by Manasi Vaidya in New York.

Current hospital diagnosis-related group (DRG) payment structures may not fully cover Gilead Sciences’ Veklury (remdesivir) costs in Covid-19 treatment. While there is a possibility DRG updates and add-on payments can make up the deficit, the extent of completely recovering costs remains unclear given the scale of the pandemic. Veklury is an intravenous infusion administered in the hospital setting for severely ill Covid-19 patients. It is reimbursed under Medicare Part A, which covers inpatient care. As such, it would typically be wrapped into DRG payments, where each inpatient case is assigned payment based on the average resources used to treat the patient type. According to a 17 July fact sheet, the average Medicare payment per fee-for-service Covid-19 hospitalisation cost has been $25,255.

However, current DRGs will likely not fully encompass Veklury’s cost since they were not designed with Covid-19 or the drug in mind, with subsequent DRG add-ons and updates potentially inadequate. Gilead had supplied Veklury to the US government under an FDA emergency use authorisation given on 1 May, with the FDA coordinating its distribution. On 29 June, Gilead announced two different prices for Veklury based on the purchasing authority: government or commercial. Given the lack of alternative approved therapies, experts said there is not much room for further price negotiations via rebates or bundling arrangements. Still, as the pandemic has created a novel reimbursement landscape, there should be no issues to stymie patient access to Veklury. Gilead did not respond to a request for comment.

Full scope of Veklury could miss DRG coverage

The DRG for a Covid-19 patient discharged during the Covid-19 public health emergency (PHE) period, which started on 27 January, was increased by 20%, as per an 27 April Centers for Medicare and Medicaid Services (CMS) release. While this rate hike may cover Veklury costs, this adjustment was done before Veklury pricing was released, said Andrew Cournoyer, director, Access Experience Team, Precision Value, Hartford, Connecticut. Thus, the impact of Veklury’s use and its reimbursement expenditures for a hospital is still unknown, said Cournoyer and Dr Dominic Galante, chief medical officer, Precision Value.

Even though Veklury is available at a lower price of $390 per vial, representing the “government price”, most hospitals are not “government purchasers” and will be subject to the price of $520 per vial, said Cournoyer. In the short term, hospitals are likely to accept the additional cost of Veklury as a deficit outside of the current DRG models, said Jack Mycka, CEO, Medical Marketing Economics, Montclair, New Jersey. The estimated DRG payments for a principal or secondary diagnosis related to Covid-19 range from $6,024 to $39,897 for patients who need ventilator support for more than four days, as per a CMS factsheet.

Group purchasing organisations that buy prescription drugs, devices and other items for many hospitals in bulk can negotiate discounts, but that ability is limited if there are no competing products on the market, said Galante. The lack of alternate approved therapies to Veklury means rebates or bundled payments will be challenging to execute, said Richard Trembowicz, associate principal, ECG Management Consultants, Boston, Massachusetts. It would be surprising if there is any scope to negotiate for rebates on Veklury because the drug has shown effectiveness at a relatively modest price, said Mycka.

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Primary diagnosis data is very important for the CMS to calculate how much Veklury will drive costs within a DRG, Trembowicz said. However, Covid-19 data collection has not been standardised nationally he said, noting examples of negative tests not being reported in some states like Florida, or not all Covid-19 deaths having an associated positive Covid-19 test.

In terms of revising DRGs to account for Veklury costs, this is not an immediate process, experts said. DRG payment rates are calculated annually and are based on previous Medicare claims, so this can create a lag of two to three years before new technologies designed to include therapies or medical interventions are factored in, said Galante. The reimbursement system is not set up to respond to a pandemic, said Mycka.

However, while it usually takes one year to modify DRGs for new technologies, this may happen in the next 3–6 months, said Roderick Cavinindependent market access consultant, Yardley, Pennsylvania. Government and private payers have been supportive of ensuring patient access to therapies, including modifying DRGs, which is driving the assumption that DRGs will be updated soon, he added. In the interim, payers expect hospitals to ask for carve outs or additional payments to cover the additional costs, said Cavin.

NTAP payments could cover costs

Veklury is anticipated to be eligible for the Medicare new technology add-on payment (NTAP), a temporary additional compensation for hospitals using qualifying new technologies, said Galante. If a hospital incurs shortfalls in reimbursement due to Veklury’s costs, NTAP exception requests will likely be made, said Cournoyer. However, while add-on payments are designed to cover the additional costs of new technologies, it is a different scenario when thousands of patients are treated with that new treatment versus just a few, said Mycka. Payers and systems are figuring out payment systems ad-hoc as a result, he said.

Another challenge with NTAPs trying to cover the additional Veklury costs is that, at least historically, payers tend to initially reject them and ask for more data, said Cavin.

There seem to be two types of commercial payer outlooks when it comes to reimbursing Veklury in the hospital, said Cavin. The first insists on establishing criteria to limit its use to severely ill patients without any further specificity, and the second is covering Veklury’s use as long as a physician determines a patient with a positive Covid test result to be severely ill, he added. Under the 1 May EUA, Veklury is indicated for lab-confirmed Covid-positive patients with severe disease, defined as patients with oxygen saturation (SpO2) ≤94% on room air or requiring supplemental oxygen, requiring mechanical ventilation or requiring extracorporeal membrane oxygenation.

Additionally, Gilead is evaluating an inhaled version of Veklury for potential outpatient use, as per an 8 July company press release. When Veklury is used in the outpatient setting, the drug‘s coverage will not be under inpatient services, so its cost may hit payers the most as its reimbursement is calculated differently, said Cavin.

Nonetheless, it is unlikely for a US payer to say that a patient cannot access a life-saving treatment like Veklury because it is too expensive, especially now given the ongoing Covid-19 pandemic, said Mycka and Cavin.

Manasi Vaidya is a Senior Reporter for Clinical Trials Arena parent company GlobalData’s investigative journalism team. A version of this article originally appeared on the Insights module of GlobalData’s Pharmaceutical Intelligence Center. To access more articles like this, visit GlobalData.