IR: 'Will they do it for other products?'

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Friday, July 6, 2012

YARMOUTH, Maine – CMS's plan to use inherent reasonableness (IR) to set prices for retail diabetes supplies could be a sign of things to come, say industry stakeholders.

CMS could be testing out IR as a way to reduce pricing for product categories not included in competitive bidding, they say.

"Retail diabetes supplies have never been subject to bidding and this is the only other avenue outside of congressional action to target those supplies," said Walt Gorski, vice president of government affairs for AAHomecare. "Will they do it for others? I think that's unclear. I think they want to see how it goes."

IR allows CMS to adjust fee schedules by up to 15% per year. The agency has had the authority to use IR for years, but it has used it only once that stakeholders can recall: to set prices for blood glucose monitors based on rebates that manufacturers were offering at the time.

It's likely CMS will keep re-bidding in the 100 competitive bidding areas that fall under Rounds 1 and 2 of the program, say stakeholders. Officials have already said they will announce the bidding schedule for the Round 1 re-compete this summer and open bidding in the fall.

"CMS believes it’s required to keep re-bidding those areas," said Cara Bachenheimer, senior vice president of government relations for Invacare. "But then there's the rest of the country—the 35% or whatever that is left out of that. Yes, CMS can use their IR authority."

While IR would give CMS the lower pricing it craves, it would allow any willing provider to continue to participate in the program—something that might not be as appealing as competitive bidding, stakeholders say.

"There are 150,000 or 160,000 enrolled DMEPOS suppliers," said Seth Lundy, a partner with King & Spalding. "They have not said so publicly, but I believe that CMS has come to the conclusion that that is too many for them to manage effectively from a program integrity standpoint."