Note: This insight was originally posted on March 23, 2021. It was updated on October 5, 2023, to include new information.

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, 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 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 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. In the CY 2019 ESRD PPS rulemaking cycle, CMS notably 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, 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 the costs of the new drug. CMS further modified the TDAPA in the CY 2020 ESRD PPS rulemaking by 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.

*Note: In 2016, CMS set payment based on 106% of each drug’s ASP. As of 2020, CMS sets payment based on 100% of each drugs ASP.
**Note: CMS proposed modifying this methodology in the CY 2024 proposed rule. Details discussed below.

To date, four ESRD-related drugs have been or are currently being paid through the TDAPA. The first set of products to receive TDAPA was calcimimetics. 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, CMS decided to incorporate calcimimetics into the base rate with an upward adjustment of $9.93, specifically accounting for these calcimimetic therapies. 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. CMS calculated the total expenditure by using the most recently available pricing data for the oral and IV calcimimetic therapies. Data from the first two quarters of 2018 were not included in the payment calculation, as CMS determined it did not accurately depict utilization of these calcimimetic treatments.

While the calcimimetics have been incorporated into the bundle, two products currently have the TDAPA payment designation.  An intravenous anti-pruritis treatment has received TDAPA since April 2022 and is anticipated to run through March 2024, following which the product will be incorporated into the bundle as a product within the existing antipruritic functional category. An oral anti-anemia product just started its TDAPA period on October 1, 2023, and it is anticipated to run through September 2025.

CMS is currently considering a modification in its bundle incorporation process for those products placed in an existing functional category after completion of the TDAPA period. Following the 2 years of TDAPA, CMS proposed a 3-year add on payment at 65% of expenditure levels for these products. This incorporation adjustment was limited as CMS argued that existing dollars in the bundle are associated with the treatment of these conditions. Some stakeholders have countered that the 35% reduction is arbitrary, does not consider competitive dynamics, and does not reward innovative products.

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.