New life for respiratory meds?
After years of sharp and steady decline, the respiratory medications market may be poised to rebound for providers.
With CMS's recent policy change that reformulates pricing for some Medicare Part B respiratory medications, market observers believe that pricing levels will actually rise, thus renewing commercial potential for HME providers. In essence, the formula change involves bundling the reimbursement for generic albuterol sulfate and the brand-name drug Xopenex into one code.
"This is going to bring a huge resurgence to the market that providers walked away from," said Mickey Letson, president of Decatur, Ala.-based Letco Medical. "People can afford to get back into it now."
The key to higher reimbursement for the inhalant drugs lies between the vaulted ceiling price of Xopenex and the subterranean floor price of albuterol. Medicare's new temporary code (Q4094), which became effective July 1, formulates the reimbursement rate based on the number of units sold and the total selling price for both Xopenex and albuterol, which, given the wide rate chasm separating the drug types, devises a reimbursement level halfway between the two. A new blended J code is expected in January 2008.
While this is good news for albuterol providers, it is a drastic drop for Xopenex manufacturer Sepracor and its providers. Not surprisingly the Marlborough, Mass.-based pharmaceutical maker has expressed major disappointment with the new policy, contending that its brand-name product is superior to the generic version.
"Tens of thousands of physicians have prescribed Xopenex inhalation solution for many thousands of Medicare Part B beneficiaries with respiratory disease because they believed, in their clinical judgment, [it] was the most appropriate choice," Sepracor said in a published statement. "This action by CMS marks the first time a single-source, innovative product has been bundled with generic, multi-source drugs that are not therapeutic equivalents for Medicare Part B reimbursement purposes."
Company officials said they "cannot reasonably estimate the potential impact" of the new policy change on Xopenex utilization or to revenues from Medicare Part B. They added that they hope to work with the government "to pursue better alternatives" to the bundling format.
New era dawns
A downward reimbursement spiral triggered by the Medicare Modernization Act led to a respiratory medication market practically devoid of any profit margin for providers over the past several years. Double-digit percentage cuts, followed by an average-sales-price-plus-6% schematic in 2005 caused a mass exodus of providers from the market because supplying the drugs became a cost liability.
"Many of the (HME companies) with smaller patient populations on respiratory medications simply exited the business," said John Durkee, vice president of North American sales for Pittsburgh-based MedSage Technologies.
Those who have stuck with it, he said, are "new" retail pharmacies and mail order firms that produce huge volumes of business to offset the respiratory medication losses.
What CMS has disclosed about the new pricing format has largely generated optimism in the respiratory community.
"Everyone is excited about the immediate future--it is a stark turnaround after watching levels drop like a rock," said Dan Fry, president of Windermere, Fla.-based Revlis Medical.
Still, Fry questions whether this new era will indeed be friendlier to independent medical providers or if it merely signals another CMS rate-cutting offensive.
"Medicare may want to woo people away from the more expensive Xopenex in favor of the much more reasonable albuterol, but what does this really mean for the future? That's what everyone is trying to figure out," he said.
Fry's brother Tom maintains that physicians prefer Xopenex and will be steadfast in prescribing it.
"That may pose a challenge for providers," said Fry, a registered pharmacist who is affiliated with unit dose pharmacies in Kentucky and Florida. "But the majority of patients should be fine with albuterol and now it's possible to make some profit on it."
Shot in the arm?
Going forward, Letson expects to see a healthy influx of new providers into the respiratory medication market. The revised pricing matrix is fair and should ensure success for all involved, he said.
"It's a shot in the arm that providers needed at a very critical time," Letson said. "Everyone benefits--the pharmacies, the patients and the payer. It should generate great cost savings and there should be no complaints."