Diabetes market becomes harsh environment

Wednesday, May 25, 2011

There's not much positivity coming from vendors of diabetic supplies in the post-competitive bidding era. Whatever confidence existed in this market has now been replaced by words like "tough," "uncomfortable," "absurd," "unreasonable" and "alarming."

Between floor-smashing low bids and nettlesome regulatory red tape, the Medicare diabetes business has become an exercise in frustration for suppliers.

Wes Morrison, vice president of sales and marketing for Titusville, Fla.-based VPI Diabetes Management, chalks up the current market challenges to basic economics.

"The quality of service will decline at the expense of a reduction in price," he said. "Healthcare is being rationed and at the end of the day, everyone will lose. More specifically, we have seen lower quality products put in the hands of our beneficiaries, which could jeopardize their health."

Struggles to eke out a margin extend from blood glucose monitors and strips to diabetic footwear, manufacturers say. Continuation of the current price structure is sure to cause various negative economic consequences, said Randy Turpin, director of marketing for Minneapolis-based Arkray.

"If we continue with these price levels, we will lose jobs, supplies will be outsourced and quality will suffer," he said. "It is hurting beneficiaries and we need to fix it."

Six months into competitive bidding, Turpin says he has seen some experienced, professional providers exit the business, a development he calls "alarming." Yet he is impressed that some providers are remaining despite the financial pitfalls.

"I am very much in awe of the people who are sticking with the market because they are dedicated to their patients," he said. "They are working so hard to keep their heads above water and move forward."

For Arkray to optimize its monitor and strip business, it must work harder on contracts and forge strong ties with managed care payers, Turpin said.

"There are several areas where we have had to sit up, take notice and expand to ensure our healthy survival," he said. "Overall, we are reshaping and rethinking everything we do."

Bryan Sowards, CEO of Titusville, Fla.-based Infopia America, says a reduction in reimbursement forces suppliers to re-evaluate the dynamics of their business model, including product acquisition costs.

"Is it fair that the reduction in reimbursements is pushing suppliers away from majors?" he asked. "Maybe the right question is, is it fair not to motivate suppliers to recognize that there are products available with same or superior technology for less cost? The industry was ready for an overhaul in demanding suppliers to be accountable in researching and developing the most efficient and cost effective business model, but at the end of the day no one can provide the standard of care that the patients deserve with the current reimbursements no matter what their selection of product."

The doctor factor

To be sure, the current Medicare climate for diabetes supplies is harsher for all involved--especially providers, said Frank Suess, president of Wellington, Fla.-based Prescriptions Plus.

"If you are a local diabetes provider in one of the competitive bidding markets, you will have lost all of your Medicare patients and competitive bidding could have been your death blow," he said. "In order to stay in business, most diabetes providers will have to branch out into non-Medicare markets."

Ladd Fowler, president of Charlotte, N.C.-based Midsouth Therapeutic, says physician documentation compliance is the biggest issue right now.

"Medicare has made it so difficult to comply with their requirements--especially doctors' progress notes--that many providers are getting out of the Medicare end of their business model," he said. "Consequently the patients are not being served and are put at risk. There is nothing that we are aware of that can require the doctors to comply with the request and therein lies the problem."

In the mail?

Along with competitive bidding and onerous regulations, the Medicare diabetes benefit may also be subject to a national mail order program in the future. At this point however, the preliminary plan offers nothing but questions, Suess said.

Among them:

• What will be the requirements to participate in this program?

• Do participants have to be a certain size?

• Do participants have to provide certain manufacturers' products?

"They say that the dealer will have to provide 50% of the meters on the market--that will bring up the bid price," he said. "They are simplifying our industry's problems. They want to eliminate as many dealers as possible and think that this will eliminate fraud. More honest dealers will go out of business, more employees will be laid off and join the unemployment and welfare lines, more leases will be broken and more mortgages will be defaulted on. As we know, CMS has no idea about our industry."