[Federal Register Volume 59, Number 6 (Monday, January 10, 1994)]
[Rules and Regulations]
[Pages 1278-1285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-480]


[[Page Unknown]]

[Federal Register: January 10, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405, 410, 413, and 414

[BPD-737-F]
RIN 0938-AF54

 

Medicare Program; Coverage of Epoetin (EPO) Used by Competent 
Home Dialysis Patients

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule adopts as final the interim final rule that 
provided for Medicare coverage of EPO used by ESRD beneficiaries who 
dialyze at home and are competent to use the drug without medical or 
other supervision and established criteria for selection of patients 
that can be considered ``competent'' and for monitoring of the patients 
who are selected. It also makes minor changes in response to public 
comments on the interim rule.
    The interim rule was necessary to implement section 4201(d)(1) of 
the Omnibus Budget Reconciliation Act of 1990 (OBRA '90). The purpose 
of the amendments is to facilitate use of EPO at home, while ensuring 
that such use of the drug is safe.

EFFECTIVE DATE: These rules are effective on February 9, 1994.

FOR FURTHER INFORMATION CONTACT: Jackie Sheridan, (410) 966-4635.

SUPPLEMENTARY INFORMATION:

I. Background

    Chronic renal failure (CRF) is a progressive and usually 
irreversible decline in kidney function that does not always require 
regular dialysis. However, CRF patients who have end-stage renal 
disease (ESRD) do require a regular course of dialysis or kidney 
transplantation in order to sustain life.
    Section 299I of the Social Security Amendments of 1972 (Pub. L. 92-
603) established the Medicare ESRD benefit by extending coverage to any 
individual who requires either dialysis or transplantation and meets 
the following requirements:

     Is fully or currently insured or entitled to monthly 
benefits under title II of the Social Security Act; or
     Is the spouse or dependent child of the insured or 
entitled individual.

    The methods and amounts of payment for services to ESRD patients 
have changed over the years and are currently set forth in 
Secs. 410.50, 410.52, and 413.170-413.179 of the HCFA rules. Law and 
program policy have moved over the years towards encouraging greater 
use of self-dialysis and home dialysis.
    On June 1, 1989, the Food and Drug Administration (FDA) approved 
the generic drug epoetin which we commonly refer to as ``EPO''. EPO is 
a sterile, colorless, preservative-free, liquid, biologically 
engineered protein that stimulates the bone marrow to make new red 
blood cells. EPO may be covered under the Medicare program when used to 
treat anemia associated with chronic renal failure. Most chronic renal 
failure patients are anemic because their kidneys are unable to produce 
sufficient amounts of a substance called erythropoietin.
    Patients with chronic renal failure include those who require renal 
dialysis and are eligible for Medicare under the end-stage renal 
disease (ESRD) provisions of the law. In accordance with the labeling 
approved by the FDA, EPO may be administered either intravenously or 
subcutaneously for the treatment of anemia associated with chronic 
renal failure or anemia induced by the drug AZT used by patients with 
the HIV virus. Individuals with chronic renal failure use the drug to 
elevate or maintain the red blood cell level (as measured by the 
hematocrit or hemoglobin level) and to decrease the need for blood 
transfusions. Chronic renal patients considered for initiation of EPO 
therapy should generally have a hematocrit of less than 30%.
    In July, 1989, we issued instructions in the Provider Reimbursement 
Manual--Part 1 (Chapter 27, Transmittal 11) authorizing Medicare 
contractors to start paying for the drug EPO, as of June 1, 1989. 
Coverage instructions were issued in November 1989 in the Intermediary 
Manual--Part 3 (Transmittal 1449), Carriers Manual--Part 3 (Transmittal 
1329), Hospital Manual (Transmittal 576) and the Renal Dialysis 
Facility Manual (Transmittal 42). The effective date of the coverage 
instructions was also June 1, 1989. The Medicare regulations were not 
amended at that time.
    Before enactment of Public Law 101-508 (OBRA '90), home use of EPO 
was not covered. For patients who dialyzed at home to receive Medicare 
payment for EPO, the drug had to be administered either in an ESRD 
facility or as a service ``incident to'' a physician's professional 
services.

II. Statutory Provisions

    Section 4201(d)(1) of OBRA '90 amended section 1861(s)(2) of the 
Act by adding a new subparagraph (Q) that--

     Provides for coverage, effective July 1, 1991, of EPO that 
is used by home dialysis patients who are competent to use the drug 
without medical or other supervision and for coverage of items related 
to administration of the drug; and
     Requires the Secretary to establish by regulation methods 
and standards for the safe and effective use of the drug at home.

    Section 4201(c) of that same law provided for payment for EPO 
furnished to ESRD patients by Medicare approved dialysis facilities to 
be made at the rate of $11 per 1,000 units, rounded to the nearest 100 
units, effective January 1, 1991. Section 13566 of the Omnibus Budget 
Reconciliation Act of 1993 (OBRA '93, Pub. L. 103-66) sets the rate at 
$10 per 1,000 units effective January 1, 1994.
    Typically, EPO is administered at the end of the dialysis 
treatment. Therefore, unless medical documentation shows that it is 
necessary to administer EPO at a time other than during dialysis, 
payment for patients who dialyze at a facility is made only to the 
facility.
    The change made by section 13555(b) of OBRA '93, which provides for 
coverage of EPO self-administered by any dialysis patient (not limited 
to those who dialyze at home) will be implemented by separate 
regulations.
    For home use of EPO supplied to a home dialysis patient competent 
to administer the drug without medical supervision, HCFA pays only a 
Medicare approved dialysis facility or a supplier of home dialysis 
equipment and supplies, if the patient obtains the drug directly from 
the supplier. In either case, payment for home use of EPO is made at 
the rate described above.
    If a home patient is competent to use EPO without supervision and 
the drug has been prescribed, generally the patient's dialysis facility 
would furnish it. If a physician administers EPO to the patient, it 
should be the physician who receives the Monthly Capitation Payment 
(MCP) for furnishing the beneficiary's renal-related services. If a 
physician other than the MCP physician furnishes EPO, this physician 
must look to the MCP physician for payment for EPO administration. In 
this latter case, HCFA pays on a reasonable charge basis for the drug, 
but makes no additional payment to the physician for administration.
    HCFA will announce annually, for public comment, whether an update 
in the EPO allowance is appropriate. By statute, any increase will not 
exceed the percentage increase (if any) in the implicit price deflator 
for the gross national product for the second quarter of the preceding 
year over the implicit price deflator for the second quarter of the 
second preceding year.

III. Provisions of the Interim Final Rule

    In the interim final rule with comment period, published on 
September 4, 1991, we made the changes discussed below:
    A. Major changes.
    We amended subpart U of part 405 of the HCFA rules, which sets 
forth the conditions for coverage of services furnished to ESRD 
beneficiaries, as follows:
    1. Patient selection.
    To ensure the safe and effective use of EPO by home dialysis 
patients, we amended Sec. 405.2163 to require that the patient's 
dialysis facility or the physician responsible for all dialysis-related 
services make a comprehensive assessment of the patient and the 
patient's needs at the time of selection for EPO therapy.
    We emphasized that proper patient selection is necessary for a 
safe, effective program of EPO therapy at home. It is necessary for the 
dialysis facility or the physician responsible for all dialysis-related 
services to assess--

     Whether the patient will actually be able to administer 
the drug or have available the necessary assistance from a care-giver; 
and
     Whether the patient complies with certain elements 
necessary for successful EPO therapy.

    Accordingly, we required that, in order to be selected for home use 
of EPO, a patient must--

     Be a home dialysis patient (either peritoneal or 
hemodialysis method).
     Have a hematocrit (or comparable hemoglobin) of less than 
30 percent unless medical documentation justifies a patient's need for 
EPO with a hematocrit higher than 30 percent. For example, a patient 
with severe angina, severe pulmonary disease, or severe hypotension may 
require EPO to prevent adverse symptoms even though the patient has a 
higher hematocrit.
     Be under the care of the physician who is responsible for 
the dialysis-related services and who prescribes EPO, and under the 
care of the renal dialysis facility that establishes the plan of care 
for the services and monitors the progress of the home EPO therapy.
     Be trained by the facility to inject EPO or have an 
appropriate caregiver who is trained to inject EPO.

    In addition, as part of the assessment, we required the following:
    a. The patient's hematocrit (or hemoglobin), serum iron, 
transferrin saturation, serum ferritin, and blood pressure must be 
measured.
    b. An appropriate protocol, developed by the patient's physician or 
facility and including monitoring of blood pressure, must be given to 
the patient for the safe and effective use of the drug.
    c. The patient must be capable of performing self-administration of 
EPO, be able to learn aseptic technique, and be able to read the drug 
labeling, or must have a primary care-giver who can perform these 
tasks.
    d. The patient must be able to adhere to a disciplined medical 
regimen.
    2. Patient care plan.
    To ensure adequate monitoring of home EPO therapy, we amended 
Sec. 405.2137(b) to add a new paragraph (b)(7) which requires that the 
patient plan for a home dialysis patient who uses EPO in the home 
include the following:

     Review of diet and fluid modifications to monitor iron 
stores and hyperkalemia related to dietary indiscretion or elevated 
blood pressure.
     Reevaluation of the patient's dialysis prescription taking 
into account the patient's increased appetite and red blood cell 
volume.
     A method of teaching the patient to identify the signs and 
symptoms of hypotension and hypertension.
     The decrease or discontinuance of EPO if hypertension is 
uncontrolled.
     A method of followup on blood work and a means to keep the 
physician informed of the results.

    3. Other concerns.
    In order to minimize possible abuse of EPO, we revised 
Sec. 405.2163(g)(4) to require that the physician or facility ensure 
that ``on hand'' EPO is limited to a two-month supply.
    We also requested the public's views and suggestions regarding this 
policy, and any other issues, including whether it is necessary to 
impose special storage requirements for safe-keeping of EPO, 
considering that the drug contains no preservatives and that its 
presence might entail possible risks to children in the household.
    B. Other minor changes.
    We also made minor changes to codify in the rules the coverage of 
EPO in general and to reflect the expansion of that coverage to include 
EPO used at home by home dialysis patients. (As explained in the 
``Background'' section of the preamble to the interim rule, previous 
coverage of EPO was implemented through general instructions issued by 
HCFA, but not reflected in the rules.)
    Section 410.10  We amended this section to show that EPO used at 
home by home-dialysis patients is now covered as one of the services 
included in ``Medical and other health services'', as defined in 
section 1861(s) of the Social Security Act.
    Section 410.29  We amended this section to show that EPO may be 
covered as an exception to the general exclusion of drugs that may be 
self-administered.
    Section 410.50  We amended this section to show that medically 
necessary drugs and biologicals are covered as part of institutional 
dialysis services furnished in a dialysis facility. (EPO covered as a 
dialysis facility service is paid as an add-on to the facility payment 
rate.)
    Section 410.52  We amended this section to show that EPO for use by 
competent patients in the home is now included in the scope of ESRD 
services furnished in the patient's home.
    Section 413.170(a)(1)  We amended this section to update the cross 
references to the ESRD program coverage provisions in the regulations.
    Section 413.170(c)  We added a new paragraph (c)(6) to describe 
reimbursement for EPO when it is furnished by a Medicare-approved 
dialysis facility or a supplier of home dialysis equipment and 
supplies.
    Sections 414.300 and 414.335  We added a new paragraph (d) to 
Sec. 414.300 and a new Sec. 414.335 to specify method of payment for 
EPO that the beneficiary obtains directly from a supplier of home 
dialysis equipment and supplies.

IV. Discussion of Comments

    We received fifteen letters of comment from two nephrologists, 
three renal dietitians, three nephrology nurses, two dialysis centers, 
two professional associations, one home health agency, one medicare 
carrier, and one law firm.

A. Patient Selection

    Comment: Two commenters, both nephrologists, recommended that EPO 
be given for patients with hematocrits greater than 30 percent, even up 
to 35 percent. One of the commenters stated that a hematocrit of 30 
percent is not normal and that in a male, for whom normal hematocrit 
would be closer to 40 percent, a 30 percent reading means that the 
individual is functioning at three-quarters of his or her ability to do 
exercises as well as other things. That, combined with the chronic 
uremic state, which all dialysis patients have, makes it much more 
difficult for these patients to function in a useful manner. The 
commenter believes hematocrits closer to 35 percent would make much 
more sense for keeping these patients in a normal state and making them 
generally much more functional. The other commenter stated that his 
dialysis center is not required to justify continuation of EPO to 
patients with hematocrits of up to 35 percent. Commenters asked whether 
justification would be required each month or a single letter of 
justification would suffice.
    Response: The drug labeling for EPO recommends dosage to maintain a 
patient's hematocrit in the range of 30-33 percent (target range) with 
a maximum of 36 percent. It also states that the dose of EPO should be 
reduced when the hematocrit reaches the target range of 30-33 percent 
or increases by more than 4 points in any two-week period. Therapy with 
EPO can result in an abnormal increase in red blood cells if the 
hematocrit is not carefully monitored and the dose appropriately 
adjusted.
    We believe we are justified in requiring a hematocrit of less than 
30 percent for initiation of EPO therapy at home. Thirty percent is the 
low end of the target range. Medical review guidelines in the manuals 
used by Medicare intermediaries and carriers provide for payment of 
subsequent claims for EPO without documentation of medical necessity as 
long as the hematocrit is below 36 percent. We have revised 
Sec. 405.2163(g)(2) to clarify that the 30 percent hematocrit threshold 
applies only to initiation of EPO therapy.
    Comment: One commenter, operating a renal dialysis program in a 
university hospital, pointed out that, due to the close working 
relationship that exists between the renal physicians, dialysis staff 
and outpatient department, a physician may order EPO for an ESRD 
patient, note that order in the patient's chart, and verbally inform 
the pharmacist of the order without providing a written prescription. 
The commenter believes this procedure to be the norm. However, the 
fiscal intermediary processing those claims will not pay for any claims 
for which a written prescription is not provided. The commenter 
believes this process to be burdensome, especially since the order is 
documented in the patient's medical chart. The commenter also asked 
whether there will be any policy affecting refillable prescriptions.
    Response: We are sympathetic to the concerns expressed by the 
commenter and remain sensitive to requirements that may appear to be 
overly burdensome. However, we believe the intermediary is justified in 
requiring a written prescription. While in the case the commenter 
presented it might seem to create additional paperwork, a written 
prescription protects the pharmacist as well as providing a basis for 
payment by the intermediary. The intermediary or carrier has discretion 
to determine whether to require documentation on refillable 
prescriptions on the basis of reasonableness and necessity.
    Comment: The same commenter suggested that we establish more 
specific guidelines for ``regular monitoring'' of patients who self-
administer EPO, especially with regard to maximum hematocrit readings. 
Two commenters recommended including guidelines similar to those in the 
manufacturer's labeling. Two other commenters suggested that we include 
a mechanism for monitoring patient compliance such as the completion of 
a patient log.
    Response: The drug labeling for EPO provides general therapeutic 
guidelines with regard to the starting dose and maintenance dose, as 
well as when the dose should be reduced or increased. We believe the 
labeling provides adequate guidelines and that physicians should have 
the flexibility to interpret those guidelines with regard to their 
patients. Since drug regimens will vary depending on the individual 
patient's prescribed plan of treatment, we do not wish to be overly 
prescriptive with respect to specific monitoring protocols. We have, 
however, revised language at Sec. 405.2163(g)(2)(iii) to require that 
the physician follow the drug labeling instructions when monitoring the 
EPO home therapy as well as in developing appropriate protocols. We 
also agree that a patient log is a valid means to monitor compliance. 
To encourage use of that mechanism or similar effective mechanisms, we 
have added ``(such as a patient log)'' in Sec. 405.2137(b)(7).
    Comment: One commenter asked what type of medical documentation 
will be required to support payment for occasional use of EPO prior to 
dialysis, required because of temporary patient weakness or a low 
hematocrit reading.
    Response: Medicare eligibility based on ESRD is not established 
until the patient has been undergoing routine dialysis for three months 
or has a kidney transplant. Thus it is unlikely that a patient 
undergoing EPO therapy before dialysis would be a Medicare beneficiary. 
However, if a beneficiary whose Medicare eligibility is based on age or 
disability receives EPO for either of the types of anemia listed on the 
drug labeling, the drug may be covered if furnished ``incident to a 
physician's service''. Routine documentation requirements for this 
treatment include appropriate diagnostic coding on the HCFA-1500 claim 
form filed by the physician.
    Comment: One commenter stated that the rule implies that home 
dialysis patients have not been receiving EPO and that the need for EPO 
must be evaluated for each patient. The commenter points out that many 
patients have met the criteria for EPO, have been monitored monthly by 
appropriate laboratory tests and frequent blood pressure checks, and 
may already have been determined to have hematocrits within the target 
range. The commenter recommended that we not require full evaluation of 
patients who are already on EPO.
    Response: We realize that a patient who is receiving EPO may have a 
hematocrit within the target range of 30-33 percent. We also realize 
that any patient considered for home use of EPO would be under the care 
of a physician who furnishes all dialysis-related services. We assume 
that, in determining whether the patient is an appropriate candidate 
for home use, the physician would take into account any previous 
evaluations and whether the patient is currently receiving EPO. 
Nevertheless, we continue to believe that every patient must be 
evaluated before being approved for home use of EPO. The physician may 
base the evaluation in part on information previously obtained in the 
course of monitoring dialysis, but must also evaluate other factors, 
such as competence to inject the drug and capacity for proper storage 
of the drug, that are not pertinent to receiving EPO in a facility or a 
physician's office.
    Comment: One commenter believes that home health agencies (HHAs) 
should not have to adhere to the standard of ensuring that the two-
month supply limitation is met, especially in a patient's own 
household. The commenter believes that such a standard could impose on 
the HHA inappropriate and unwarranted liability, especially since EPO 
is a drug that allegedly ``may be abused.'' The same commenter also 
requested that the phrase, ``in the judgment of the home health 
agency,'' be inserted after the word ``patient'' in Sec. 405.2163(g)(2) 
to prevent reviewing agencies from alleging that the patient did not 
have the abilities necessary to self-administer EPO.
    Response: Under Sec. 405.2163 (g)(2) and (h)(3), the patient's 
physician or dialysis facility (and not the supplier) is responsible 
for ensuring that the patient is capable of self-administering the drug 
and, through the drug prescriptions, that the amount ``on hand'' does 
not exceed a 2-month supply. Accordingly, if an HHA qualifies to be a 
supplier of home dialysis equipment and supplies, that HHA would not be 
subject to the responsibilities that aroused the commenter's concern. 
Ordinarily, HHAs would not be involved in monitoring self-
administration of EPO.
    Comment: One professional association commented that the wording in 
Sec. 405.2163(g)(2)(iii), that is, ``being able to adhere to a 
disciplined medical regimen'', is a broad subjective statement that 
lacks meaning without some measurement of nonadherence. It recommended 
replacing the language with the words ``be able to meet the 
requirements of an established home dialysis training program and 
periodic reassessment by qualified training staff.''
    Response: We agree that the cited current language lacks 
specificity and have removed it. However, we did not add the suggested 
language because, in this context, it is training in the self-
administration of EPO (rather than in self-dialysis as such) that is 
pertinent, and that is already dealt with in paragraph (g)(3).

B. Patient Care Plan

    Comment: Three commenters, all renal dietitians, questioned the 
wording of the requirement to review a patient's diet and fluid 
modifications to monitor adequate iron stores and hyperkalemia. All 
commented that the amount of iron required during EPO therapy can 
rarely be met with dietary iron, since such diets are typically iron 
deficient. They noted that oral or even intravenous supplemental iron 
is required and recommended that we revise the language to include the 
following:

     Review of diet and fluid intake for indiscretions as 
reflected by hyperkalemia and elevated blood pressure secondary to 
volume overload.
     Review of medications for adequate provision of 
supplemental iron.
     Evaluation of hematocrit and measures of iron stores.

    Response: We agree with these comments and have revised 
Sec. 405.2137(b)(7) (i)-(iii) to include the suggested content.

C. Other Concerns

    Comment: One commenter asked for clarification of the effective 
date.
    Response: The law (section 4201(c) of the Omnibus Budget 
Reconciliation Act of 1990) that set the payment rate at $11 per 1,000 
units was effective January 1, 1991. However, under section 4201(d) of 
that Act, coverage of EPO self-administered at home by home dialysis 
patients is effective July 1, 1991. Thus, Medicare payment is available 
for services that are furnished on or after that date and that also 
meet the requirements of the interim final rule published on September 
4, 1991.
    Comment: Two commenters felt that an initial 2-month EPO supply 
might be too much since (1) patients who receive the drug from a renal 
facility must be seen by their physician monthly and (2) a 2-month 
supply might discourage patients from maintaining blood pressure and 
hematocrit monitoring. The commenters were also concerned that the 
supplier or renal facility may be requested to take back unused 
portions of EPO, if the home dialysis patient received a kidney 
transplant or died soon after receiving the supply. They suggested that 
a smaller quantity would alleviate the beneficiary's coinsurance 
responsibility.
    Response: First, we note that the provision sets the 2-month 
initial supply as a maximum limit, to be used when circumstances make a 
2-month supply appropriate. We recognize that patients who obtain their 
supplies directly must be monitored monthly, and we would expect a 
physician to prescribe a lesser amount for some patients. In 
Sec. 405.2163, we have added a paragraph (h) to highlight the 
responsibilities of the physician and the dialysis facility. Paragraph 
(h)(3) makes clear that the 2-month supply is a maximum.
    Comment: One commenter stated that billing procedures instructing 
an initial billing of up to a 2-month supply followed by subsequent 
billings limited to a 1-month supply are inconsistent with our proposed 
regulations which appear to intend that the beneficiary maintain a 2-
month supply at all times.
    Response: The commenter has misinterpreted the intent of the 
policy. The intent is not to require a ``minimum'' 2-month supply, but 
rather to ensure that the patient has at least a 1-month supply. As 
stated above, the physician may initially prescribe ``up to'' a 2-month 
supply. When half of the initial 2-month supply is used, the next 1-
month supply may be ordered, and so on.
    Comment: In response to our specific request for comments on 
whether it is necessary to impose special storage requirements for 
safe-keeping of EPO, two commenters stated that storage and home safety 
issues need to be more specifically addressed and documented. They 
recommended that we require, as part of the assessment, assurance that 
the patient has the ability to store EPO under refrigeration, secure 
from tampering and out of the reach of children.
    Response: We agree with the commenters and have revised 
Sec. 405.2163(g) to add the suggested language.
    Comment: One commenter questioned whether HCFA will establish 
regional intermediaries to process home EPO claims.
    Response: EPO claims from home dialysis patients who obtain their 
dialysis supplies directly from suppliers will be processed by four 
regional carriers that were designated under a final rule published on 
June 18, 1992 (at 57 FR 27290), and that also process claims for 
durable medical equipment, prosthetics, orthotics and other items 
covered under Medicare Part B.
    However, claims for items furnished incident to a physician's 
service as defined in 42 CFR 410.10(b) will continue to be processed 
under the current carrier configuration, and regional intermediaries 
will continue to process claims from facilities.
    Comment: One commenter stated that at least one 8-hour day should 
be allocated to train a patient in proper techniques of self-
administration. The commenter also asked whether a training fee can be 
charged for this training time or whether any additional reimbursement 
can be obtained since this added monitoring activity expands physician 
activities under the monthly capitation plan.
    Response: We agree that patients need to be properly trained in the 
self-administration of EPO; however, we do not believe that we should 
set a specific minimum time limit for training as suggested by the 
commenter. We believe there should be sufficient flexibility to allow 
for differences in individual patients' learning ability.
    There is no separate payment for training or retraining in, and 
monitoring of, home use of EPO. A patient should be trained to self-
administer EPO as part of the home dialysis training program that is 
paid for at the home dialysis training composite rate in accordance 
with Sec. 413.170 of the HCFA rules. With respect to monitoring self-
administration of EPO, we believe the additional physician's time and 
effort are minimal and should be subsumed within the physician's 
monthly capitation payment under Sec. 414.314 of those rules.
    Comment: Two commenters asked whether reimbursement can be expected 
for home supplies needed to self-administer EPO, e.g., syringe, needle, 
alcohol wipes.
    Response: Payment for the medical supplies needed for 
administration of EPO, whether in the home or in a facility, is 
included in the Medicare payment rate for EPO. Both before OBRA '90 and 
since the implementation of those provisions, HCFA has always included 
the cost of supplies as part of the Medicare payment for EPO. We see no 
basis for different treatment of supplies for self-administration of 
EPO in the home.
    The payment rate for EPO is $11.00 per 1,000 units and, we believe, 
is more than adequate to cover the minimal cost of supplies (less than 
20 cents per administration). The manufacturer of EPO is protected from 
competition for seven years by the Orphan Drug Act. The company reports 
substantial profits and gives rebates to facilities depending upon 
usage. It appears that facilities pay considerably less for EPO than 
the Medicare rate, providing sufficient payment for supplies needed for 
administration.
    The source of this information is the Department's Office of the 
Inspector General (OIG) study, ``Draft Report--Review of Epogen 
Reimbursement'' (Audit No. A-01-92-00506). The OIG reviewed invoices 
paid by dialysis facilities and financial reports filed by the 
manufacturer and found that facilities generally pay nine to ten 
percent less for EPO than the Medicare payment rate. In addition, the 
manufacturer gave surveyed facilities end-of-year rebates ranging from 
two percent to eight percent depending upon the volume of EPO used.
    Comment: Two commenters expressed the hope that local physicians 
will be able to continue to administer EPO incident to a physician's 
service.
    Response: This regulation is in no way intended to preclude 
provision of EPO furnished incident to a physician's service.
    Comment: One commenter was of the opinion that there is no 
statutory authority for the provision in Sec. 413.170(c)(6)) requiring 
suppliers to accept assignment of benefits for EPO.
    Response: The statutory provisions for payment of benefits for EPO 
are in section 1881(b)(1). Section 1881(b)(1)(B) of the Act provides 
for payments ``to or in behalf of'' beneficiaries for home dialysis 
supplies and equipment. However, with respect to payment for self-
administered EPO, section 1881(b)(1)(C) permits payment only to a 
supplier of home dialysis supplies and equipment that is not a provider 
of services, a renal dialysis facility, or a physician. There is no 
authority in the law to pay this benefit to a beneficiary. Therefore, 
the law implicitly requires payment to a supplier under assignment.
    Furthermore, any other reading of the statute would have anomalous 
results. For example, if the statute did not require suppliers to 
accept assignment, the beneficiary would be protected for charges for 
home dialysis supplies and equipment, but not for EPO furnished 
directly by the supplier. Nothing in the legislative history suggests 
the Congress intended such a result.

V. Specific Changes to the Interim Final Rule.

    In response to the comments discussed above, we have made the 
following changes in the text of the interim final rule published on 
September 4, 1991.
    1. Patient care plan.
    We have revised Sec. 405.2137(b)(7) to establish separate 
requirements for review of medication and evaluation of hematocrit for 
iron stores and to suggest use of a patient log for keeping the 
physician informed of the results of blood tests.
    2. Patient selection.
    We have revised Sec. 405.2163 to--

     Require that the physician follow the drug labeling when 
he or she establishes the protocol and monitors home use of EPO;
     Include as an assessment requirement obtaining assurance 
that EPO can be stored under refrigeration, secure from tampering and 
out of reach of children in the patient's residence.
     Add a paragraph (h) to highlight the responsibilities of 
the physician and the dialysis facility and to make clear that the 
``two-month'' supply of EPO is a maximum and that control of the amount 
``on hand'' is maintained through the physician's prescriptions.

    B. Technical amendments.
    1. Throughout the text ``Erythropoietin'' is changed to 
``Epoetin'', which is the generic name of the drug.
    2. In Sec. 413.170(c)(6), the cross-reference is corrected.

VI. Regulatory Impact Statement

A. Executive Order 12866

    Executive Order 12866 (E.O. 12866) requires us to prepare an 
analysis for any document that meets one of the E.O. 12866 criteria for 
a ``significant regulatory action''; that is, that may--

     Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
     Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
     Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or
     Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
E.O. 12866.

    In the proposed rule, we determined that a regulatory impact 
analysis was not required for these rules because they would not have 
an annual impact of $100 million or more or meet any of the other 
threshold criteria. However, we indicated our intention to include in 
the final rule a cost and benefit analysis that considers the social 
benefits to Medicare beneficiaries who use EPO at home. We asked for 
specific comments concerning benefits from home administration of EPO. 
We listed, as examples of these benefits, savings in travel and 
transportation costs previously required to obtain EPO or the ability 
of the beneficiary to resume employment. We also requested public 
comment on any benefits and costs that may be anticipated as a result 
of this regulation.
    No comments were received concerning the benefits of self-
administration of EPO or on any portion of the impact analysis. Thus, 
we have prepared an analysis based on our review of data available to 
us and of pertinent literature.
    The following chart summarizes home dialysis beneficiary records 
for the period February 28, 1991 through February 29, 1992. It reflects 
the most current data on file and also encompasses the time immediately 
before and after July 1, 1991, the effective data of coverage of home 
administration of EPO. We identified, as ESRD beneficiaries who are 
potentially eligible for home use of EPO, beneficiaries who have 
completed the necessary home dialysis training or were home dialysis 
patients during this period. The chart indicates the number of 
beneficiaries on home dialysis and the number receiving EPO therapy as 
of June 30, 1991. The same information is shown for the billing period 
November 1, 1991 through January 31, 1992, the most current billing 
information for home dialysis beneficiaries.

                                                               Home Dialysis Beneficiaries                                                              
                                                          [February 28, 1991-February 29, 1992]                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Home Dialysis                                                                                
                                                           Beneficiaries              Self-Adm.*               Fac/Phy.**            Not Receiv'g EPO   
--------------------------------------------------------------------------------------------------------------------------------------------------------
As of 6/30/91.......................................                   38,515                                            12,733                   25,782
Billing Period 11/1/91-1/31/92......................                   38,515                    1,656                   11,890                   24,969
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Self-Adm. stands for self-administered.                                                                                                                
**Fac/Phy. stands for facility or physician administered.                                                                                               

    Our records indicate that as of June 30, 1991 there were 38,515 
beneficiaries that dialyzed at home. Before coverage of home 
administration of EPO, 12,733 of these beneficiaries received EPO in 
the ESRD facility or in a physician's office. As a result of coverage 
of home administration of EPO, 1,656 beneficiaries or 4.3 percent of 
home dialysis beneficiaries self-administer EPO. We estimate that this 
number will increase as more beneficiaries become qualified to self-
administer EPO and realize the benefits of home administration.
    In attempting to perform a cost-benefit analysis, we reviewed three 
published reports and one unpublished report. We also relied upon 
billing information submitted by intermediaries. Average expenditure 
for ESRD beneficiaries receiving EPO therapy approximate $6,900 
exclusive of dialysis treatment. This amount includes the cost of the 
drug and other services such as iron treatment and hypertension 
therapy. The average annual cost for patients not using EPO 
approximates $450, exclusive of dialysis treatments, and includes the 
cost of other services such as blood transfusions and hepatitis 
therapy. The annual expenditures for EPO users represent very gross 
estimates. More definitive cost data and experience with the 
administration of EPO is needed in order to permit analysis of actual 
costs and EPO's relative effects.
    As mentioned earlier in this preamble, use of EPO by chronic renal 
failure patients reduces or eliminates the need for blood transfusions. 
EPO also reduces the recipients' risk of transfusion-related illnesses. 
The transmission of non-A, non-B hepatitis is of greatest concern (see 
``Recombinant Human Erythropoietin: Factors to Consider in Cost-Benefit 
Analysis'', American Journal of Kidney Diseases, Vol. XVII, No. 1, 
January 1991). Although rare, the threat of acquired immunodeficiency 
syndrome (AIDS) and hepatitis B should also be considered. For ESRD 
patients receiving EPO, the risk of hepatitis infection related to 
transfusions has been reduced from 13.8 to 4.5 percent because the 
patient's need for blood transfusions has been reduced and in some 
cases eliminated.
    Reducing the need for transfusions also increases kidney transplant 
success in chronic renal failure patients by reducing sensitization. 
According to the above cited article, some individuals receiving 
frequent transfusions may develop cytotoxic antibodies. Excessive 
cytotoxity levels may result in increased waiting time for suitable 
organs. Also, when high cytotoxity levels are present, graft survival 
rates are reduced. When EPO is used, thus reducing or eliminating the 
need for transfusions, patients are more likely to retain transplanted 
organs successfully.
    There are other potential benefits associated with the use of EPO. 
Since EPO stimulates the production of red blood cells thereby reducing 
or eliminating anemia, the need for hospitalization due to anemia or 
anemia-related illnesses could be expected to decline.
    Another very important though not quantifiable benefit of receiving 
EPO is improved quality of life. An article appearing in The Journal of 
the American Medical Association (JAMA) (The Quality of Life of 
Hemodialysis Recipients Treated with Recombinant Human Erythropoietin, 
Vol. 263, No. 6, February 9, 1990) reported on the results of a study 
of over 300 hemodialysis patients in nine dialysis centers. The study 
showed that hemodialysis patients receiving EPO are happier--their 
energy levels are higher, physical functioning is improved, physical 
activity levels are increased, etc. Similar results were also reported 
in the American Journal of Kidney Diseases article mentioned earlier in 
this impact statement. Although these studies did not specifically 
study home dialysis patients, we believe that results would be equally 
true for this group.
    In reviewing the literature on EPO, we also found that most EPO 
recipients require additional medications or therapies to counteract 
possible adverse effects. Some of the possible side effects of EPO 
therapy are iron depletion, hypertension, and arteriovenous graft 
clotting.
    Iron Depletion--EPO recipients may not get the full benefit of 
increased hematocrits from EPO if they lack sufficient iron reserves. 
EPO increases the body's production of red blood cells. This requires 
sufficient iron reserves. Consequently, patients on EPO may become iron 
deficient. Their iron reserves must be monitored and iron supplements 
administered to ensure that the patient's iron reserves are not 
depleted.
    Hypertension--Use of EPO may elevate a patient's blood pressure, a 
reaction that may be related to the rate of increase in hematocrit. 
Therefore, an EPO patient's blood pressure must be carefully monitored. 
Thirty percent of all EPO patients receive hypertension therapy.
    Arteriovenous (AV) Graft Clotting--Fourteen percent of all EPO 
patients experience clotting of AV graft as compared to 6 percent of 
chronic renal patients not receiving EPO. The cause of the AV clotting 
is believed due to increased hematocrit.
    The foregoing benefits and adverse effects of using EPO are the 
same for patients who receive the drug in a physician's office or ESRD 
facility as for patients who self-administer the drug. Those 
beneficiaries who received EPO in a physician's office or ESRD facility 
and, as a result of this regulation, shift to self-administration will 
realize further benefits, such as savings of time and in transportation 
costs. In order to receive the full benefit of EPO therapy, most 
patients receive it at least three times a week. Therefore, we estimate 
that the savings in transportation costs will average approximately 
$300 per beneficiary for calendar year 1992. Of course, this estimate 
is only an average; the actual saving will vary depending on distance 
traveled to and from the ESRD facility or physician's office by a 
particular beneficiary.
    Since EPO is a relatively new drug, definitive information on its 
large scale effectiveness, direct costs, savings, etc., is not 
available. Literature supports the view that ESRD beneficiaries 
receiving EPO experience an improved quality of life, resulting in 
higher energy levels and improved physical functioning. For those 
beneficiaries who did receive EPO in a physician's office or ESRD 
facility and meet the criteria for self-administration, the change to 
self-administration will save time and eliminate travel expenses 
associated with office and facility visits. We expect that over time 
more home dialysis beneficiaries who did not receive EPO or received a 
reduced dosage because they were unable to travel to the physician's 
office or ESRD facility as often as needed will become candidates for 
self-administration of EPO. We do not have data on which to base a 
prediction of the number who will choose this form of administration. 
Obviously, each beneficiary's physician will need to consider potential 
adverse as well as beneficial effects.

B. Regulatory Flexibility Act

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 602 
through 612) unless the Secretary certifies that a final rule will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, individuals are not considered to be 
small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis if a final rule may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act since we have determined, and the Secretary certifies, that 
this rule will not have a significant economic impact on a substantial 
number of small entities and will not have a significant impact on the 
operations of a substantial number of small rural hospitals.

Paperwork Reduction Act

    Section 405.2137 of this rule contains information collection 
requirements that are subject to review by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1980. When OMB 
approves these provisions, we will publish a Federal Register notice to 
that effect. If you comment on the information collection requirements, 
please send a copy of those comments directly to: Office of Information 
and Regulatory Affairs, Office of Management and Budget, room 3002, New 
Executive Office Building, Washington, DC 20503, Attention: Allison 
Herron Eydt, Desk Officer for HCFA.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney disease, Laboratories, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 410

    Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Rural areas, X-rays.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 414

    End-stage renal (ESRD), Health professions, Laboratories, Medicare.
42 CFR CHAPTER IV HEALTH CARE FINANCING ADMINISTRATION, DEPARTMENT OF 
HEALTH AND HUMAN SERVICES
    The interim rule with comment period that was published on 
September 4, 1991, at 56 FR 43706, to amend Parts 405, 410, 413, and 
414 of this chapter is adopted as final with the changes set forth 
below.

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart U--Conditions for Coverage of Suppliers of End-Stage Renal 
Disease (ESRD) Services

    1. The authority citation for subpart U continues to read as 
follows:

    Authority: Secs. 1102, 1861, 1862(a), 1871, 1874, and 1881 of 
the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 1395hh, 
1395kk, and 1395rr), unless otherwise noted.

    2. Section 405.2137 is amended to revise paragraph (b)(7), to read 
as follows:


Sec. 405.2137  Condition: Patient long-term program and patient care 
plan.

* * * * *
    (b) Standard: Patient care plan. * * *
    (7) For a home dialysis patient who uses EPO in the home, the plan 
must provide for monitoring home use of EPO that includes the 
following:
    (i) Review of diet and fluid intake for indiscretions as indicated 
by hyperkalemia and elevated blood pressure secondary to volume 
overload.
    (ii) Review of medications to ensure adequate provision of 
supplemental iron.
    (iii) Ongoing evaluations of hematocrit and iron stores.
    (iv) A reevaluation of the dialysis prescription taking into 
account the patient's increased appetite and red blood cell volume.
    (v) A method for physician followup on blood tests and a mechanism 
(such as a patient log) for keeping the physician informed of the 
results.
    (vi) Training of the patient to identify the signs and symptoms of 
hypotension and hypertension.
    (vii) The decrease or discontinuance of EPO if hypertension is 
uncontrollable.
    3. Section 405.2163 is amended to revise paragraph (g) and add a 
new paragraph (h), to read as follows:


Sec. 405.2163  Condition: Minimal service requirements for a renal 
dialysis facility or renal dialysis center.

* * * * *
    (g) Use of EPO at home: Patient selection. The dialysis facility, 
or the physician responsible for all dialysis-related services 
furnished to the patient, must make a comprehensive assessment that 
includes the following:
    (1) Pre-selection monitoring. The patient's hematocrit (or 
hemoglobin), serum iron, transferrin saturation, serum ferritin, and 
blood pressure must be measured.
    (2) Conditions the patient must meet. The assessment must find that 
the patient meets the following conditions:
    (i) Is a home dialysis patient.
    (ii) Has a hematocrit (or comparable hemoglobin level) that is as 
follows:
    (A) For a patient who is initiating EPO treatment, no higher than 
30 percent unless there is medical documentation showing the need for 
EPO despite a hematocrit (or comparable hemoglobin level) higher than 
30 percent. (Patients with severe angina, severe pulmonary distress, or 
severe hypertension may require EPO to prevent adverse symptoms even if 
they have higher hematocrit or hemoglobin levels.)
    (B) For a patient who has been receiving EPO from the facility or 
the physician, between 30 and 33 percent.
    (iii) Is under the care of--
    (A) A physician who is responsible for all dialysis-related 
services and who prescribes the EPO and follows the drug labeling 
instructions when monitoring the EPO home therapy; and
    (B) A renal dialysis facility that establishes the plan of care and 
monitors the progress of the home EPO therapy.
    (3) Conditions the patient or the patient's caregiver must meet. 
The assessment must find that the patient or a caregiver who assists 
the patient in performing self-dialysis meets the following conditions:
    (i) Is trained by the facility to inject EPO and is capable of 
carrying out the procedure.
    (ii) Is capable of reading and understanding the drug labeling.
    (iii) Is trained in, and capable of observing, aseptic techniques.
    (4) Care and storage of drug. The assessment must find that EPO can 
be stored in the patient's residence under refrigeration and that the 
patient is aware of the potential hazard of a child's having access to 
the drug and syringes.
    (h) Use of EPO at home: Responsibilities of the physician or the 
dialysis facility. The patient's physician or dialysis facility must--
    (1) Develop a protocol that follows the drug label instructions;
    (2) Make the protocol available to the patient to ensure safe and 
effective home use of EPO; and
    (3) Through the amounts prescribed, ensure that the drug ``on 
hand'' at any time does not exceed a 2-month supply.

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1. The authority citation for part 410 continues to read as 
follows:

    Authority: Secs. 1102, 1832, 1833, 1835, 1861 (r), (s), and 
(cc), 1871, and 1881 of the Social Security Act. (42 U.S.C. 1302, 
1395k, 1395l, 1395n, 1395x (r), (s), and (cc), 1395hh, and 1395rr).

    2. Nomenclature change.
    In Secs. 410.10(k), 410.50(d), and 410.52(a)(4), ``erythropoietin'' 
is revised to read ``epoetin''.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT

    1. The authority citation for part 413 is revised to read as 
follows:

    Authority: Secs. 1102, 1122, 1814(b), 1815, 1833(a), 1861(v), 
1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 
1302, 1320a-1, 1395f(b), 1395g, 1395l(a), 1395x(v), 1395hh, 1395rr, 
1395tt, and 1395ww).


Sec. 413.170  [Amended]

    2. In Sec. 413.170(c)(6), ``Erythropoietin'' is revised to read 
``Epoetin'', and ``Sec. 413.170(c)(5)(iii)'' is revised to read 
``paragraph (c)(6)(iii) of this section.''

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

    1. The authority citation for part 414 continues to read as 
follows:

    Authority: Secs. 1102, 1833(a), 1871, and 1881 of the Social 
Security Act (42 U.S.C. 1302, 1395l(a), 1395hh, and 1395rr).


Sec. 414.300  [Amended]

    2. In Sec. 414.300(d), ``Erythropoietin'' is revised to read 
``Epoetin''.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: September 23, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Approved: October 13, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-480 Filed 1-7-94; 8:45 am]
BILLING CODE 4120-01-P