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CMS to Partially Reimburse Hospitals for Xigris Costs

Kate Traynor

Beginning Oct. 1, hospitals can be reimbursed up to $3,400 for each qualifying Medicare beneficiary who receives drotrecogin alfa activated for the treatment of life-threatening sepsis.

According to a rule published in the Aug. 1 Federal Register, (PDF) the Centers for Medicare & Medicaid Services (CMS) considers drotrecogin alfa activated, or Xigris, a new technology that represents a substantial improvement over existing treatments available to Medicare beneficiaries. As such, reimbursement for the Eli Lilly and Co. drug will be made through an "add-on payment" that remains in effect through the 2004 fiscal year. CMS expects by that time to include drotrecogin alfa activated therapy in a diagnosis-related group (DRG) that has been updated to reflect the drug's cost.

Until then, claims for the add-on payment must use the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) code 00.11, which indicates infusion of drotrecogin alfa activated.

The $3,400 maximum add-on payment corresponds to half of Lilly's estimate of the cost of drotrecogin alfa activated that is infused during a standard 96-hour course of therapy for a person weighing 70 kg.

To qualify for the add-on payment, hospitals must use the drug as described in the product's Food and Drug Administration-approved labeling. Drotrecogin alfa activated is currently indicated for reducing the likelihood of death in adults with severe sepsis who are at high risk of dying. Medicare carriers cannot authorize the add-on payment if the drug is used in the presence of labeled contraindications, which include active internal bleeding, recent hemorrhagic stroke, recent intracranial or intraspinal surgery or severe head trauma, and the presence of an epidural catheter.

CMS stated in the Federal Register that the agency reserves the right "to reexamine the issue of limiting the types of patients for which add-on payments are made" for fiscal year 2004. Also, CMS will reduce the level of reimbursement for new technologies, such as drotrecogin alfa activated, if the agency estimates that the total cost of reimbursements will exceed a target set for the fiscal year.

Drotrecogin alfa activated is the first product to earn the new technology designation and qualify for special payment under the Medicare, Medicaid & SCHIP Benefits Improvement and Protection Act of 2000 (BIPA). The act required CMS to establish a method for hastening the inclusion of new technologies in the agency's clinical coding system and to factor the cost of the technology into the DRG to which the technology is assigned.

According to CMS, Congress intended payments for new technologies assigned under BIPA to be "budget-neutral." Thus, CMS will offset the add-on payment for drotrecogin alfa activated therapy by reducing payments elsewhere in the Medicare system.