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How the Transitional Drug Add-On Payment Adjustment (TDAPA) Works

Summary

The TDAPA supports payment and patient access to new therapies introduced to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS). While no major TDAPA revisions were finalized in the Calendar Year (CY) 2021 ESRD PPS Final Rule, stakeholders should continue to monitor this payment adjustment policy, as it has evolved since its introduction and may continue to change in future rulemaking cycles.

As manufacturers look to bring new and innovative therapies into the dialysis space, understanding opportunities for separate reimbursement in a bundled payment environment will be critical. Since the introduction of the present ESRD PPS in 2011, Medicare has utilized a bundled payment mechanism to reimburse facilities for dialysis services as well as for most dialysis drugs, laboratory tests, and other related items and services that were previously billed separately. This per-patient-per-treatment payment is case-mix adjusted to account for certain patient- and facility-level variations and other potential adjustments (e.g., outlier payment, Quality Incentive Program performance). The bundled payment incorporates Part B ESRD-related drugs and their oral equivalents. Oral-only ESRD-related drugs are slated to be incorporated into the bundled payment beginning in 2025.

To pay for new ESRD-related therapies not yet accounted for in bundled payment, the Centers for Medicare and Medicaid Services (CMS) introduced the TDAPA in the 2016 rulemaking cycle. This designation enables payment for new ESRD-related therapies until the CMS gathers sufficient claims data to incorporate the new therapy into the bundle and adjust the base payment rate. When initially introduced, the TDAPA was only available for new drugs outside of existing ESRD PPS functional category (i.e., 1 of 11 CMS-designated categories of ESRD therapies, such as anemia management). Such therapies would be paid at 106% of average sales price (ASP) and be eligible for no less than 2 years of TDAPA while CMS collected drug cost and utilization data.

Since its introduction, the CMS has refined these TDAPA eligibility criteria and payment parameters. Notably, in the CY 2019 ESRD PPS rulemaking cycle, CMS expanded TDAPA eligibility for all new renal dialysis drugs, regardless of whether or not the drug fits within an existing functional category. For new therapies in existing functional categories, the CMS limited TDAPA eligibility to 2 years and set payment at 100% of the drug’s ASP. Following the conclusion of the TDAPA, the bundled payment would not be adjusted to reflect costs of the new drug. The CMS further modified the TDAPA in the CY 2020 ESRD PPS rulemaking in suspending TDAPA eligibility for generic drugs and drugs with certain types of New Drug Applications, conditioning the TDAPA on ASP data availability and modifying the payment rate for TDAPA-eligible calcimimetics to 100% of ASP.

Table 1. TDAPA Eligibility Summary
Key Components New ESRD-Related Drugs and Biologics that Are Not in Existing Functional Categories New ESRD-Related Drugs and Biologics that Are in Existing Functional Categories
Year implemented 2016 2020
 “Substantial Clinical Improvement” criterion? No No
Payment rate of add-on ASP* ASP*
Length of add-on payment At Least 2 Years 2 Years
Is the product included in the bundle at the end of the TDAPA period? Yes Yes
Is the payment rate updated at the end of the TDAPA Period? Yes No

*Note: In 2016, the CMS set payment based on 106% of each drug’s ASP. As of 2020, the CMS sets payment based on 100% of each drugs ASP.

To date, only 1 set of ESRD-related drugs—calcimimetics—has been paid through the TDAPA. These oral and IV therapies received this payment adjustment between January 1, 2018, and December 31, 2020. In the CY 2021 ESRD PPS rulemaking cycle, the CMS decided to incorporate calcimimetics into the base rate with an upward adjustment of $9.93, specifically accounting for these calcimimetic therapies. The CMS arrived at this amount by dividing the calcimimetic expenditures over the 18-month period from July 2018 through December 2019 by the total number of paid hemodialysis-equivalent dialysis treatments over that period. The CMS calculated the total expenditure by using the most recently available pricing data for the oral and IV calcimimetic therapies. Data from the first 2 quarters of 2018 were not included in the payment calculation, as the CMS determined it did not accurately depict utilization of these calcimimetic treatments. The CMS estimated that the bundling of calcimimetics would negatively impact regional, independent, and hospital-based facilities. Additionally, variation in calcimimetic utilization could create financial pressure for certain facilities that treat large percentages of patients with characteristics associated with calcimimetic use.

Given the frequency with which the CMS has refined this payment designation, further refinements to the TDAPA could occur in future rulemaking cycles. While MedPAC did not offer any TDAPA-related recommendations in its most recent March 2021 report, the Commission has previously recommended that the CMS not provide TDAPA eligibility to new products in existing functional categories. MedPAC also previously considered whether a “substantial clinical improvement” criterion should be included in the eligibility criteria for the TDAPA. The CMS has used such a criterion in the inpatient payment system with the New Technology Add-on Payment (NTAP) and included such a criterion in the TDAPA-like Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies in the dialysis space. While not binding, these recommendations illustrate that the TDAPA will more than likely continue to evolve along with the ever-advancing ESRD therapeutic and policy landscape writ large.

Given the numerous revisions to the TDAPA’s eligibility criteria and payment provisions since its introduction in 2016, stakeholders in the ESRD and broader kidney care space should continue to monitor any new developments related to this payment designation. Avalere has a deep experience in the kidney care space and can support manufacturers in a number of ways, including providing guidance on this payment adjustment, analyzing stakeholder incentives related to the TDAPA, and supporting CMS engagement and comment submission during the rulemaking process.

To learn more about how Avalere can support you in understanding the evolving ESRD and kidney care policy and market landscape, connect with us.

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