GAO report sparks rebound in Apria, Lincare stock price

 - 
Tuesday, November 30, 2004

WASHINGTON - CMS’s revelation of a $57 per month dispensing fee for inhalation medications put a bounce in the steps of some respiratory providers, but it was a GAO report in October that first lightened the mood and breathed new life into some stumbling stocks.

The promise of a $55 to $64 per month dispensing fee in the GAO report made an immediate impact on business. Shares of Lincare Holdings, the country’s largest provider of inhalation drugs, rose 18% the day the report was released. Apria Healthcare also saw a 4% increase.

Both companies had seen their stock values plummet following the unveiling of the average sales price reimbursement model in last year’s Medicare Modernization Act. The new model translated into an 89% cut for albuterol and ipratropium bromide reimbursements, according to CMS.

In response to the cuts, many national providers threatened to stop providing respiratory medications to Medicare patients unless a “reasonable” dispensing fee was established. Lincare had plans to walk away from the business as early as mid-October (just days before the GAO report was released) if a resolution to counter the cuts was not proposed.

Although a dispensing fee had been rumored since the cuts first were announced, estimates had set it much lower than $57. A report by Wachovia Securities analyst William Bonello predicted the monthly fee would fall in a $30 to $40 range, a figure most industry insiders agreed with.

Links: