New mechanisms for antibiotic reimbursement in the United States: CMS’s IPPS FY2020 Final Rule

Dear All (and with thanks to Kevin Outterson for substantial help with this newsletter),

On August 2, 2019, the US government agency that administrates Medicare & Medicaid (CMS) announced several significant changes to hospital antibiotic reimbursement in US hospitals, effective October 1, 2019 (link to the very detailed Federal Register notice; go here for user-friendly summaries in Health Affairs and on Further wonkish details on this change (called the IPPS FY2020 Final Rule) are just below my signature, but in brief it defines rules for reimbursing new in-hospital antibiotics when they are needed, it proposes a way to recognize the overall cost of managing drug-resistant infections, and is the most significant pull incentive for antibiotics that we’ve ever seen. The new rule also includes payments for managing the complexity of drug-resistant infections. Importantly, we are not talking about a proposal, but a fully finalized regulation that kicks off for patient discharges on or after October 1, 2019 — less than 2 months from today!

The Final Rule begins to level the playing field so clinicians can choose antibiotics for their hospitalized patients without undue fear of hurting the hospital’s finances. Many private insurers in the US voluntarily follow CMS billing rules as well.

In parallel, CMS highlighted the need to pair these incentives with antibiotic stewardship, promising action on the long-anticipated CMS antibiotic stewardship rule.

CMS went about as far as anyone reasonably expected, given their existing legal authorities. The stage is now set for Congress to finish the task with DISARM H.R.4100 (codifying and extending these DRG reforms, link) and then a delinked pull incentive in a bill to be introduced this fall.

Very exciting to see! All best wishes, –jr

John H. Rex, MD | Chief Medical Officer, F2G Ltd. | Expert-in-Residence, Wellcome Trust. Follow me on Twitter: @JohnRex_NewAbx. See past newsletters and subscribe for the future:

Wonkish background on how Medicare pays for hospital antibiotics:

Medicare pays hospitals in a bundled payment, called the Diagnosis-Related Group (DRG). The bundled payment for any given DRG is meant to cover all typical costs of care for that DRG. The DRG includes inpatient antibiotics, but since most are generic, the DRG pricing assumes generic antibiotics. If a hospital physician chooses to use a branded antibiotic (hopefully, for good clinical reasons — more on that below), the hospital will lose thousands of dollars on that patient. The result is that US hospitals routinely wait several years to add new antibiotics to their hospital formularies (go here for a recent paper on this) and continue to use dangerous but cheap drugs like colistin (see chart at the bottom of page 13 of this 29 Mar 2019 summary by Alan Carr). 

Until now, the only way out of this box has been the New Technology Add-on Payment or NTAP. An NTAP is a temporary (3-year) fix that is applied to new technologies before their cost has been incorporated into the relevant DRG. In theory this was a good approach but in practice it suffered from several limitations. One is that the antibiotic must demonstrate “substantial clinical benefit” (SCB) which is difficult with the necessities of non-inferiority studies for new antibiotics (go here or here for detailed discussions of the problem of superiority vs. non-inferiority for antibiotics). To the best of my knowledge, only 3 antibiotics have made it through this hurdle in the past decade: DIFICID fidaxomicin, ZEMDRI (plazomicin), and VABOMERE (meropenem-vaborbactam). Since the low number of NTAP antibiotics means that handling the paperwork for reimbursement is not part of the standard workflow, most hospitals have ignored NTAP for antibiotics, thus defeating its purpose. In addition, the payment amount was sufficiently low that the net value of claiming the NTAP reimbursement seen as not worthwhile.

In the Final Rule, CMS has addressed these issues by both waiving SCB for all QIDP antibiotics and boosting the NTAP amount by 50% (technically from 50% of the excess cost to 75% of the excess cost). For Melinta’s Vabomere, the NTAP hA now jumped from $5544 to $8314. The increased number of qualifying antibiotics and larger dollar amounts should help hospital billing offices sit up and take notice.

But, the NTAP lasts only for up to 3 years, as it is designed as an on-ramp to help with adoption of new technologies until the DRG adjusts for their use. Combined with the slow pace of antibiotic uptake, the DRG will probably never fully adjust to encompass the new therapy.

To address this further problem, CMS has boosted reimbursement for hospital DRGs with new ICD-10 codes for drug-resistant infections. So long as the hospital includes one of these diagnosis codes on their bill, they will receive a “complication or comorbidity” (CC) payment upgrade. Unlike the NTAP, this change is permanent and the impact will be ongoing.

Better still, CMS is thoughtfully considering entirely new DRG codes for drug-resistant infections. CMS is asking for stakeholder comments to flesh out this important idea. See above-cited Health Affairs paper (link) for additional details. 

Upcoming meetings of interest to the AMR community:

  • 20 Aug 2019 (webinar, 17:00-18:30 CEST): REVIVE webinar entitled “Models for antimicrobial R&D: Computational modelling for population PK and PKPD.” Go here to register.
  • [Mark your calendar now!] 3-6 Sep 2019 (Boston). Annual ASM-ESCMID Conference on Antibiotic Development. The Bootcamp series will continue on 3 Sep with main meeting on 4-6 Sep. Mark your calendar now and check back here for details.
  • 6 Sep 2019 (Cambridge): CeBIL Annual Symposium 2019: Legal Innovation to Support the Development of Anti-Microbial Drugs. For more details and to register, go here.
  • 6-8 Sep 2019 (Bilbao, Spain): 5th ESCMID conference on Vaccines. Check back here for details.
  • 10 Sep 2019 (webinar, 17:00-18:30 CEST): REVIVE webinar entitled “Models for antimicrobial R&D: Advanced and complex in vivo models for infectious disease research.” Go here to register.
  • 3 Oct 2019 (webinar, 17:00-18:30 CEST): REVIVE webinar entitled “Natural product antibiotics: from traditional screening to novel discovery approaches.” Go here to register.
  • 2-6 Oct 2019 (Washington, DC): IDSA’s annual IDWeek meeting.
  • 19-27 Oct 2019 (Annecy, France): International Course on Antibiotics and Resistance (ICARe) – A soup-to-nuts intensive residential training program on all things AMR, especially R&D for new antibiotics. See this link for details.
  • 16-18 Dec 2019 (Bangkok, Thailand): 3rd International Symposium on Alternatives to Antibiotics in Animal Production. Go here for details:
  • 1-6 Mar 2020 (Il Ciocco, Tuscany, Italy): GRC on Antibacterial Discovery and Development: “Now is the time to re-boot antibiotic R&D before it’s too little, too late.” Go here for details.
  • 12-13 Mar 2020 (Berlin?): BEAM-, Novo REPAIR-, CARB-X-, DZIF-, ND4BB-, ENABLE-supported (among a long list!) Conference on Novel Antimicrobials and AMR Diagnostics. Final location is TBD, details will appear here, and you should mark your calendar now. 
  • 16-17 Mar 2020 (London): BSAC Spring Conference entitled: “Bridging the gap between science, policy and effective antimicrobial use.” Go here for details. 
  • 18-21 Apr 2020 (Paris): Annual ECCMID meeting (#30)
  • 25-30 May 2020 (Rotterdam), Annual ESPID meeting (European Society for Pediatric ID, #38)
  • 10-13 Apr 2021 (Vienna): Annual ECCMID meeting (#31)


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