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Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under Medicare Part B


Between 1995 and 2010, certain prostate cancer drugs covered under Medicare Part B were subject to least costly alternative (LCA) policies, which based the payment amount for a group of clinically comparable products on that of the least costly one. However, in April 2010, LCA policies for Part B drugs were discontinued in response to a court ruling stating that the use of an LCA policy was not authorized under Medicare law. Recently, Congressman Ken Calvert expressed concerns that the withdrawal of LCA policies for prostate cancer drugs may have created an unintentional incentive for physicians to administer costlier drugs. Congressman Calvert requested an examination of the policy withdrawal and its impact.


For each quarter between the beginning of the third quarter of 2010 and the end of the second quarter of 2011, we identified the lowest Medicare payment amount among clinically comparable luteinizing hormone-releasing hormone (LHRH) agonists used to treat prostate cancer and calculated the amount that Medicare would have saved if the more expensive LHRH agonists had been reimbursed at these lower amounts. To determine whether the withdrawal of LCA policies affected utilization patterns for LHRH agonists, we tracked quarterly shifts in utilization from 1 year before the policies were withdrawn to 1 year after.


If LCA policies for LHRH agonists had not been rescinded, Medicare expenditures would have been reduced by $33.3 million over 1 year, from $264.6 million to $231.3 million. After LCA policies were removed, utilization patterns shifted dramatically in favor of certain costlier products. However, the overall utilization of LHRH agonists to treat prostate cancer has been decreasing, a trend that began at least 1 year prior to elimination of LCA policies and continued for more than a year after.


Our results indicate that Medicare spending for LHRH agonists is higher in the absence of LCA policies. We also confirmed changes in utilization patterns for LHRH agonists, some of which appear to have occurred independently of LCA policies and some of which coincided with their removal. LCA policies may be a useful tool for conserving taxpayer funds, provided that patients retain access to appropriate care, but are not likely to be restored without legislative action. Therefore, we recommend that CMS consider seeking legislative authority to implement LCA policies for Part B drugs under appropriate circumstances. CMS partially concurred with our recommendation.