Retail Pharmacies Fear CMS’ Bidding Plan Could Strip Their Diabetic Supply Business

From: Inside Health Policy

Community pharmacists say CMS’ decision against creating separate bidding programs for diabetic supplies that are sold retail and through the mail indicates that the agency is trying to push those supplies into mail-order because retail pharmacies would lose money selling them at Medicare’s mail-order pay rate. In announcing that medical equipment suppliers would have to bid again in the first round of the competitive bidding program, CMS said retail pharmacies would continue to be excluded from the bidding and instead the agency signaled that it might simply reimburse retail pharmacies at mail-order diabetic supply rates.

“We are currently exploring options for adjusting the fee schedule amounts for retail diabetic supplies without requiring local suppliers to compete for contracts and expect to provide additional information on this issue in the coming weeks,” CMS stated in a fact sheet accompanying the announcement.

Representatives for both mail-order and retail pharmacies say that statement is good news for mail-order suppliers, who believe that retail pharmacies should not be paid twice as much for diabetic supplies, and is bad news for bricks-and-mortar pharmacies that, because of greater overhead and lower volume, cannot sell supplies at the prices set by the mail-order bid program.

The Affordable Care Act requires that, by 2016, CMS either expand the bidding program to all durable medical equipment, orthotics, prosthetics and supplies nationwide or apply bid prices from previous bids to all DMEPOS. Round two, the bidding process for which has already concluded, expands the program from nine metropolitan areas to 100.

John Coster, National Community Pharmacists Association senior vice president of government affairs, said he thinks CMS will apply the mail-order rates to retail because that’s the easiest thing for CMS to do. CMS likely would prefer regulating a handful of mail-order suppliers to the tens of thousands of retail pharmacies, Coster said, adding that CMS has favored mail-order in the recent past so he expects it to do the same now. NCPA “begged” CMS to let retail pharmacies continue home delivery of supplies, he said, but CMS banned that practice even though the agency was not required to do so.

Coster said the better option for retail pharmacy would be to hold a separate bid for retail, although that approach also has pitfalls. For example, the Affordable Care Act lets small pharmacies supply medical equipment without being accredited, but in order to bid, pharmacies must be accredited. Pharmacies like the accreditation exemption, but it’s a double edged sword under the bid program. Pharmacies would have to pay the $5,000 cost of accreditation for the chance that their bids are accepted. That $5,000 would be on top of the other requirements that are part of selling medical equipment, such as the audits that pharmacies hate.

The more likely scenario is that community pharmacies will stop selling diabetic supplies, Coster said.

Coster said that’s unfortunate because mail-order produces waste. CMS estimates that the first year of the first round of the bidding program saved $51 million on diabetic testing supplies. (The first round is in nine metropolitan areas.) Coster said a large part of those savings is the result of seniors buying fewer diabetes testing supplies from mail order because they already had more supplies than they needed in the near-term because of waste and auto-shipping by mail-order vendors.

CMS surveyed beneficiaries as part of its analysis of the first year of the program, and those phone calls revealed that in most cases seniors had more than enough supplies on hand, often multiple months’ worth, and therefore did not need to obtain additional supplies when the program began, Coster said.

“This would suggest that beneficiaries received excessive replacement supplies before they became medically necessary,” the CMS report states. “CMS concludes that the competitive bidding program may have curbed inappropriate distribution of these supplies that was occurring prior to implementation.”

The bidding period for the national mail-order program for diabetic testing supplies concluded on March 30, and the new prices are scheduled to go into effect on July 1, 2013. CMS is expected to announce soon how it will handle retail diabetic supplies. — John Wilkerson