What about pricing?

Sunday, September 25, 2011

When the winning bid amounts for mail order diabetes supplies were announced in the Round 1 re-bid, the industry was shocked by the average cut of 56%, compared to an average cut of 32% across all product categories.

There's no way to provide brand name products at that price, said provider Dan Gooch, who spoke with several well-known providers that did not win contracts.

"We were all 30% to 40% above the winning pivotal bid," said Gooch, owner of Pal-Med in Columbia, S.C. "I called the winners and it appeared that most bid one or two generic products and none of the major products."

To that end, CMS in 2010 implemented changes meant to avoid such low-ball bids in the future. Those include: contract winners must provide, at minimum, 50% of all the different types of diabetes testing supplies on the market by brand and model names; and contract winners are prohibited from influencing or incentivizing beneficiaries to switch their brands.

"CMS thinks that they have fixed the problems that have plagued Round 1, like beneficiaries not being able to get the leading brand of product from any of the competitive bidding winners," said Tom Cronin, CEO of Woburn, Mass.-based Neighborhood Diabetes. "But, unless there are more teeth added to the anti-switching aspect of the Program for Round 2, I think winners will just make rock-bottom bids and switch beneficiaries to lower quality brands, even though the rules say they aren't supposed to."