The question addresses the potential impact of future changes to Medicare's End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) or the Transitional Drug Add-on Payment Adjustment (TDAPA) on CorMedix Inc.'s (CRMD) DefenCath revenue beyond July 2024. DefenCath received FDA approval in November 2023 and launched commercially in April 2024 (inpatient setting) and July 2024 (outpatient hemodialysis setting).
DefenCath was classified as a renal dialysis service subject to the Medicare ESRD PPS, which provides a bundled payment for renal dialysis services but also includes a TDAPA for certain new drugs and biologicals. The TDAPA for DefenCath was approved in April 2024 with a July 1, 2024, implementation date.
Here's how future changes could impact DefenCath:
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TDAPA Duration and Transition: DefenCath's TDAPA and post-TDAPA add-on payment adjustments are set to apply for five years, with add-on payments continuing for years three through five. The initial TDAPA period typically lasts for two years, followed by a post-TDAPA add-on payment for an additional three years. For DefenCath, the TDAPA period is from July 1, 2024, to June 30, 2026. After the TDAPA period, CMS typically goes through rulemaking to modify the base rate of the ESRD PPS to account for the drug, integrating its cost into the bundled payment. The key risk here is whether the increase in the bundled payment base rate will be sufficient to adequately reimburse dialysis facilities for DefenCath at a profitable price for CorMedix. If the base rate adjustment is insufficient, it could materially reduce revenue from the drug.
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ESRD PPS Bundling Changes: The ESRD PPS bundles payments for renal dialysis services, including the cost of certain drugs. There is a continuous process of CMS evaluating and potentially including more drugs into the bundled payment system. For example, oral-only phosphate binders, previously covered under Medicare Part D, were included in the ESRD PPS bundle effective January 1, 2025, with a TDAPA to ease the transition. This indicates a trend where CMS aims to integrate more ESRD-related drugs into the bundled payment, which could affect how future innovations are reimbursed. Any future changes to what is included in the ESRD PPS bundle or how the bundle is calculated could impact DefenCath's long-term reimbursement rates once its specific TDAPA period concludes.
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Average Sales Price (ASP) Calculation: TDAPA reimbursement is calculated based on 100% of the Average Sales Price (ASP). If ASP data is not received by CMS, the adjustment might not be applied. Fluctuations in ASP due to market dynamics or manufacturer reporting could affect the actual payment received during the TDAPA period.
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Broader Healthcare Policy Changes: The broader healthcare landscape, including legislative changes like the Inflation Reduction Act (IRA), can influence drug pricing and reimbursement. The IRA, for instance, includes measures for price negotiations with Medicare and imposes rebates for price increases that outpace inflation. While the direct impact on DefenCath's specific reimbursement mechanisms (TDAPA/ESRD PPS) might not be immediate, such policies create a general environment of cost containment that could indirectly pressure future reimbursement levels for all drugs, including those for ESRD.
CorMedix's ability to maintain coverage and adequate reimbursement from third-party payors, including government programs like Medicare, is crucial for the successful commercialization of DefenCath.
