Sam Jaffe

Once upon a time there was a government program that was designed to pay for the  medical cost of the nation’s senior citizens. Born in the midst of social  activism and optimism in 1965, the plan successfully insured millions of the  most vulnerable and poorest patients.

Unfortunately, there’s no fairy-tale ending to this story. The  legislation, which included Part A, succeeded in solving the healthcare crisis  of the era of its birth: high hospital costs. Part B, which paid for drugs given  by doctors in hospitals or clinics, was also included in the 1965 law. Back  then, prescription drugs were for the most part an afterthought to medical care.  A task force appointed by President Lyndon Johnson recommended adding  prescription drug coverage in its 1969 report, but by then, Richard Nixon had  taken over the presidency and had little interest in prescription drug reform.

While Medicare Part B has been a godsend for most Medicare  patients with cancer (almost all chemotherapeutics are covered by Part B), it  didn’t go far enough. More and more senior citizens were becoming overwhelmed  with their prescription drug bills. And many older inpatient therapies, from  diabetes management to antibiotic regimens, have been replaced with pills.

The Medicare Catastrophic Coverage Act of 1988 was the first  substantial expansion of Medicare since the program’s creation. Coverage of  prescription drugs resulted in a substantial increase in the cost of Medicare,  which added to the Act’s numerous problems. Because of a public campaign,  Congress repealed the majority of the law’s provisions, including the  prescription drug benefit. New attempts during the Clinton administration failed  to gain support, and it wasn’t until the new millennium that increasing drug  costs and unequal access to coverage caused lawmakers to take a fresh look at  creating a Medicare drug benefit.

The Bush administration made Medicare reform a priority, and after  the 2002 Congressional elections, the Republican-controlled legislative and  executive branches were in a position to carry out that agenda. A push for  reform was also brought on by findings that drug companies were overcharging  Medicare.

After a period of political bargaining, the Medicare Modernization  Act narrowly passed the House (220-215) and Senate (54-44) and the Act was  signed into law on Dec. 8, 2003. Along with the addition of the prescription  drug program, it overhauled some of the coding that doctors use for  reimbursement and reformed the administrative structure of the Centers for  Medicare and Medicaid Services.

Now a few months into the new program, implementation continues to  be the challenge. Glitches at the first of the year temporarily left many  seniors without access to benefits at the pharmacy and some are paying more for  prescription drugs with Part D than with their previous plan. But as this most  recent Medicare experiment nears the May 15 enrollment deadline, patients and  lawmakers are hoping for favorable results.

Articles

Tracing the steps to the creation of Medicare Part D.

How Part D Came to Be

Although cancer is well-known for attacking people of all ages, the majority of  cancer victims are the elderly. Thus Medicare has long been the primary means of  insurance for cancer treatment. And as of Jan. 1, 2006, it also became the  primary means of paying for prescription drugs. Now many cancer patients are  wondering how the changes to the program will affect them.

The answer to that question depends on the individual’s specific drugs,  income, and previous insurance status. It’s all part of Medicare’s biggest  overhaul since its establishment. Medicare is nothing if not big. Some 43  million Americans get their health care through the program, the majority of whom  are over the age of 65. And it will soon get much bigger as the baby boomers  start to arrive at retirement age.

Yet the program has also been creaking with its five decades of age. Founded  in a time [the mid-1960s] when devastating hospital costs took priority over  prescription drug expenses, Medicare didn’t cover them. Despite an unsuccessful  record to create reform, the government added a prescription drug plan to the  system in 2003 called Medicare Part D.

Most Medicare cancer patients who underwent treatment prior to 2006 are  probably aware of Medicare Part B—the program that covers any drugs administered  to a patient in a doctor’s clinic. (Medicare Part A covers inpatient treatment  that a patient gets in a hospital.) Since most chemotherapy drugs are taken in a  clinical setting, Part B has been the primary payer for most cancer drugs. And  that won’t change much under the new program.

"Cancer drugs administered in a doctor’s office will still be covered under  Medicare Part B,” says Terry Coleman, a partner at the Washington, D.C. law firm  of Ropes & Gray, who helped to lobby for patient advocacy issues in the new  program. “If a doctor writes the prescription and you get the drug at a  pharmacy, it qualifies for Medicare Part D. But there are only a handful of oral  cancer drugs that qualify.” Coleman says some of the chemotherapy drugs and  anti-emetics (drugs that help with chemotherapy side effects, such as extreme  nausea and intestinal distress) have recently come out with oral versions that  can be taken at home rather than the doctor’s office. But a rule in the program  states that if there’s an injectable version of an oral drug, it is still  covered under Part B.

In order to spread costs across the broadest possible patient base, all  Medicare beneficiaries are required to sign up for a Part D plan by May 15, 2006  in order to avoid a penalty of higher co-pays. Thus millions of seniors have  been faced with the unenviable task of finding an insurance plan that fits their  needs.

Determining the right program is no easy task. There are hundreds of different  private insurance companies offering plans, each of which can vary by state.  Each plan differentiates itself by offering different co-pay rates, different  deductibles and different formularies (specific drugs offered by the plan).  However, they all must stick close to the standards set by the Medicare  Prescription Drug, Improvement and Modernization Act (MMA) of 2003. Those  standards are:

 A yearly deductible of no more than $250. In other words, the first $250 of pharmacy costs must be paid for by the patient.

 A 25 percent co-payment for the next $2,000 in drug costs. That means any costs accrued above $250 and below $2,250 will be split 75 percent/25 percent between the insurance company and the patient. (Pharmacies are reimbursed by the insurer.)

 100 percent of costs for the next $2,850 in drug costs is covered by the patient. This is the so-called “doughnut hole.” It leaves Medicare patients exposed to high drug costs if they have to pay between $2,250 and $5,100 in annual drug costs.

 If drug costs exceed $5,100, the co-payment from that point on is 5 percent.

While that might seem complicated enough, remember that those are only standards  set by Medicare administrators. Just about every variation in co-payments,  deductibles, and doughnut hole amounts is offered by private insurers.

The math alone can get excruciatingly difficult. However, it’s important to  remember that in the big picture, all the plans are relatively similar. Whether  they charge more for the premium or co-payment, they all must follow the same  guidelines for out-of-pocket spending by the patient. Thus the catastrophic  costs that used to leave some cancer patients bankrupt and sometimes without  necessary treatment should now be a thing of the past for anyone eligible for  Medicare.

But the homework in choosing a plan doesn’t stop  there. Each insurer is allowed to negotiate its own formulary with drug makers.  As a result, a particular insurance plan might not carry a specific drug that  you take. Luckily, Congress included an oncology exception to the MMA, which  requires that all cancer-related drugs be included in every private insurer’s  formulary. Thus all prescription cancer medications that aren’t already covered  by Part B, including many anti-emetic and anti-nausea supportive care drugs,  will be covered by all Part D plans. It’s the drugs that cancer patients take  for other problems, such as hypertension or heart conditions, that might not be  covered.

The first step in determining which drug plan to choose is to make a list of  all the drugs you currently take. Then, when you contact insurers about their  specific plans, make sure they cover those drugs in their current formulary. A  good starting point is the “My Medicare” website (

), which lists all the  insurance plans and contact information by state. Unfortunately, it doesn’t list  each plan’s formulary, so a patient must visit the website or call the toll-free  phone line of the various insurance companies for more information.

Sound intimidating? Now imagine doing all that if you’re 80 years old and  have never used a computer. That describes the mother of John Cox, MD, an  oncologist at the Methodist Dallas Medical Center in Texas. Cox is no  initiate in this area—he chairs the American Society of Clinical Oncology’s  clinical practice panel, which advocated for a prescription drug program for  Medicare. So when his mother was having trouble understanding how to enroll, he  offered to help. Two visits and several hours at the computer left him no closer  to finding the right insurance plan for his mother. “Confusing isn’t the word,” Cox says. “We narrowed it down to six or seven possible providers, but each  has various promulgations and it’s maddening trying to get the exact information  from different sources.” Cox next plans to turn to the pharmacist in his  clinic for advice. “But not everyone has a co-worker in that field. The next few  months will be a very confusing time for everyone.”

I never would have imagined that one day the government would pay for these  drugs. I’m so thankful for it.

There are other sources of help, though. One is the Patient Advocate  Foundation, a non-profit organization based in Virginia. The PAF has counselors  who can assist seniors in determining the right program for them, and will  actually enroll them over the phone. (The PAF has no financial connection to any  insurance companies.)

One person who took advantage of the PAF’s help is Nova Speece, a 66-year-old  retiree from Harmony, North Carolina, who spent as much as $300 a month in  pharmacy costs—nearly half her income. Diagnosed with colon cancer in August of  2005, she underwent chemotherapy and surgery last year. A recent biopsy showed  another cyst on her colon, which may or may not be cancerous. The prospect of  more medical bills caused her to jump at the chance to find out more about  Medicare Part D when she received a postcard from her local Social Security  office. A visit to that office resulted only in a promise of more information to  be mailed to her. She never received the mailing.

So, on the advice of her doctor, Speece called the PAF and was enrolled  immediately in a program. Because she earns less than $9,576 a year and is  single, she qualifies for a low-income Part D plan, with no deductible and a  co-payment of only $3 per prescription. Her future drug costs will  be measured in the tens of dollars rather than in the thousands. “This is so  exciting for me. I never would have imagined that one day the government would  pay for these drugs. I’m so thankful for it.” Speece says she’ll spend the money  she saves in prescription drug costs to pay off the almost $5,000 she owes for  surgery and doctors’ office visits from her bout with cancer.

Speece, like many cancer patients, got most of her cancer medications through  Medicare Part B. But that doesn’t mean Part D won’t be a big part of some cancer  patients’ lives. Some of the most promising new cancer drugs only come in pill  form. “One group that will really be helped by Part D will be anyone who is  prescribed Gleevec,” says Coleman. Gleevec (imatinib), which costs $2,200 a  month, treats chronic myelogenous leukemia and gastrointestinal stromal tumors  and was first approved by the Food and Drug Administration in 2001.

A newly approved drug for myelodysplastic syndromes called Revlimid (lenalidomide) will cost $4,500 a month and may soon be approved for treating  myeloma. Revlimid is a derivative of Thalomid (thalidomide), a little  understood chemical that somehow modulates the immune system to better fight  myeloma. Though thalidomide has not officially been approved for myeloma, many  oncologists are prescribing it for off-label usage. Medicare will pay for  off-label use (up to 60 percent of cancer drugs are prescribed off-label) as  long as that use is listed in one of three official usage reference books.

One of Cox’s biggest concerns, however, is the impact Medicare Part D  will have on patient assistance programs of the pharmaceutical firms. Those  programs offer free or reduced-price drugs to lower-income or uninsured  patients, all at the cost of the drug companies. Cox estimates that as much  as 40 percent of his patients utilize such programs. Now that all senior  citizens are technically insurable, federal statute forbids drug companies from  providing free pills to them. “The emphasis needs to shift from patient  assistance programs to offering co-payment assistance to people in need,” says  Nancy Davenport-Ennis, the founder and president of the Patient Advocate  Foundation. "A few thousand dollars in co-payment costs might seem like a  pittance for some of these drugs, but it might not be affordable to someone  living on a small fixed income.”

 contacted five large drug companies with questions about the  future of patient assistance programs. The only company that responded was  Genentech, the biotechnology powerhouse that produces such anti-cancer  blockbusters as Avastin (bevacizumab), which costs $4,400 a month for an  uninsured patient, Tarceva (erlotinib), and Herceptin (trastuzumab). Krysta  Pellegrino, manager of product communications for the company, doesn’t expect to  see much change in how the company runs its program. “Most of our drugs are  covered by Part B already, so Part D won’t have a big impact on how we assist  patients.”

But as science advances, targeted oral drugs like Gleevec and Avastin will  become more the norm than the exception, which means Medicare Part D will become  more important to cancer patients in the coming years. “We’re on the verge of a  revolution in oral biological drugs that will target individual genes or  proteins,” says Coleman. “It’s going to change how cancer is treated.” And, he  points out, Medicare Part D will now pay for most such drugs.

Newer oral cancer drugs will be covered under the new prescription drug plan. 

Maneuvering the Maze of Medicare Part D

On the face of it, the June 17, 2005 announcement seemed an innocuous shred of red tape. The Food and Drug Administration was changing the way AstraZeneca could label its anti-cancer drug Iressa (gefitinib). Just a wording change.

But that wording change spoke volumes. The FDA was essentially pulling its approval from Iressa by making distribution so restrictive that it had returned to being an experimental drug, and the only people who could get it were those currently showing benefit or subjects in clinical trials.

Although AstraZeneca continues to test the drug for potential niche markets (initial studies show a higher response rate among Asian lung cancer patients for reasons not fully understood), it will take the company years to do enough testing to convince the agency to give full approval. Luckily, patients can look to an alternative therapy called Tarceva (erlotinib), a new drug that acts on the same molecular pathway as Iressa. Nevertheless, for the first time, a drug that received accelerated approval has been pulled. And a series of other accelerated approval applicants has met with hardships or downright rejection from the FDA’s advisory committees. Is this just a one-time confluence of coincidences or the beginning of a new, stricter policy at the FDA?

Most experts, and the FDA itself, say the accelerated approval process is alive and well. Richard Pazdur, MD, director of the FDA’s newly formed Office of Oncology Drug Products, says commercial sponsors and the agency have gained increasing experience with the process to expedite drugs to the American public. He says the Iressa issue only demonstrates that the accelerated approval process works.

“At the time Iressa was approved, there were no other therapies for refractory lung cancer,” says Pazdur. “Subsequently, Tarceva was approved, and several randomized confirmatory trials failed to demonstrate the benefit of Iressa.”    “Iressa is a one-off event,” says Charles Bennett, MD, PhD, an oncologist at Northwestern Comprehensive Cancer Center in Evanston, Illinois, who has studied the process. “It’s not a policy shift or paradigm.” What is happening, Bennett and others say, is that the FDA is dealing with a flood of new experimental cancer drugs, and with the hits come misses. Among the Gleevec (imatinib) and Erbitux (cetuximab) success stories of accelerated approval, there are bound to be failures like Iressa. In addition, Zarnestra (tipifarnib), a drug for acute myeloid leukemia patients, was denied accelerated approval in May of this year but is still in phase III testing and may be resubmitted for approval in two to three years.

At the heart of the accelerated approval system is the simple desire to make drugs that appear to offer hope to otherwise untreatable maladies available to patients as early as possible. A typical drug approval can take five to 10 years after the initial application. In the early 1990s, AIDS activists demanded a shortcut for promising drugs, even if the data were incomplete. In 1992, the FDA responded by revamping an earlier, little-used compassionate care program (see sidebar, page 40) into an official accelerated approval system, complete with official benchmarks and phone-book-size regulatory manuals. 

To qualify for the system, a drug must show significant potential to treat a disease that otherwise has no treatment. An accelerated approval drug doesn’t need to show a clinical endpoint (proof that the disease is being cured or deaths are being reduced), but there must be compelling evidence to believe that progress is being made in fighting the disease or symptoms are being relieved. That evidence can be physical (tumor shrinkage) or it can be relational (a decrease in a protein that tends to appear when cancer is present). It also doesn’t have to be overwhelmingly convincing. Data from clinical studies that test only a few dozen or a few hundred patients can be submitted, whereas thousands of subjects in double-blinded studies must be tested for full approval. 

“Drugs approved under accelerated approval are based on a surrogate that is reasonably likely to predict clinical benefit,” says Pazdur. “Therefore, there is an element of risk acknowledged by the FDA in approving drugs under accelerated approval.” Pazdur notes that accelerated approval is meant to be only a temporary measure. Drug companies are required to do full studies to prove the drug is safe and effective. But he says accelerated approval can negatively impact patient accrual for these studies. “The approval has implications for completion of confirmatory trials since oncologists and patients have commercial access to the drug after accelerated approval.” 

Vicki Vandamme found herself on the Iressa roller coaster. An avid windsurfer from Marin County, California, the 51-year-old nonsmoker saw minor shrinkage of her lung tumor while on chemotherapy. She was then put on Iressa, but her June 16 checkup proved that Iressa wasn’t working. The tumor had grown and spread to her lymph nodes. The FDA announced its stricter labeling provision for Iressa just one day later.

At the heart of the accelerated approval system is the simple desire to make drugs that appear to offer hope to otherwise untreatable maladies available to patients as early as possible.

Vandamme, who is adamant she can beat the disease, is back on chemotherapy and hopes to start Tarceva soon.

Although the Iressa case is the first example of effective withdrawal of an accelerated approval drug, the case of Zarnestra sheds more light on the accelerated approval process.

When Zarnestra was denied accelerated approval in May, some patient advocates and pundits publicly voiced concern that the accelerated approval process, meant to be an expressway, was now slowing to a crawl. A closer look at the Zarnestra story, however, shows that this wasn’t a bureaucratic slowdown. For one thing, the 11-member panel wasn’t unanimous in its recommendation. The final vote was seven to four.“It was a very heated debate and it wasn’t an easy decision to make,” says Art Flatau, a leukemia survivor who represented patients on the committee. Flatau voted against approval. “I just didn’t see the compelling evidence.”

Flatau and the other committee members who voted against accelerated approval had reason to be skeptical. Only 136 elderly, newly diagnosed AML patients were evaluated in the phase II trial used to support Zarnestra’s approval. Johnson & Johnson, maker of the drug, claimed that 15 percent of patients had a complete remission. Flatau compared that success rate with chemotherapy results, which, according to a database search by fellow panel member and M. D. Anderson Cancer Center leukemia specialist Susan O’Brien, MD, can be as high as 40 percent remission. Topping Flatau’s concerns was the fear that many elderly patients would choose the drug, if approved, over chemo-therapy out of a fear of side effects. “It’s clear that this drug is safer than chemotherapy,” he says, but adds that there’s no evidence it’s more effective.

Ronald Bukowski, MD, director of experimental therapeutics at the Cleveland Clinic and another member of the FDA committee, disagreed with Flatau and voted for the accelerated approval of Zarnestra. That doesn’t mean he was satisfied with the data, though. “The trial should have been designed for patients that aren’t eligible for chemotherapy,” he says. Johnson & Johnson is enrolling patients in a phase III trial for newly diagnosed AML patients 70 and older.

Zarnestra isn’t the only issue that has upset FDA critics. Rep. Edward Markey of Massachusetts published a staff report in June that quantified another argument against the early approval process. His office did a public records search of drugs that received accelerated approval and then failed to do the required follow-up studies. According to the report, half failed to do the required studies. “The system is broken,” he said in a June press conference. 

The FDA disagrees. Robert Temple, MD, associate director of the agency’s office of medical policy, points out that of the 24 oncology-related drugs that have received accelerated approval, nine have been upgraded to full approval after follow-up studies. Of the other 15, seven were just approved in the past two years—not nearly long enough to complete a full phase III trial. “And the rest are working on studies,” says Temple. “It’s not a useful observation to say that the drug companies haven’t finished their trials in such a short time frame.” 

Temple insists the system isn’t broken but that it could stand a tune-up. He points out that the structure of trials is crucial. “We’re much more interested in seeing the early results from a large randomized trial than the early results from a small trial,” he says. In other words, if the early results of a phase III trial are promising enough, the ears at the FDA will be more sympathetic toward accelerated approval. “That way, the follow-up data are already in the process of being collected.” 

Indeed, most experts agree the accelerated approval process isn’t in need of an overhaul but could use some minor tinkering to correct fixable flaws. Bennett lauds the program for its success rate, but he is still anxious about the tendency to approve drugs that have been tested in few subjects because “it raises some safety questions,” he says.

Nevertheless, Bennett says the positives outweigh the negatives of the program. According to his data, accelerated approval knocks hundreds of days from the typical time it takes a drug to get full approval. And on each of those days, patients with terminal diseases have access to drugs they otherwise wouldn’t have a chance to get.

Indeed, most experts agree the accelerated approval process isn’t in need of an overhaul but could use some minor tinkering to correct fixable flaws.

Accelerated process speeds drugs to the patient, but some rally for changes to the system.

Sam Jaffe

How Part D Came to Be

Maneuvering the Maze of Medicare Part D

Accelerated Drug Approval: Taming the Shortcut?

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