WASHINGTON, July 23, 2012— Officials said last week at a public hearing that Medicare reimbursement for diabetic testing supplies sold at the retail level is being pushed down because of two government mechanisms for cutting prices—inherent reasonableness and competitive bidding.

The Monday hearing was conducted to discuss a plan by the Centers for Medicare & Medicaid Services to significantly lower prices on diabetes testing supplies through its inherent reasonableness standard. Officials are considering the inherent reasonableness standard as a way to adjust Medicare reimbursement by comparing existing retail prices with competitive bidding prices.

Single payment amounts for diabetic testing strips (A4253) delivered in the nine Competitive Bidding Round 1 areas range from $13.88 to $15.62, according to CMS. The national average fee schedule amount for non-mail order test strips is now $37.67.

The National Association of Independent Medical Suppliers (NAIMES) reported that CMS intends to significantly lower prices one way or another. The result will likely create access problems for beneficiaries.

“CMS made it clear that if they decided to not pursue the IR (inherent reasonableness) reduction, it would not eliminate the mandate to competitively bid non-mail order diabetic testing supplies in the future,’’ NAIMES reported in its newsletter. “Since the Round 1 payment amounts are in themselves unsustainable, the application of either IR or further competitive bidding for these items would likely result in chronic access issues for these products.”

Walter Gorski of the American Association for Homecare told CMS officials at the hearing that they should proceed cautiously and base changes in payments on sound research and data. He said prices gleaned from competitive bidding were inaccurate and that using them as a basis for retail fees would be a mistake.

Bruce Levinson, senior vice president of the Center for Regulatory Effectiveness, noted that a letter to the president from more than 240 experts stated that prices determined through the government’s competitive bidding process contradicted science and were the product of improper market design.

Bill Popomaronis, vice president of the National Community Pharmacists Association, warned that CMS is in the process of producing prices that are unsustainable for small pharmacies.

“Independent community pharmacists are working hard to provide the best care and access to beneficiaries while working with CMS to improve quality of care and drive down long-term costs,’’ he said in a prepared statement. “The facts are, with drastic cuts to reimbursement for diabetic testing supplies, beneficiaries will no longer have access to the care they need and deserve.”