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«October 2015 1107 9th Street, Suite 501, Sacramento  CA 95814  916-538-6091 0 About Cataract Surgeons for Improved Eyecare: Cataract Surgeons ...»

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Analysis of the Economic Impacts of

Dropless Cataract Therapy on

Medicare, Medicaid, State Governments,

and Patient Costs

October 2015

1107 9th Street, Suite 501, Sacramento  CA 95814  916-538-6091


About Cataract Surgeons for Improved Eyecare:

Cataract Surgeons for Improved Eyecare (CSIE) is a nonprofit educational organization of

cataract surgeons and ophthalmologists from across the United States. Members of CSIE are

prominent in the leading medical societies devoted to ophthalmology and cataract surgery. The organization is dedicated to public education concerning improvements in the care of patients requiring cataract surgery.

About Andrew Chang & Company, LLC:

Andrew Chang & Company has years of experience providing best-in-class research and economic analyses for use in the development of public policy and both business and government strategy and operations. Using advanced economic, statistical, and business administration techniques, we provide consulting services to governments, public sector agencies, Fortune 1000 companies, and nonprofit organizations.

1 Analysis of the Economic Impacts of Dropless Cataract Therapy on Medicare, Medicaid, State Governments, and Patient Costs (Table of Contents) Section Page Key Findings 3

1. Background 5

2. Methodology 11

3. Findings 20

4. Conclusion 24


- Appendix A: Survey of Current Literature

- Appendix B: Trade Journal Articles Regarding Dropless Therapy

- Appendix C: Dropless Therapy Prescriber Survey Results 25

- Appendix D: Cataract Surgery Estimate (2016)

- Appendix E: Case Studies

- Appendix F: Bibliography 2 Key Findings  Based on U.S. Bureau of the Census data of population projections and National Eye Institute data regarding the prevalence of cataracts among age groups, Medicare and Medicaid will fund more than 38 million cataract surgeries over the next ten years. Medicare is expected to pay for the great majority of these surgeries – 96% of the total, or an average of 3.7 million surgeries each year. Medicaid is expected to fund the remaining 4%, or an average of 150,000 surgeries per year. The number of Medicare and Medicaid-funded cataract surgeries is expected to grow at a compounded average annual growth rate of approximately 3%.

The cost of drop therapy – that is, multiple prescription drugs applied topically to the eye for  a period of weeks both before and after surgery – is an additional expense of cataract surgery. Most of this expense is currently borne by Medicare, Medicaid, state governments, and patients. Based on CMS data and our survey of physicians currently using the dropless therapy, within Medicare, the cost of the drug combination used for drop therapy ranges from a low of $175 to a high of $431 per eye, with a weighted average of $323. Within Medicaid, the cost of the prescription drugs used in drop therapy ranges from a low of $174 to a high of $431 per eye, with a median of $337. The confidence level established for our survey is 95%, meaning that we can be 95% confident that our survey would produce the same results if we were to conduct it again.

 Priced at $100 per prescription, dropless therapy is significantly less expensive than the traditional drop therapy alternative for cataract surgery.

 Current Medicare and Medicaid policy is to neither reimburse for dropless therapy nor to allow the patient to pay. Rather, the current policy requires that the incremental cost of dropless therapy be absorbed by the surgical facility or the physician performing the surgery. This puts dropless therapy at a disadvantage compared to drop therapy, for which Medicare and Medicaid do provide reimbursement.

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therapy for cataract surgeries would save cataract patients approximately $1.4 billion for out-of-pocket co-payments between 2016 and 2025, under the most likely scenario.

Currently, out-of-pocket co-payments can reach as much as $650 per eye for individual

–  –  –

 Changing the current federal policy and allowing patients to choose and pay for dropless therapy for cataract surgeries would save Medicare, Medicaid, and patients between $2.1 billion and $13.0 billion, with a most likely savings estimate of $8.7 billion, between 2016 and 2025, based on our survey of physicians. Under the most likely scenario, Medicare and Medicaid would save approximately $7.1 billion over the same period. The confidence level for our survey was established at 95%, meaning that we can be 95% confident in our

–  –  –

 U.S. state governments would save $124 million in Medicaid payments during this ten year time frame, under the most likely scenario.

 Cumulative savings for individual state governments ranged from $200,000 to $19 million per year. California would save approximately $19 million over the next ten years. New York and Florida would save $9.5 million and $8.4 million, which account for the states positioned to benefit the most, respectively.

 Dropless therapy would produce additional recurring cost savings to the health care system overall, for an indefinite period, as a result of averted administrative costs for care providers.

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1. Background Currently, most cataract patients are required to self-administer multiple drugs to their eyes several times a day for a period of weeks both before and after cataract surgery. This typically involves the use of three different prescription eye drops: an antibiotic, a steroid, and a non-steroidal anti-inflammatory drug (NSAID). The purpose of the drop therapy is to prevent inflammation and infection after cataract surgery. The benefits of utilizing antibiotics and antiinflammatories for prophylaxis against infection and inflammation are well documented.

Appendix A sets forth a summary of some of the existing literature.

In contrast to drop therapy, dropless therapy is performed by the physician immediately following cataract surgery, and requires only a single administration. When the patient is discharged after surgery, she does not have to purchase and self-administer drugs for prophylaxis against infection and inflammation. This minimizes patient compliance issues. By ensuring that 100% of the prescribed medication is applied to the desired area of the eye at the time of surgery, health outcomes are improved. Since dropless therapy was introduced for use in the United States, approximately 80,000 cataract surgeries have been performed in this way.

The most common approach to dropless therapy entails a single injection of antiinfective and anti-inflammatory drugs. A compound solution of three U.S. Food and Drug Administration approved drugs has been optimized for isotonicity at a pH most compatible with the eye. The compound consists of triamcinolone acetonide injectable suspension,1 moxifloxacin hydrochloride ophthalmic solution,2 and vancomycin hydrochloride.3 The 1 Approved by the U.S. Food and Drug Administration in 1957.

2 Approved by the U.S. Food and Drug Administration in 1999.

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eye drops. It also eliminates the need for repetitive administrations over a period of weeks, as is required with drop therapy. Other approaches to dropless therapy involve separate injections of the three drugs. As in the case of the compound solution, these separate injections are administered only once, immediately following surgery.

Although it is not the subject of our analysis, as a threshold matter we ascertained that a number of studies have documented the safety and efficacy of currently available dropless therapies.4 In addition, approximately 40 trade articles regarding the efficacy of dropless therapy have been published. A partial list of these publications is provided in Appendix B. These studies and articles compare dropless therapy to traditional drop therapy across a number of

parameters. The general conclusions set forth are as follows:

 Prescription cost: The cost of dropless therapy currently is approximately $100 per prescription. This compares to a cost of approximately $350 for the most commonly prescribed drop therapy alternatives. It should further be noted that costs in the

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 Patient compliance issues: Traditional drop therapy requires the patient or a third party to administer eye drops for a period of approximately four weeks both pre- and post-operatively. Administering drops is often difficult for those recovering from cataract surgery. This is particularly so because the vast majority of cataract surgeries are performed on older patients. Many elderly people cannot independently administer the required eye drops and require assistance from caregivers to administer the drops properly. Unlike saline eye drops with which most patients are 3 Approved by the U.S. Food and Drug Administration in 1986.

4 J. Liegner, Better surgery through chemicals, presentation at the American Society for Cataract and Refractive Surgeons Annual Meeting, April 25-29, 2014, Boston, MA; Galloway, S., Intravitreal placement of antibiotic/steroid as a substitute for post-operative drops following cataract surgery, presentation at the American Society for Cataract and Refractive Surgeons Annual Meeting, April 25-29, 2014, Boston, MA.

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eye for effectiveness, and touching the surface of the eye with the bottle can lead to contamination and infection. This careful regimen must be repeated, often more than a dozen times a day, for a period of a month or more. In addition to the physical difficulties many patients experience with self-administration, patient compliance is negatively affected by memory issues that are common among the cohort of the population eligible for cataract surgery. When patients forget to administer their drugs, or cannot do so, surgical outcomes are poorer, and complications result. The patient’s difficulty in remembering the specifics of their regimen is increased by the fact that the frequency of application for each of the three drugs typically changes during the course of the prescription. (In this analysis, we do not undertake to estimate the costs of complications from patient noncompliance, but they are likely significant). Table 1-1 summarizes some of the literature regarding the difficulty

patients experience in properly administering drops:

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5 L. Dreer, et. al., “Determinants of medication adherence to topical glaucoma therapy,” Journal of Glaucoma, 2012, Issue 21, pp. 234-40.

6 A.L. Hennessy, et al. “Videotaped evaluation of eyedrop instillation in glaucoma patients with visual impairment or moderate to severe visual field loss.” Ophthalmology, 2010, Issue 117.

7 K. Mansouri, K.. “Compliance and knowledge about glaucoma in patients at tertiary glaucoma units.” International Journal of Ophthalmology, 2011, Issue 31 pp. 369-76.

8 T. Tsai, et. al., “An evaluation of how glaucoma patients use topical medications: A pilot study.” Transactions of the American Ophthalmological Society, 2007, Issue 105, pp 29-35.

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superior medical results for cataract patients. The direct injection of the medication to the desired area eliminates the variability in application and outcomes that results when drugs must be individually administered over a prolonged period, outside the

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 Patients with disabilities: Dropless therapy enables the provision of cataract surgery to a large population of cataract patients for whom traditional drop therapy would not be practical. This includes patients who are physically and/or mentally challenged, such as those with osteoarthritis, rheumatoid arthritis, scoliosis, Parkinson’s, kyphosis, Alzheimer’s, and dementia.

Given that the one-time administration of medication in dropless therapy is significantly less expensive than the multiple drugs and doses required by traditional drop therapy, this analysis was undertaken to quantify the economic impacts on Medicare, Medicaid, U.S. state governments, and patients that could be expected if dropless therapy were adopted more widely for use in connection with cataract surgeries. In addition to estimating and documenting the potential savings to the federal government and state governments through the Medicare and Medicaid programs from the use of dropless therapy in cataract surgeries covered by these programs, we have estimated the potential patient savings resulting from reduced pharmaceutical co-payments.

The analysis of economic impacts herein is limited to cataract surgery and does not include other conditions that may be treated using dropless therapy, such as retina procedures.

It also excludes quantification of the likely significant additional patient savings resulting from averted costs for care provision during the post-surgery stage. The general magnitude of these indirect costs that result from drop therapy is alluded to anecdotally in the case studies, but savings from elimination or mitigation of these costs are not included in the overall savings

–  –  –

reductions in physician costs resulting from lower administration costs in connection with dropless therapy, as compared to drop therapy. These costs include the cost of instructing patients in the techniques of self-administration, the cost of follow-up necessary to ensure patient compliance, and the cost of dealing with complications (including infection) that result from imperfect self-administration, incomplete compliance, and noncompliance, all of which are associated with the traditional drop therapy alternative.

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Cash Flow Model:

In order to calculate the economic benefits, we constructed a cash flow model to estimate the potential savings to the federal government, state governments, and patients. The model utilizes generally accepted principles of mathematics, statistics, business administration, public finance, and policy analysis. The architecture of the cash flow model is shown in Figure 2-1.

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11 _________________________

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