Fe, fi, fo, fum: Cuts rankle med giants

Tuesday, August 31, 2004

WASHINGTON - The national providers of respiratory drugs flexed their muscles in July by again threatening to quit the business - and severely limit beneficiary access - if an estimated 89% reimbursement cut for albuterol and ipratropium bromide takes shape in 2005.

These warnings translate into a real fear by CMS that access to these drugs could be all but cut off and could ultimately influence the formulation of a new dispensing fee for respiratory drugs, say industry watchers.

“In the absence of a reasonable dispensing fee to cover the necessary costs incurred by providing these nebulizer medications in the home, Lincare plans to cease providing respiratory therapy drugs and will send appropriate notice to its patients by mid-October so that they can make alternative arrangements,” said the company in a press release.

Apria and American Home Patient also restated their intentions to stop serving Medicare patients if a revised dispensing fee - as discussed in the notice - is not formulated.

“We are hopeful that a potential dispensing fee or other service fees mentioned in the NPRM will be sufficient to pay for these non-drug costs,” Lawrence Higby, Apria’s president and CEO, said in company press release. “A reasonable dispensing fee is absolutely crucial to maintain Medicare beneficiaries’ access to respiratory medications.”

Lincare, Apria and the other nationals have huge financial stake in the treatment of the estimated 1.2 million Medicare patients on nebulizer therapy.

Last November, when the Medicare Modernization Act blind sided the industry with the creation of the ASP reimbursement model, Lincare’s stock plummeted by nearly 30% and has yet to fully recover. This time, although the 89% figure is considered devastating, the news was not unexpected and Lincare’s stock value remained mostly steady after the NPRM was released.

The companies also took issue with Medicare’s assertion that the market will experience a “substantial shift” from nebulizers to meter dose inhalers (MDI) based on the new discount under Medicare Part D. Their concerns center on the manual dexterity of some patients who may not be able to properly use the small inhalers.

“[We] believe that treating physicians are most capable of determining the appropriate treatment regime for their patients and that it is unfair to conclude that those physicians are prescribing nebulizers merely because of reimbursement concerns,” said a press release from Brentwood, Tenn.-based American Home Patient.

By the numbers
In 2003, Medicare spent :

(a) About $130 million for nebulizers (both rental and purchase) and nebulizer related accessories and supplies;

(b) About $13 million for servicing/maintenance fees;

(c) About $1.3 billion for albuterol sulfate and ipratropium bromide and another $120 million for other inhalation drugs for a total of approximately $1.4 billion.

(d) About $35.5 million for 7.1 million dispensing fees; and

(e) About $4.5 million for beneficiary training under CPT code 94664