CMS meeting to cut rates for non-mail diabetes supplies draws industry criticism

ALEXANDRIA, Va. — The Centers for Medicare and Medicaid Services on Monday hosted a public meeting to entertain a controversial payment adjustment — called "inherent reasonableness" — in reimbursing for non-mail-order diabetes supplies.

According to published reports, CMS' authority to make payment adjustments was finalized in 2005 and can be invoked if existing reimbursements are deemed to be grossly excessive. The action comes out of the competitive bidding process for mail order, which resulted in prices more than two times lower than those for diabetic supplies sold at retail establishments.

"Although we recognize that there are pricing differences between mail-order and non-mail order diabetic testing supplies because of the delivery methods for these supplies, information about the prices of mail-order diabetic testing supplies can inform the analysis of prices for non-mail order diabetic testing supplies because several key cost components are identical for both, such as product acquisition costs and administrative costs, including claims processing and paperwork costs," the agency stated in the Federal Register in announcing the public meeting last month.

"Rather than phasing in non-mail-order diabetic testing supplies under the competitive bidding program at this time, we are considering an alternative for adjusting the payment amounts for non-mail-order diabetic testing supplies in the short term using information obtained from the local Round One Rebid competitions for mail-order supplies and other pricing information to establish special payment limits for non-mail-order diabetic testing supplies," the agency continued. "We believe that this alternative would allow beneficiaries the greatest degree of choice in deciding where to obtain their non-mail-order diabetic testing supplies as suppliers would not have to be awarded contracts to continue furnishing these items to Medicare beneficiaries."

“Community pharmacists are indispensable to helping combat diabetes, whether it is the counseling they offer, the medications they dispense, the lifestyle modification classes they provide or the wide variety of testing supplies they carry,” stated Bill Popomaronis, VP LTC/HHC/NIPCO for the National Community Pharmacists Association, during the meeting this morning. “However, that dynamic will be harmed if these small business pharmacies are forced to walk away from a pricing structure for diabetic testing supplies that only a large self-warehousing chain pharmacy or mail-order supplier can make work.” He warned the policy would produce financially unsustainable reimbursement cuts for independent community pharmacies.

The policy comes on the heels of other impediments to selling diabetes testing supplies under Medicare Part B, as CMS has proposed "burdensome and expensive requirements" while working with a secondary payer to receive slow reimbursements, Popomaronis added.

In his testimony, Popomaronis detailed the concerns that come with the “inherent reasonableness” standard, which, according to an NCPA press statement, include:

  • Reimbursement reductions that are financially unsustainable because small pharmacies cannot purchase the supplies in bulk like the large chains or mail-order suppliers;

  • A lack of evidence that the fee schedule is grossly excessive as compared with the cost to independent pharmacies to purchase these supplies;

  • The misguided notion by CMS that savings and success for diabetic patients necessarily means driving down per unit costs, which may be contrary to the integrated care models being promoted by healthcare systems in the public and private sector; and

  • A failure to acknowledge the money CMS wastes on mail-order diabetes testing supplies that are shipped, as demonstrated by the large amount of unused prescription drugs generated by mail-order supplies in the One Year Implementation Update to Round 1, and further confirmed by CMS’ own Jonathan Blum, who suggested the competitive bidding program decrease in utilization of mail-order diabetes testing supplies could lead one to infer that community pharmacies could serve patients better than mail order.


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