ASP pricing raises Xopenex profile

Monday, January 31, 2005

WASHINGTON - Medicare may find an unexpected increase in its respiratory medication bill now that the cost-cutting average sales price reimbursement formula has taken effect. Industry insiders expect to see a jump in sales for the more costly drugs, Xopenex and DuoNeb, based on their higher-than-expected reimbursements.

DuoNeb will see a $1.30 per dose reimbursement. Xopenex will be reimbursed at $3.20 per dose for the .125 mg strength; $1.60 per dose for the .63 mg strength; and 80 cents per dose for .31 mg strength. Each strength is $1.28 per .5mg.

The actual acquisition cost of Xopenex is around $2.20, one dollar less per dose than its announced reimbursement.

The payment for Xopenex was not expected to be this high, explained Lisa Smith, an attorney Brown and Fortunato. A miscalculation in the ASP was made when Medicare tried to factor all three strengths of the drug under one code and at one reimbursement rate per dose.

This pricing could attract more providers to Sepracor’s asthma drug Xopenex, which was not profitable under the average wholesale price reimbursement method. Under AWP pricing Xopenex did not have a separate code and was reimbursed at albuterol’s rate, which did not cover the acquisition cost.

“This may bode well for Sepracor,” said one source. “They may have finally gotten their drug into the market.”

Sepracor, however, is advising providers not to abruptly switch all their patients over because the DMERCs could change the drug’s pricing now or at the end of the first quarter, said Mickey Letson, president of the Letco Companies.

“The element of discussion as it relates to Xopenex right now is do you believe that the reimbursement will change,” he said. “It’s going to be difficult to ask your doctors to switch all your patients to Xopenex and then come April 1 ask them to switch them again.”

Smith and Letson said they expect Medicare to react to the drug’s new pricing, especially if there is a jump in Xopenex utilization.

“CMS is thinking it’s going to be reducing its cost for drugs by knocking albuterol so far down, so if everyone switches to Xopenex, which is more expensive than albuterol was initially, then I think we will definitely see some type of push back from CMS,” said Smith.

DuoNeb and Xopenex may also prove impossible for providers accustomed to the low acquisition costs of albuterol and ipratropium. A supplier getting by on $5,000 in goods maybe not see the benefit of spending $100,000 on up front costs, especially given the narrow profit margins.

“Would you rather invest $10 and make $57 or invest $265 and make $57?” said Letson. “If you can make the same amount of money with a low overhead then more people are going to choose the lower overhead.”

Letson said he is advising providers to look at their drug mix as a whole to find out what is most profitable for their business and best for their patients.

“The biggest struggle is with these pharmacies that have ingrained in their mind that profitability is in albuterol and ipratropium,” he said. “From now on it’s not, and a lot of people have to get their sights off those two drugs.”