DISARM Act solves AMR risk.

New approaches to antibiotic reimbursement are being explored in the United States in Medicare and in Europe through the work of Chatham House and DRIVE-AB. Traditionally, Medicare payments for inpatient antibiotics are based on Medicare severity diagnosis-related groups (MS-DRGs). The MS-DRG system is based on a set of fixed payment rates derived from the average treatment costs for a group of bundled services defined by specific diagnoses and other clinical characteristics. 27 While this creates incentives for hospitals to operate efficiently, MS-DRG rates based on historical average costs can create disincentives for hospitals to use newer, more expensive technologies not yet accounted for in the MS-DRG calculations. New technology add-on payments are viewed as a promising workaround. Introduced in 2001, such payments are a bridge to reimburse hospitals for the excess costs of new technologies not yet accounted for in the MS-DRGs during the first two to three years of product marketing. 28 Fidaxomicin for the treatment of Clostridium difficile diarrhea was granted new technology add-on payments beginning in 2012, providing an additional $868 per course, but only when the cost of the case exceeded the standard MS-DRG amount. 29 Fidaxomicin was superior to vancomycin, whose generic cost is about $120 per fourteen-day course of treatment, in sustained cure of C. difficile diarrhea, while noninferior on initial resolution. 30New technology add-on payments provide only short-term reimbursement adjustments for hospitals—that is, only long enough for the added cost to be reflected in the standard DRG amount. This process may have limited financial impact. In the first three months only thirty-eight new technology add-on payment claims were submitted by hospitals to CMS for fidaxomicin. Fidaxomicin recently failed to receive an extension of the add-on payment beyond the initial two years. Furthermore, these payments are awarded only for new technologies with demonstrated “substantial clinical improvement” over existing therapies—a challenging requirement for antibiotic development, since most antibiotic clinical trials for approval are designed to demonstrate noninferiority rather than superiority. In 2014 the Centers for Medicare and Medicaid Services (CMS) denied a new technology add-on payment for dalbavancin for failing to demonstrate “substantial clinical improvement” over existing therapy for acute bacterial skin and skin structure infections. 31 Dalbavancin was not superior in efficacy or safety to vancomycin but claimed improved convenience through once-weekly dosing. 32 In March 2014 the Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms (DISARM) Act of 2014 was introduced in Congress. DISARM, if passed, would create an additional add-on payment to the MS-DRG, similar to the new technology add-on payment, but as a permanent carve-out. This payment reform would apply only to antibiotics used in acute care hospitals that receive payments under Medicare fee-for-service (Part A) while participating in the Antimicrobial Use module of the CDC’s National Healthcare Safety Network (or an alternative program determined by HHS). Because DISARM is budget-neutral, one challenge faced by hospitals is that the increased payments for qualifying antibiotics would come from a lower base rate for the MS-DRG. As originally introduced, DISARM applies to most qualified infectious disease products. The practical effect may be to exempt most new hospital antibiotics from the MS-DRG and, therefore, from the pressure to limit low-value treatments created by the DRG system. Once again, a more effective alternative would be to target incentives to the antibiotics that most improve outcomes for patients. This alternative version of DISARM is being explored in Congress because it results in a significantly lower budget impact and targets incentives more carefully. In the outpatient setting, reimbursement rates for antibiotics are typically based on average selling price or some cost-to-charge ratio. Traditionally, low rates are a result of competition with low-cost generics and the absence of demonstrated superiority. 33 Even if DISARM or similar reforms allow for higher prices, add-on payments as a percentage of drug price and conventional outpatient reimbursement still encourage higher sales volume instead of rewarding appropriate use. Comprehensive payment reforms for both settings are needed that move away from price/volume models toward rewarding better outcomes for patients and appropriate use, while ensuring appropriate access for patients.