Retail diabetes: How low will CMS go?

Friday, July 27, 2012

BALTIMORE – It was mail order vs. retail during last week's public hearing on inherent reasonableness (IR) for retail diabetes supplies, according to sources who attended the hearing.

"The retail pharmacies said they can't do it at very low prices and the mail-order providers said it was unfair to get paid less," said Cara Bachenheimer, senior vice president of government relations for Invacare.

CMS scheduled the hearing to discuss whether prices for retail are "grossly excessive" and should be adjusted using IR. The agency has already slashed prices for mail order through competitive bidding, but retail was excluded from the program.

While no one wants to see pricing for retail (right now, $37.67, on average, for test strips) slashed to Round 1 levels ($13.88 to $15.62), mail-order stakeholders say there shouldn’t be that much variation in pricing.

"For a long, long time there was one price for both channels and it's an artificial influence from initial rounds of bidding that changed that," Michael Iskra, a member of the Quality Diabetes Care Coalition (QDCC), told HME News. "I agree that it's a different business model, but that's sort of a non-issue. As a mail-order channel, we would argue that we have incremental costs, like accreditation costs and the cost of participating in competitive bidding, that retail doesn't have."

But retail stakeholders, especially independent community pharmacies, argue it's not a level playing field for retail and mail order.

"Independent community pharmacies cannot purchase diabetes test strips at the same prices as large chains or mail order suppliers," Bill Popomaronis, vice president of long term and home health care pharmacy services for the National Community Pharmacists Association (NCPA), told CMS officials at the meeting. "There are not great margins on these products, and given all the other costs of participating in the Part B program, reduction in payment might defeat CMS's goal of maintaining access."

Still unknown is what, exactly, CMS plans to use as evidence to support reducing payment amounts for retail supplies, a requirement for using IR. Stakeholders at the meeting asked CMS for more transparency.

"What is this data they referring to and what do they think the evidence will show?" said industry consultant Tom Milam, who attended the hearing.

One way or another, pricing is likely to change, say stakeholders.

"It's this or competitive bidding, essentially," said Bachenheimer.

Stakeholders expect CMS to issue a proposed rule on using IR for retail supplies this fall.