    Mr. Cosgrove. Yes, that is absolutely true. For 35 of the 
55 drugs that we looked at, Medicare was the majority 
purchaser, and there were a handful of drugs for which Medicare 
paid more than 90 percent of the share of the total market.
    Mrs. Capps. And just to be clear here, we need to do all we 
can to keep the drug pipeline flowing. These new drugs are 
expensive, but they do save lives. And a thriving drug industry 
is important for Medicare and for patients, that goes without 
saying, but we also need to make sure that we are spending 
taxpayer dollars wisely, and we are spending so much on these 
part B drugs that I wonder if we are able to get the best deals 
possible.
    Do you have any thoughts here, Mr. Cosgrove? Does Medicare 
part B program have all the necessary tools that it needs to 
help reduce drug costs for taxpayers and beneficiaries?
    Mr. Cosgrove. Well, I think this is a lot of money when you 
are talking about $20 billion.
    Mrs. Capps. Yes.
    Mr. Cosgrove. And you are also talking about drugs that can 
be incredibly valuable on a wide variety of things, but that 
can be true for lots of parts of Medicare as well. And so I 
think that it is the responsibility of this committee and the 
rest of Congress to make sure that we are always getting the 
best deal, to make sure that providers are paid appropriately, 
and that beneficiaries have access to quality care, but that 
Medicare is not overpaying, and that would include making sure 
that we pay the right price and we set the right incentives for 
providers to do the right thing.
    Mrs. Capps. Mr. Binder, do you have any thoughts on this?
    Mr. Binder. Well, I agree with what Mr. Cosgrove said. The 
drug-pricing methodologies are complicated, and in this case 
you are talking about overlaying a methodology on the market 
mechanism as well, the manufacturers price their drugs. So you 
are overlaying this methodology, this payment methodology, and 
that becomes complicated, and you add sequester on that, it 
becomes even more complicated.
    But there have been a number of proposals, including in the 
President's budget and other places, for other fixes or 
adjustments to either the ASP plus 6 or other approaches that 
could potentially help alleviate some of these issues.
    Mrs. Capps. Thank you.
    I will just bring up again the second bill, H.R. 460, the 
Patients' Access to Treatments Act, that I have introduced with 
Mr. McKinley, because it does address restraining the excessive 
cost sharing for specialty drugs, bringing medically necessary 
treatment within reach for average Americans.
    While this bill only addresses the private insurance, the 
problem isn't unique to the commercial market. Under part B 
patients who face a serious diagnosis or are living with a 
chronic health condition are subject to significant financial 
burdens. Unlike the protection that many of us have with 
private plans, seniors who can't afford supplemental coverage 
and have traditional Medicare part B plans have no out-of-
pocket max. That means that they continue to pay 20 percent out 
of pocket for every part B service, as you know. And for 
patients undergoing cancer treatments or requiring ongoing 
doctor-administered therapies, this cost can be prohibitive, 
especially when you realize that half of Medicare beneficiaries 
have incomes below $22,000 a year.
    I mean, this is a set-up for failure. Health expenses 
constitute almost 15 percent of household budgets for 
individuals who are on Medicare, nearly three times the 
spending of non-Medicare households. I sound like I am on a 
soapbox, but maybe I will ask just in conclusion, 15 seconds, 
Ms. Davenport-Ennis to comment.
    Ms. Davenport-Ennis. Certainly the Medicare beneficiary is 
not in a position to pay what is required in a 20 percent 
copayment into perpetuity in part B Medicare.
    Mrs. Capps. Thank you.
    Yield back.
    Mr. Pitts. The chair thanks the gentlelady.
    We are going to go to one more round on each side, one more 
follow-up on each side. So the chair recognizes Mrs. Ellmers 
from North Carolina, 5 minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman, and I apologize for 
coming in so late to this so important subcommittee hearing.
    I do have a couple of questions, and I would like to ask 
Ms. Davenport-Ennis and Dr. Barry Brooks this question. Earlier 
I made an opening statement regarding the Medicare part D and 
the effect that sequester has on those cancer drugs or 
chemotherapy agents. Given my discussion with the community 
oncologists and the numerous media reports that are going on 
now over the past few months, you know, we are now entering 
into about the third month of this affecting chemotherapy 
drugs. Basically patients are being forced out of their local 
community clinics to the more expensive hospital setting. What 
impact do you believe my bill would have in stopping this 
harmful trend?
    Ms. Davenport-Ennis. I believe that it will at least stop 
some of the hemorrhaging of what is happening now. I think 
ultimately the committee is going to need to look at a 
comprehensive approach to what can be done to stabilize 
reimbursement to the practices, but your bill is certainly 
going to take a significant step forward in resolving this.
    Mrs. Ellmers. Thank you.
    Dr. Brooks?
    Dr. Brooks. I agree that your bill would slow our 
hemorrhage and allow us to return to some semblance of 
stability. One-third of the market of community oncology has 
migrated to the hospital in the last 7 years, and that has been 
accelerated in the last 3 months under the weight of the 
sequester burden, and were we to relieve that, hopefully access 
could be maintained, and community oncology could continue to 
be practiced the way it has for the last two decades.
    Mrs. Ellmers. Thank you.
    I would also like to pose another question to the entire 
panel. Basically, as you know, the whole point of sequester is 
to reduce the spending at the Federal level; however, treating 
people in the hospital is actually more expensive than 
providing the same service in a physician's office or clinic 
setting. In fact, studies show that providing chemotherapy 
costs Medicare and the taxpayers $6,500 more per patient per 
year in the hospital setting and $650 out of the patient's own 
pocket.
    Basically also, and I will just add this, just last night I 
saw attacks from doctor--a doctor from Tulsa, Oklahoma, that 
read, quote, We have sent 50 percent of our chemo to hospitals 
in the past week, even patients with good insurance, because 
drugs are unaffordable for us at this point.
    Given that the application of sequester by CMS is actually 
costing taxpayers money instead of saving it, shouldn't 
Congress be doing everything in our power to reverse this and 
make a change where we see a need? And I will just ask a 
basically yes or no answer from the entire panel.
    Mr. Binder. I am sorry, could you repeat that?
    Mrs. Ellmers. Basically--I caught you off guard. Basically 
my point is as a result of more patients going to the hospitals 
and being treated in the hospital setting, it actually costs 
Medicare and the hard-working taxpayers of America $6,500 more 
per patient per year, but then also, and this is the truly, you 
know, shameful part, another $650 out of pocket for that 
patient. In your opinion, shouldn't we be doing everything we 
can to fix that?
    Mr. Binder. Yes.
    Mrs. Ellmers. OK. Perfect.
    Dr. Brooks?
    Dr. Brooks. Absolutely.
    Ms. Davenport-Ennis. Completely.
    Dr. Melton. I would agree.
    Mr. Cosgrove. Medicare needs to save money.
    Mrs. Ellmers. Thank you. I appreciate that from all of you.
    And, Mr. Chairman, I would like to submit for the record a 
statement from the American College of Rheumatology. It is 
actually a publication examining reforms to improve the 
Medicare part D drug program for seniors.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mrs. Ellmers. Thank you, Mr. Chairman, and I yield back the 
remainder of my time.
    Mr. Pitts. The chair thanks the gentlelady.
    That concludes the questioning from the Members. The 
Members may have additional questions that we will submit to 
you in writing. We ask the witnesses to please respond promptly 
to the questions that we send you. I remind Members that they 
have 10 business days to submit questions for the record, and 
Members should submit those questions by the close of business 
on Tuesday, July 16th.
    Very informative hearing. Thank you very much for your 
patience as we had to delay due to floor votes. Without 
objection, the subcommittee is adjourned.
    [Whereupon, at 12:50 p.m., the subcommittee was adjourned.
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Today our work continues in the ongoing effort to enhance 
the quality of health care for our nation's seniors. We will 
examine the Medicare Part B drug program and reform proposals 
aimed at improving the important program.
    We owe it to our seniors to evaluate the effectiveness of 
Medicare and suggest improvements to the program. Earlier this 
week, this subcommittee examined Medicare's traditional benefit 
design and sought input from experts on how to modernize it.
    The Medicare Part B drug program is essential to our 
nation's seniors, especially those who are battling cancer. The 
invaluable role that these drugs play in the treatment of 
chronic illness cannot be overstated. As we look to examine the 
program, we must ensure that the program, and seniors' access 
to these essential drugs, only continues to get better.
    When Congress changed the Part B drug reimbursements to 
track their average sales price in 2003, there were questions 
as to whether that average sales prices was an appropriate 
pricing mechanism. Since then, MedPAC has weighed in on the 
issue by noting that Congressional movement to the ASP system 
has resulted in substantial price savings for Medicare on 
nearly all drugs covered by these reimbursements, and was 
contributing to decreased Part B spending.
    Recently, members of Congress and the administration have 
proposed changes to the Part B drug program. Some of the 
changes seek to improve the program; others, like the 
president's call to cut physician reimbursements for these 
drugs, may not have such positive effects.
    As we examine reform proposals to improve the Medicare Part 
B drug program, I want to commend all of my colleagues who have 
offered such proposals, including Representatives Whitfield, 
Green, Rogers, Capps, Lance, Ellmers, and Burgess. I look 
forward to hearing testimony on their proposals today.
    With that Mr. Chairman, I yield the balance of my time to--
----------------------------------.
                              ----------                              


                 Prepared statement of Hon. Mike Rogers

    Thank you Mr. Chairman for holding this important hearing.
    The United States is home to the most effective and 
successful cancer care in the world, creating an environment 
that has resulted in the best cancer survival rates across the 
globe.
    According to the National Cancer Institute (NCI), overall 
cancer death rates have continued to decline in the United 
States among both men and women -as well as among all major 
racial and ethnic groups -for all of the most common cancers, 
including lung, colon and rectum, female breast, and prostate.
    However in the last five years, a troubling change in the 
delivery of cancer care has begun to emerge - a change that has 
been directly affecting not just the continuing rise in the 
cost of Medicare, but also the ability for cancer patients to 
access treatment.
    Since 2008, community oncology clinics have seen the steady 
shift from the physician office setting to the hospital 
outpatient department (HOPD) as a result of flawed Medicare 
payment policies that reimburse hospitals at higher rates than 
oncology clinics for the exact same service.
    Due to the significant changes in Medicare payment policies 
and the eroding revenues to community oncology clinics, 
physician practices are suffering from serious financial 
difficulties and struggling to keep their doors open.
    The most recent Practice Impact Report from the Community 
Oncology Alliance (COA) reports that oncology clinics have 
closed or consolidated at a 20 percent faster in the past year 
than they did a year before - a statistic that should give us 
all pause.
    In the past year 288 clinic sites closed, 407 practices 
were financially struggling and 469 practices had entered into 
a contractual relationship or had been acquired by a hospital.
    The consolidation of cancer treatment services to the 
hospital outpatient setting has serious implications for 
patient access especially in rural areas where radiation 
therapy is not always available through local hospitals. 
Patients may be forced to travel long distances to receive 
care, posing a considerable barrier to care for beneficiaries 
who require radiation treatment therapy daily for months at a 
time.
    Moreover, this shift in setting for cancer treatment poses 
a threat to the solvency of Medicare as the current disparities 
in payment have created incentives for hospitals to buy 
physician practices, driving up costs for the Medicare program 
and for cancer patients.
    Reimbursement should be equal for the same service provided 
to a cancer patient regardless of whether the service is 
delivered in the hospital outpatient department or a physician 
office.
    I look forward to working with my colleagues to ensure the 
future of community cancer care.
    Thank you Mr. Chairman, I yield back.
                              ----------                              


             Prepared statement of Hon. Frank Pallone, Jr.

    Thank you Chairman Pitts, and thank you for holding this 
hearing today. Medicare reimburses for prescription drugs in 
two settings. Outpatient prescription drugs are covered by 
Medicare Part D, while prescription drugs administered in a 
physician's office are paid for by Medicare Part B. This is a 
critical benefit that allows seniors to have access to 
physician-administered drugs which are most commonly cancer 
drugs used for chemotherapy and its related side effects or 
drugs to treat other serious illnesses.
    Congress has debated for years on whether Medicare can save 
more money on the drugs it pays for through the Part B program. 
Under the Medicare Modernization Act of 2003, to address 
widespread spending growth, we changed paying physicians based 
off of the manufacturer's Average Wholesale Price (AWP), which 
was often inflated, to a payment based on a manufacturer's 
Average Sales Price, or ASP. Today, a doctor is reimbursed ASP 
+ 6%-an amount much more reflective of the actual price 
manufactures receive for their products.
    The new system has been working. But according to 
stakeholders and industry leaders, challenges with the ASP+6% 
reimbursement policy still exist. In addition, some believe 
that there is a growing shift from receiving this care in a 
community physician setting to a hospital outpatient setting-a 
trend which, if based on fact, would have implications to the 
overall spending of the Medicare program.
    Now, I know there are a number of members of our Committee 
who have taken an interest in this area, some who would like 
the current system to be amended further. In addition, many 
stakeholders, some of who are here today, have outlined 
additional challenges with the reimbursement structure of Part 
B.
    For example, Oncologists are concerned about prompt pay 
discounts provided to wholesalers by manufacturers for paying 
within a specified time window. These discounts are not 
necessarily passed on to physicians when they purchase drugs 
from the wholesalers, but do have the effect of lowering the 
ASP reimbursement rate. Accordingly, Oncologists would like to 
see prompt pay discounts excluded from the ASP calculation. Of 
course, when it comes to seriously ill cancer patients, we want 
to ensure they have access to the best care and the best drug 
for their individual circumstances. So we should certainly 
tread with caution if there is credible evidence that lowering 
reimbursement could create market disruptions and result in 
Oncologist practices closing, thereby limiting Medicare access 
for seriously ill cancer patients.
    Now, as we all know, sequestration has resulted in a two 
percent across the board cut to Medicare. This includes a cut 
to Part B drugs. While I believe it is extremely important for 
seniors to have access to these lifesaving drugs, I do not 
agree with the approach that we should lift sequestration 
piecemeal like based on individual member bills. That approach 
is simply disingenuous.
    I opposed sequestration since it was first conceived. The 
idea that across the board, blind cuts could be used as a 
vehicle to reduce spending is foolhardy and dangerous. The case 
of Part B drugs shows just that. I recognized that 
sequestration would have real world effects, which is why I 
voted against the set of indiscriminate federal budget cuts. It 
is hypocritical that the same Members who voted in favor of the 
Budget Control Act of 2011 are now turning around and 
introducing legislation to reverse cuts on specific portions of 
the system. By pursuing a piecemeal approach to fix 
sequestration, we are being asked to place a higher value on 
some services than others. These cuts seriously hurt our 
economy, debilitate programs Americans rely on, and put our 
public safety at risk. Access to Part B drugs by our nation's 
seniors is just one example of the negative impact of 
sequestration on the daily lives of constituents in every one 
of our districts. We need a long term fix that truly addresses 
the budget in its entirety.
    Thank you.
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