(Management Case Study) Insights on Managing 505(b)(2) Products in Infusion Centers: One Health System's Journey

Purpose: The Center for Medicare & Medicaid services (CMS) made several code changes, including product-specific codes to identify certain drugs approved under a New Drug Application submitted under section 505(b)(2). CMS now requires a unique billing and payment code (HCPCS) for all products approved under section 505(b)(2) that are not rated as therapeutically equivalent to their reference listed drug in the FDA Orange Book and were not within the same billing and payment code as another drug or biological as of October 1, 2003. These coding changes required the pharmacy to change how these 505(b)(2) agents were dispensed and charged.

Methods: Two products were identified as high risk for cost impact, cyclophosphamide and protein bound paclitaxel. Stakeholder groups were engaged to identify potential barriers to 505(b)(2) conversions and develop action plans. Physicians that frequently prescribed the first two medications targeted were consulted about their comfort level with interchangeability. The revenue cycle team reviewed changes required in the charge master for charging implications. The managed care team worked with payors to help the team understand barriers to implementation with different payor types. The pharmacy team was tasked with mapping a process for electronic medical record build, procurement, dispensing and other considerations within the medication management process. Supply chain assessed the cost impact of conversions and non-conversion.
Targeted strategies were developed for the two greatest risk points identified, pharmacy operations and financial considerations. The medication management process needed safeguards to ensure correct ordering, compounding, dispensing and administration of non-interchangeable 505(b)(2) medications due to the risk of confusion since the products are not easily differentiated. Additional safeguards were also needed due to ongoing product shortages forcing potential deviations from preferred products. Financial barriers included applying the appropriate HCPCS code, ensuring compliance with the insurance plan’s approach to applying the HCPCS changes including the prior authorization processes, selection of formulary agents, and contract market share compliance.

Results: The system selected to go forward with a preferred formulary agent approach to both cyclophosphamide and protein bound paclitaxel. The pharmacy and therapeutics team adopted approval language that allowed the listing of all available products on formulary, but selection of a single agent as preferred. “These products are considered clinically equivalent. Formulary selection between these products will be determined based on financial considerations.” Products with differing HCPCS codes were built as separate medications in electronic medical record. The products were differentiated in name by the manufacturer name similar to the listings in the CMS outpatient prospective payment system documentation. Treatment plans were designed to auto-select the preferred agent. In the event an alternative agent was required due to insurance formulary, the alternative product was allowed. In the event multiple products of a single drug were required, they were stocked as separate agents within the pharmacy. The prior authorization team was notified of the preferred agent and all existing authorizations were updated to the preferred agent if allowed by insurance. A communication process was developed between the prior authorization team and the pharmacy for when the medication to be dispensed was different from the preferred agent to avoid authorization mismatches.

Conclusion: Navigating the complexities of appropriately handling 505(b)(2) approved medications is a complex issue that provided many challenges to implementation. By partnering with managed care, revenue cycle, supply chain, pharmacy, and information technology partners to develop process for 505(b)(2) approved medications, we have been able to ensure appropriate charge capture while maintaining compliance with vendor contracts. We anticipate use of this process as other 505(b)(2) products come to market that are commonly used in the outpatient infusion space. We continue to advocate to our insurance partners to consider cross walks and simplification of approval process.