Dispensing fee: Big win or big flop?

Friday, December 31, 2004

YARMOUTH, Maine - With the average-sales-price reimbursement formula rearing its ugly head this month, many industry insiders continue to question the viability of providing respiratory medications in the new reimbursement climate.
While many have called the addition of the $57 per month dispensing fee a “big win” for the industry, some say the transition could still cost smaller providers dearly in revenues and even patients.

“Big companies absolutely should be OK under the ASP if they understand the efficiencies of business,” said one industry watcher. “I would say the same for medium-size companies, but at some level of small provider the revenues will not be enough to maintain business.”

Under the new reimbursement no one can say what the cut off will be in terms of making a profit or losing money on respiratory medications. Differences in business models and even state pharmacy regulations make that impossible, say sources.

What is certain, however, is that those who do enough volume to slip by on $57 per patient per month operating costs will stay in the game.

“We are going to remain in the respiratory medication business even though we will have minimum margins on albuterol and ipratropium,” said Tim Pontius, president of Toledo, Ohio-based Young Medical Equipment and chairman of AAHomecare “The fact of the matter is if we don’t do it with what little margin we have, then the nationals and others are going to come in and gobble up those patients. And, most of those patients have some sort of combined therapy, and we would end up losing that business as well.”

Pontius agrees that the reimbursement climate will be difficult for smaller providers, citing an AAHomecare-sponsored study that found a $68.10 dispensing fee would be required for most companies to stay afloat.

“Fifty-seven dollars is not $68,” he said. “That means a lot of average companies are going to be asked to provide this service under what their break even point is, and no one can afford to do tha.t.”

Others contend that the dispensing fee does not serve to benefit one size company over another.

“I think if it’s OK for [the big companies], it’s OK for the smaller companies too,” said RDI President Keith Trowbridge.

In Issue 21 of RDI’s The Full Dose newsletter, Trowbridge said he calculated a $36.84 pre-tax profit for albuterol and a $33.09 pre-tax profit for an albuterol and ipratropium combination. The calculations take into account the $57 dispensing fee and many of the services involved in supplying the meds.