CMS contemplates service fee for respiratory meds

August 2, 2004 WASHINGTON - Medicare last week issued a Notice of Proposed Rulemaking that revealed an 89% cut for albuterol and ipratropium. That's the bad news. The good news is that CMS also floated the idea that it might soften the cut by paying HMEs a service fee for dispensing the drugs. "This is the first time that I have actually seen that [CMS is] considering raising or adjusting the dispensing fee to try ad make up some of the shortfall providers are expecting," said Lisa Smith, an attorney with Brown & Fortunato in Amarillo, Texas. "I know this was something the industry wanted, but until the notice came out I hadn't heard that it was something that was under serious consideration at CMS." CMS will collect comments on a service component until September 24. Even if a service component is implemented, there is no guarantee it will help recoup the costs associated with providing respiratory medications, including shipping, handling, compounding and billing, say industry watchers. The 89% cut take shape as the much talked about ASP plus 6% reimbursement model first unveiled in the December 2003 Medicare Modernization Act. Under this new model, albuterol's payment is expected be 4 cents per milligram when the final numbers are calculated. Ipratropium bromide will be reimbursed 30 cents per milligram, according to the proposed fee schedule. The Notice of Proposed Rulemaking said the cuts were necessary in reducing what the government considered a gross overpayment for respiratory medications based on current acquisitions costs. Medicare estimates in 2003 it overpaid on albuterol and ipratropium bromide by nearly $900 million, or about 64% of the $1.4 billion Medicare paid for the two drugs, according to acquisition prices determined by OIG and GAO studies. The cuts are expected to save $4.2 billion over 10 years on respiratory medications alone. The ASP reimbursement, since its inception, has been called "draconian" and "devastating" by many involved in the business. Some companies, including inhalation giants Lincare and Apria, say they will exit the business if the full cuts take effect, prompting serious concern over how patients will receive their medications. "How many patients does Lincare and Apria service with respiratory meds today?" said an industry source. "It's tens of thousands. What are those patients going to do on Jan. 1, 2005 when Lincare and Apria exit the business?" In statements following the CMS notice, Apria and Lincare confirmed their plans stop providing inhalation drugs to Medicare beneficiaries if a "reasonable dispensing fee is not established." CMS's also predicted in the notice a significant shift in the market when the new drug benefit takes effect in 2006 and patients can get reimbursement for meter dose inhalers. MDIs are not currently covered, while nebulizers fall under the Part B benefit. "What this [expectation] presumes is that the driving decision on the patient's treatment is financial," said an industry source. "I would challenge that presumption with COPD patients." Also included in notice was a proposal to switch the delivery of inhalation medications from every 30 days to every 90 days. The switch could prove beneficial to providers in lowering overhead costs, said Smith.