Proposal to reduce med reimbursement stuns industry

Sunday, April 2, 2006

WASHINGTON - A Medicare proposal to reimburse the brand-name drugs Xopenex and DuoNeb at lower generic rates has sent shockwaves through the respiratory med industry.

A draft local coverage determination (LCD), issued last week, calls for Xopenex to be paid as albuterol, while payment for DuoNeb would be based on the allowance for separate unit dose vials of albuterol and ipratropium.

"This is unusual," said Mickey Letson, president of Decatur, Ala.-based Letco Companies. "(For Medicare to say) 'this drug is better than that drug,' that's practicing medicine. I'm not sure how they can do that."

Just-released ASP pricing for second quarter 2006 saw increases for Xopenex (18 cents per dose to $3.53) and DuoNeb (7 cents to $1.09 per dose).

Under the proposed changes, Xopenex would be reimbursed at 18 cents a dose and DuoNeb at 28.8 cents per dose.

That spells trouble for large providers and could signal the end of DuoNeb, Letson said.

"For the first time, the major people affected will be the nationals," he said. "They are the only ones making money on DuoNeb."

Letson expects the drugs' makers to put up a fight. But while Sepracor, the manufacturer of Xopenex, could make a good clinical case for Xopenex, which purportedly works faster than albuterol and with fewer side effects, the same might not hold true for Dey's DuoNeb. DuoNeb has the identical ingredients of one vial of albuterol and one vial of ipratropium, making it difficult to prove that it has a clinical benefit over the low-cost generics, he said.

The one possible claim Dey has, providers say, is that DuoNeb's smaller volume takes less time to nebulize--important when it comes to patient care.

"If companies are paid for DuoNeb at the albuterol rate, it's going to eliminate DuoNeb and drive patients back to where they've got separate vials," said Les DeFelice, president of Wheeling, W.Va.-based DeFeliceCare. "For the sickest, it's an issue when combining meds."

Providers who switched patients to Xopenex because it still allowed for some profit margin, could find themselves forced out of the respiratory med business, particularly small- to mid-sized companies, said one industry watcher.

"I'd be hard-pressed to think that there's going to be that many DMEs in the pharmacy business a year from today," the insider said.

Providers have until May 8 to comment on the proposal.