New Rules Expand Application of the NTAP Program for Innovative Antibiotics

ContagionApril 2020
Volume 5
Issue 2

To better support the use of critical antibiotics, the Centers for Medicare & Medicaid Services revised the rules governing reimbursement for qualifying antibiotic products. For these changes to succeed, hospital systems will need to make adjustments.

Antibiotics are critical to the foundation of modern medicine; they not only provide a cure for potentially deadly bacterial infections but also enable people to undergo surgery, chemotherapy, and other complicated medical procedures.1

Continued availability and effectiveness of these drugs are critical to public health, but increasing resistance and diminished development of innovative antibiotics raise concerns about the ability to treat future infections.2,3


For many developers, there is not a clear path to sustainable revenue generation for innovative antibiotics, in large part due to limited use.4 Stewardship programs appropriately restrict the use of novel classes of antibiotics or those with new mechanisms of action when they reach the market, helping preserve their effectiveness. Similarly, physicians may wait for diagnostic results before prescribing some types of antibiotics. Although these actions contribute to the life span of the available antibi- otic arsenal, they may limit the revenues generated by manufacturers, potentially making it difficult to maintain products on the market.5,6

Although stewardship protocols place appropriate limits on prescribing, disadvantageous payment mechanisms may also restrict use of innovative antibiotics. For Medicare and Medicaid beneficiaries, hospital reimbursements are made through a diagnosis-related group (DRG) that covers the costs of all care administered and medical products used during an episode of care. These reimbursements are a set rate based on average costs of a specific condition, giving physicians the flexibility to provide the care that they deem most appropriate. However, the use of new, high-priced drugs has the potential to exceed the set reimbursement amount for the DRG, resulting in a financial loss for the hospital. The price of newly approved antibiotics often exceeds the DRG reimbursement, creating an added disincentive for use by hospitals, which in turn further limits potential revenue for the manufacturer.


The Centers for Medicare & Medicaid Services’ (CMS) new technology add-on payment (NTAP) program is intended to reduce this financial disincentive. The program provides additional reimbursement for new drugs or devices that demonstrate substantial improvement over existing technologies but have costs that exceed the standard DRG amount.7 A medical product may receive these payments for 2 to 3 years, and as products are adopted among providers, the applicable DRGs are expected to adjust upward as updates incorporate the cost of the new technology.

Few antibiotics have qualified for an NTAP during the years it has been available, but recent changes in the inpatient prospective payment system (IPPS) are designed to increase the number of new antibiotics that may qualify and reduce the financial disincentive that hospitals may face when using these drugs.8 CMS made 3 important changes: First, the requirement for substantial clinical improvement is waived in NTAP applications for qualifying antibiotics, so the only requirements are newness and exceeding the cost of the DRG. Second, hospitals using qualifying anti- biotics with an NTAP are reimbursed the lesser value of 75% of the costs that exceed the DRG or the cost of the antibiotic (in contrast to 65% for other medical products). Finally, CMS changed the severity scores for 18 types of resistant infections, resulting in higher reimbursement rates for episodes of care that involve those infections.9

Although these are promising actions from CMS, their potential impact on antibiotic revenues is limited, and there are concerns that these actions will not be enough to reverse the downward trend. For one, the NTAP period is finite, making this a temporary boost in reimbursement for qualifying drugs. This reimbursement mechanism is also still volume based, and even if it influences a change in how new antibiotics are used, there is a ceiling on how much additional use and therefore revenue a given drug might generate.10

However, the effect of the NTAP changes will also be influenced by hospital and pharmacy practices, especially by how frequently the NTAP is used. In hospitals where the NTAP for antibiotics has not been widely adopted, there may be opportunities for change that can increase this program’s impact for both providers and manufacturers.


Since the program’s inception in 2000, just 3 antibiotics (fidaxomicin, meropenem-vaborbactam, and plazomicin) have qualified for the NTAP. For this reason, many hospitals, pharmacy departments, and infectious disease clinicians may be unfamiliar with the NTAP mechanism for antibiotic products. Until there is greater understanding of what drugs have qualified for NTAP and how to process the reimbursement documentation, there likely will be limited changes in formulary placement, coverage, or prescribing. Manufacturers can raise awareness of these programs if they have a qualifying product on the market but may not have the resources to do so on a large scale. As the NTAP program expands, better monitoring and stronger awareness campaigns may be the first step toward increasing usage of this mechanism.

Receiving reimbursement through the NTAP mechanism may be administratively burdensome, particularly for small or rural hospitals. Large health care organizations may have processes within their electronic medical record systems to facilitate coding and reimbursement, and these processes are likely critical for the NTAP mechanism’s use with antibiotics. A new antibiotic might be appropriate for use under a large number of DRGs, so without a system in place to trigger the NTAP reimbursement process, hospitals may miss opportunities to receive additional reimbursement. Introducing clear pathways to trigger the NTAP process within the clinical workflow may reduce administrative burden while maximizing reimbursement. Many institutions may already have protocols in place for receiving an NTAP for other high-priced drugs, such as chimeric antigen receptor T cells, and be able to transfer some of those processes.

For hospitals with aware ness and processes that enable them to receive NTAP reimbursements, there still may be limitations to the frequency of use. Siloed budgets within hospitals create a barrier because the additional reimbursement amount does not get credited back to the pharmacy budget. As a result, pharmacy departments may still incur a financial penalty for using a new, high-cost antibiotic. Where possible, hospitals should consider removing this barrier by either developing an approach that credits the pharmacy’s budget when an NTAP antibiotic is used or removing some of the institution’s budget siloes. Either approach would help reduce the financial disincentive for appropriate use as the program intends.

There may also be a role for professional organizations as they develop guidelines for specific indications. Even if the NTAP removes a financial barrier to use of new antibiotics, physicians often rely on practice guidelines to assist in prescribing decisions and may prescribe an antibiotic only if it is recommended in the guidelines. Sales data provide evidence that updates to these guidelines have a substantial impact on use, and more frequent updates may increase use of new antibiotics and the NTAP mechanism.10


Ultimately, although CMS’ changes to antibiotic reimbursement are a promising next step, they provide only an incremental improvement in revenue for antibiotic developers. Even if hospitals fully use the NTAP mechanism to enhance appropriate prescribing of new antibiotics, it is unlikely that sales will reach the levels needed to sustain a market for innovative antibiotics. Further, physicians and pharmacists will continue to rely on practice guidelines driven by ongoing product data to make prescribing decisions, so continued evidence generation will be critical to support appropriate use. For long-term sustainability, payment for this drug category will need to shift away from volume-based reimbursement. CMS should continue to work with providers and other relevant stakeholders to explore reimbursement mechanisms that delink antibiotic revenue from volume sales while also supporting strong stewardship programs and encouraging data generation.

Schneider is a managing associate at the Duke-Margolis Center for Health Policy in Washington, DC. She leads a portfolio focused on incentives for antimicrobial and neglected disease product development, value-based reimbursement policy, and payment reform for Alzheimer disease and oncology products. Her work on antibiotic issues is supported by a grant from the Wellcome Trust.


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5. Taylor NP. Achaogen seeks near-term sale through bankruptcy process. FierceBiotech. April 16, 2019. Accessed February 7, 2020.

6. Taylor NP. Melinta files for bankruptcy in another dark day for antibiotics. FierceBiotech. January 2, 2020. Accessed February 7, 2020.

7. Clyde AT, Bockstedt L, Farkas JA, Jackson C. Experience with Medicare’s new technology add-on payment program. Health Aff (Millwood). 2008;27(6):1632-1641. doi: 10.1377/hlthaff.27.6.1632.

8. Verma S. Aligning payment and prevention to drive antibiotic innovation for Medicare beneficiaries. Health Affairs. August 2, 2019. Accessed October 25, 2019.

9. Fiscal year (FY) 2020 Medicare hospital inpatient prospective payment system (IPPS) and long term acute care hospital (LTCH) prospective payment system (CMS-1716-F). Washington, DC: Centers for Medicare & Medicaid Services; August 2, 2019. Accessed October 25, 2019.

10.Carr A, Stringer J, Shen J. Antibiotic and antifungal update: January 2020. Blue Matrix website. Published January 28, 2020. Accessed February 10, 2020.

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