Dialysis Unplugged: Should Medicare adopt dynamic pricing for medications?

“If the United States is ever going to control our health care costs, we have to demand better evidence of effectiveness, and stop handing out taxpayer dollars with no questions asked.”

The above quote is from an op-ed article published yesterday in the New York Times by two influential health policy makers  Drs’ Ezekiel J. Emanuel  and Steven D. Pearson. They were referring to two expensive proton beam machine being built at the Mayo clinic in Minnesota and Arizona. However, a similar question could be posed for some of the therapies used in dialysis patients. Shouldn’t Medicare demand evidence on effectiveness before paying for epo or sevelemar or paracalcitol?

Take ESA treatment of anemia in patients with kidney disease. The FDA has indicated in the label for these drugs that therapy should be interrupted or the dose reduced if the hemoglobin level rises above 11 g/dL. The FDA has not provided a lower Hb limit. Still, Medicare continues to reimburse providers for the cost of ESAs for a target Hb concentration of 10 to 12 g/dL. There is no randomized controlled trial (RCT) evidence that supports the idea of targeting a Hb above 11 g/dL in dialysis patients. A Hb>11 g/dL is not associated with better outcomes than aiming for a Hb of <11 g/dL. However, Medicare expenditure for ESAs has increased almost exponentially (Fig.1). Indeed, the latest numbers show that over 40% of dialysis patients have Hb concentrations above 12 g/dL. 

Fig. 1 Costs (Per Person Per Year) of dialysis services between 1991 and 2004
Source: USRDS

In the Normal Hematocrit study, published in NEJM, dialysis patients at high risk for cardiovascular disease were randomized to a higher Hb (13-15 g/dL) versus a lower Hb concentration (9-11 g/dL). Patients in the lower Hb arm had fewer vascular access thrombosis events, lower mortaility and fewer MI's compared to those randomized to the higher Hb arm. A Hb target range of 9-11 g/dL is supported by evidence from a randomized trial. Forget about disincentives, should Medicare stop reimbursing providers if the Hb concentration is >12 g/dL range?

Fig. 2. Total Medicare spending for injectable drugs between 1993 and 2003
Source: USRDS

The situation is even more uncertain with metabolic bone disease. While observational studies suggest an association between hyperphosphatemia (and the calcium x phosphorus product) and mortality in dialysis patients, RCTs have so far failed to demonstrate that control of hyperphosphatemia is associated with improved survival. Worse still, these trials have been relatively modest in size and none have been placebo controlled. As Block pointed out recently in Current Opinions, a placebo controlled trial is long overdue. 

Nevertheless, despite the lack of randomized control data, Medicare continues to reimburse for expensive non-calcium containing phosphorus binders like sevelamar and lanthanum. A similar situation exists for vitamin D analogues compared to generic calcitriol. Medicare costs are rising (Fig.2) and yet there is a paucity of RCT evidence.

In the NY Times article, Emanuel and Pearson make an interesting recommendation: that Medicare adopt “dynamic pricing”. They argue that Medicare should only pay more for therapies that are proven. For treatments that are unproven, they recommend that Medicare should pay only what it pays for the cheaper alternatives. In other words, Medicare should only pay for sevelemar or lanthanum at the rate it pays for generic calcium carbonate phosphate binders. Or for paracalcitol at the rate paid for generic calcitriol. 

If studies were done showing that these therapies are better than other treatments, the payment should go up. If no studies were done, or the new evidence demonstrated no advantages, then coverage would continue, but at the lower reimbursement. They write:  “Of course hospitals could continue charging patients more … and patients who wanted the treatment could pay the difference themselves.”

So, should Medicare adopt dynamic pricing? I am not advocating Medicare withhold payment for medications that are used by dialysis patients. But, as resources become constrained at the federal level, policy makers will look to options like dynamic pricing as being attractive. Unless of course industry gets the message and starts investing in clinical trials to demonstrate the effectiveness of their drugs in dialysis patients.