CMS targets drug compounding for reimbursement hit

Sunday, August 27, 2006

WASHINGTON - In another blow to the neb-med industry, Medicare plans to cut payments to compounding pharmacies for respiratory drugs beginning January 2007.

While CMS has not made any official announcements, the move was disclosed in a letter to Sen. Charles Grassley, R-Iowa, according to an article in USA Today last week. Creating separate HCPC codes would allow CMS to pay less for compounded drugs than commercially available drugs. Until now, Medicare has reimbursed most drugs at the same rates, whether a pharmacy purchases brand-name drugs from a drug manufacturer or the raw ingredients to compound it themselves.

Barry Kubat, co-owner of Kubat's Pharmacy in Omaha, Neb., believes drug makers who fear compounding is a direct threat to their revenue streams are pressuring regulators like the FDA and Medicare.

"We feel very strongly that's the reason why they are doing this," said Kubat. "The compounding industry has, for the most part, refused to negotiate reimbursement based on the cost of chemicals."

Basing reimbursement on an ASP of active ingredients, without taking the cost of value-added services into consideration, would remove profitability for compounding pharmacies, said Lisa Smith, an attorney with Brown & Fortunato in Amarillo, Texas. That could mean access problems for patients.

"If there's no commercially available product and the pharmacy cannot afford to compound (a prescribed drug), the physician is going to have to decide to put the patient on a different, commercially available regimen," she said. "This really could impact those patients that truly need a compounded respiratory medication."

There may be a potential upside to this, said Mickey Letson, president of Decatur, Ala.-based Letco Companies.

"It will standardize reimbursement for compounding," said Letson. "At that point, it's an opportunity for compounding pharmacies to make arguments about clean rooms and the services that go with it as reasons for a reasonable reimbursement."

Earlier this month, the FDA warned Rotech, CCS Medical and Lincare-subsidiary Reliant, that they may be violating federal law by mass-producing copies of commercially available respiratory drugs. Rotech responded to the warning by stating it would stop compounding drugs and begin moving 30,000 patients onto commercial products.