CMS Continues to Monitor the Relative Cost of the MA Program

Concerns about overpayment as a result of favorable risk selection of healthier-than-average beneficiaries have confronted the Medicare program throughout its history of contracting with Medicare Advantage (MA) plans. The goal of the MA risk adjustment system is to use risk scores to assure that MA plans that enroll sicker-than-average beneficiaries are paid appropriately, but not to increase payment for an average beneficiary. A Medicare and Medicaid Research Review (MMRR) paper, titled “Measuring Coding Intensity in the Medicare Advantage Program,” used recent data and improved methodology to estimate the effects of coding intensity on MA risk scores.

MA Risk Adjustment System

The MA payment system creates incentives for MA plans to find and report as many diagnoses as can be supported by the medical record. For example, the MA payment system uses diagnostic information to assign a risk score to each beneficiary, where the average beneficiary in Medicare fee-for-service (FFS) has a risk score of 1.0. MA plans are paid the product of their plan bid multiplied by the enrollee’s risk score. Therefore, if an MA plan bids $1,000/month for an enrollee with a risk score of 1.0, and then enrolls a beneficiary with a risk score of 1.2, the plan gets paid $1,200/month for that enrollee.

The implicit assumption in the design of the MA payment system is that a beneficiary will have the same risk score of 1.0 whether they are enrolled in FFS or MA. As such, if a FFS beneficiary had a risk score of 1.1 if enrolled in MA, then the MA plan would be overpaid. The term “coding intensity” is the difference between the scores that a group of beneficiaries would have if enrolled in MA and their scores in FFS.

The Challenge

The Government Accountability Office (2012) estimated that in 2010 MA beneficiary risk scores were at least 4.8 percent and perhaps as much as 7.1 percent higher than they would have been if the same beneficiaries had been enrolled in FFS.

  • According to the MMRR paper, the mean risk scores in MA increased faster than in FFS from 2004 to 2013—by 0.305 in MA, compared to 0.106 in FFS. As measured using the 2004 risk model, MA risk scores grew from 90.2 percent of FFS risk scores in 2004 to 109.1 percent in 2013, an increase of 18.9 percentage points. From 2004–2013, the mean MA risk score increased 2.2 percentage points per year more quickly than the mean FFS score using the 2004 risk model and 1.6 percentage points more quickly using the 2014 risk model. According to the paper, the main reason that MA risk scores increased more quickly than FFS scores appeared to be due to increases in relative coding intensity.
  • CMS and the Congress have responded to the increase in risk scores over time in several ways.
  • Starting in 2010, CMS lowered payment by 3.41 percent by applying an across-the-board coding adjustment. This coding intensity adjustment will increase to 4.91 percent in 2014 and to at least 5.91 percent in 2018.
  • Starting in 2013, CMS set the four most severe diabetes Hierarchical Condition Categories (HCCs) (HCC15-HCC18) to have the same payment coefficient. As a result, recording diagnoses that move enrollees from HCC18 (diabetes with ophthalmologic or unspecified manifestation) into HCC15 (diabetes with renal or peripheral circulatory manifestation) will no longer increase revenue for MA plans.
  • CMS made further changes to the model in 2014, removing some of the HCCs that were the subject of MA efforts at increasing coding intensity.
  • The legislated increase in coding intensity adjustment is 0.25 percent per year from 2014 through 2018.
  • The President’s Budget for 2015 proposes increasing the minimum adjustment to 0.67 percent per year through 2020, topping off at 8.51 percent in 2020, which is much closer to the expected increase in relative risk scores.

Paper’s Conclusion

The paper concludes that it is challenging to accurately measure the effects of coding intensity on MA risk scores and even more challenging to devise optimal policy responses. It notes that HHS is continuing its analysis of the relative risk of MA and FFS enrollees in order to improve the ability of the Medicare program to accurately pay for MA beneficiaries.

Childhood Cancer Research: We Must Do Better

Every summer about this time I play golf in a pediatric cancer research fundraiser where the parents, family, and friends of Jeffrey Pride raise money for pediatric cancer research. Jeff died of acute lymphoblastic leukemia (ALL) at age seven, and for the last 12 years The Jeffrey Pride Foundation for Pediatric Cancer Research has raised money for the pharmacological research of new chemotherapeutic agents and to subsidize clinical trials so that children will be able to receive new and potentially breakthrough therapies.

Like many charitable organizations that have sprung up after such a tragedy, The Jeffrey Pride Foundation is an all-volunteer, tax-exempt, Internal Revenue Code Sec. 501(c)(3) organization whose sole mission is to raise funds, 100 percent of which go directly to pediatric cancer research. In addition, because the foundation’s board wanted its funds to have the greatest impact, it chose, with the help of Jeff’s doctors, to contribute to the Children’s Oncology Group (COG), the world’s largest pediatric cancer research organization. And as one of the larger donors to COG, the foundation has a designated fund called The Jeffrey Pride Fund for Targeted Therapy Discovery in Childhood Acute Lymphoblastic Leukemia. COG, a National Cancer Institute (NCI) supported clinical trials group, oversees more than 90 percent of all pediatric cancer research done in North America, Australia, New Zealand, Sweden, and the Netherlands, and writes all treatment protocols for children’s chemotherapy regimens. According to the NCI, each year approximately 4,000 children who are diagnosed with cancer enroll in a COG-sponsored clinical trial.

Outlook for Survival

Despite the best efforts of the NCI, COG, private fundraising foundations, and clinical researchers, cancer is still the leading cause of disease-related death among children (ages 1-19) in the United States. In 2014, it is estimated that 15,780 children will be diagnosed with cancer and 1,960 will die of the disease. There is some good news, however. According to the NCI, survival rates have improved for some childhood cancers. For instance, in 1975, just over 50 percent of children diagnosed with cancer survived at least 5 years. However, by 2004-2010, more than 80 percent of children diagnosed with cancer survived at least 5 years.

Pediatric Regimens Needed 

Some evidence suggests that children may have better treatment outcomes if they are treated with pediatric treatment regimens rather than adult treatment regimens. For instance, it is possible that the improvement in the 5-year survival rates for 15- to 19-year-olds with ALL, from approximately 50 percent in the early 1990s to 78 percent in 2003-2007, reflects the greater use of pediatric treatment regimens. This evidence underscores the need for more pediatric cancer clinical trials and the development of pediatric treatment regimens. Unfortunately, this can only happen through greater funding from the government, private donations, and a greater commitment from drug manufacturers. In fiscal year 2012, the NCI’s funding of pediatric cancer research was only 208.1 million, which was approximately 3.5 percent of its $5.87 billion budget.

Long-Term Outlook and Follow-Up Care

While 5-year survivor rates are up for certain childhood cancers, surviving for 5-years is not a lifetime cure. In addition, childhood cancer survivors need follow up care and ongoing medical surveillance because of the risk of complications steming from their treatment. An analysis of childhood cancer survivors treated between 1970 and 1986 has shown that cancer survivors remain at risk for complications and premature death as they age, with more than half experiencing a severe complication or death by the age of 50.

In addition to regular medical follow-up examinations for childhood cancer survivors, the NCI underscores the importance of parents keeping an accurate record of cancer treatments, including: the type and stage of cancer; date of diagnosis and dates of any relapses; types and dates of imaging tests; contact information for the hospitals and doctors who provided treatment; names and total doses of all chemotherapy drugs used in treatment; the parts of the body that were treated with radiation and the total doses of radiation that were given; types and dates of all surgeries; any other cancer treatments received; any serious complications that occurred during treatment and how those complications were treated; and the date that cancer treatment was completed.

The NCI booklet Facing Forward: Life After Cancer Treatment contains a list of organizations that can help parents keep track of this information. The NCI also provides a handbook for parents of children with cancer.


Abuse-Deterrent Oxycodone/Naloxone Combination Approved by FDA

The FDA has approved a second extended-release/long-acting (ER/LA) opioid analgesic with FDA-approved labeling describing the product’s abuse-deterrent properties as recommended by the FDA’s 2013 draft guidance for industry, Abuse-Deterrent Opioids – Evaluation and Labeling. The FDA believes that information about a product’s demonstrated abuse-deterrent properties is important to health care providers, patients, and the public. Accordingly, the draft guidance recommends that new drug sponsors appropriately characterize the abuse-deterrent properties of their product in their proposed product labeling.

Abuse-Deterrent Properties

Since the early 1990s, the use of opioid analgesics for chronic pain has resulted in addiction, over-dose and death. In fact, by 2009, 100,000 deaths were attributed to opioid analgesics, with 15,500 reported in 2009 alone (see The risk of opioid abuse, addiction, and overdose in treatment of chronic pain). Targiniq ER® is expected to deter, but not totally prevent, abuse by snorting and injection. When crushed and snorted, or crushed, dissolved and injected, the naloxone blocks the euphoric effects of oxycodone, making it less liked by abusers than oxycodone alone. The drug, however, can still be abused by taking it orally.

Clinical Evaluation

Targiniq ER was evaluated in a clinical trial of 601 human subjects with chronic low back pain, with the safety data supporting approval including treatment of more than 3,000 people. Abuse liability studies from laboratory and human subjects demonstrated the abuse deterrent features of Targiniq ER as they relate to snorting and injecting. The most common side effects noted by clinical study participants were nausea and vomiting.


Targiniq ER (oxycodone hydrochloride and naloxone hydrochloride extended-release tablets), manufactured by Stamford-based Purdue Pharma LP, has been approved to treat pain severe enough to require daily, 24-hour, long-term treatment, and for which alternative treatment options have proved inadequate. Targiniq ER is not approved for as-needed pain relief. Targiniq ER will be available in 10/5 mg, 20/10 mg and 40/20 mg dosage strengths for dosing every 12 hours.

Postmarket Studies Required

The FDA’s approval is contingent on postmarketing studies to assess the risks of misuse, abuse, increased sensitivity to pain, addiction, overdose, and death associated with use beyond 12 weeks. The studies will also further assess the abuse-deterrent features of the drug. Details of the FDA’s approval and postmarketing requirements are contained in the FDA’s approval letter to Purdue Pharma.


The FDA has announced that Targiniq ER is part of the Risk Evaluation and Mitigation Strategy (REMS) for ER/LA opioids, a multi-agency federal effort to address the growing problem of prescription drug abuse and misuse. The REMS introduces new safety measures to reduce risks and improve safe use of ER/LA opioids while continuing to provide access to these medications for patients in pain. REMS specifically requires drug manufacturers to make available to health care professionals educational programs on how to safely prescribe ER/LA opioid analgesics and to provide Medication Guides and patient counseling documents on the safe use, storage, and disposal of these opioids.

For further discussion of the REMS program and the uproar over the FDA’s approval of Zohydro®, another ER/LA opioid analgesic with approved deterrent labeling, despite a 12-2 vote for disapproval by the agency’s advisory committee, see Should States Limit Access to FDA-Approved Opioids?

FedEx Indicted for Distributing Illegal Internet Pharmacy Drugs

The U.S. Attorney for the Northern District of California has indicted the FedEx Corporation, FedExExpress, Inc. and FedEx Corporate Services, Inc. (collectively, FedEx) for conspiring with two separate—but related— online Internet pharmacy organizations, the Chhabra-Smoley Organization and Superior Drugs, to distribute controlled substances and prescription drugs to U.S. consumers who had no legitimate medical need for them based on invalid prescriptions.


Since 1998, when Internet pharmacies first began offering consumers prescription drugs, some of these pharmacies have been filling orders based only on the completion of an online questionnaire, without a physical examination, a proper diagnosis, or a face-to-face meeting with a physician. This practice violates both federal and state laws governing the distribution of prescription drugs and controlled substances.

Warnings Made to FedEx

According to the indictment, as early as 2004, FedEx had been warned by the FDA, the Drug Enforcement Administration (DEA), and Congressional members and their staff that illegal Internet pharmacies where using FedEx services to distribute prescription drugs and controlled substances in violation of the FDC Act, the Controlled Substances Act (CSA), and other state laws.

Knowledge of Illegality Alleged

The indictment also alleges that in response to these warnings, FedEx established an Online Pharmacy Credit Policy requiring that all online pharmacy shippers be approved by the Credit Department prior to opening a new account. FedEx purportedly established a Sales policy in which all online pharmacies were assigned to a “catchall” classification to protect the commission-based compensation of its sales professionals from the volatility caused by online pharmacies moving shipping locations often to avoid DEA detection.

The indictment further alleges that, as early as 2004, FedEx clearly knew that it was delivering drugs to dealers and addicts because FedEx’s couriers expressed safety concerns to management that FedEx trucks were stopped on the road by online pharmacy customers demanding drugs, that the delivery address was a parking lot, school, or vacant home, and that FedEx drivers were threatened if they insisted on delivering packages to an address instead of giving the packages to individuals who demanded them. In response, the indictment alleges that FedEx merely held Internet pharmacy packages for problem shippers for pick up at specific stations, rather than delivering them.

FedEx’s employees are also alleged to have known that the Chhabra-Smoley and Superior Drugs online pharmacies had been shut down, and that their owners, operators, pharmacists, and doctors had been indicted, arrested, and convicted of illegally distributing drugs. Nevertheless, FedEx allegedly continued to deliver controlled substances and prescription drugs for these organizations.

Specific Statutory Violations

The indictment specifically charges FedEx with knowingly and intentionally conspiring with the Chhabra-Smoley Organization (from 2000 through 2008) and Superior Drugs (from 2002 through 2010) to violate the CSA, 21 U.S.C. Secs. 841 and 846, and the FDC Act, 21 U.S.C. Secs. 331, et seq., by distributing controlled substances and prescription drugs, including Phendimetrazine (Schedule III); Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), to customers who had no legitimate medical need for them based on invalid prescriptions.

FedEx must appear in federal court in San Francisco on July 29, 2014, to answer the charges.