Diabetes supplies clobbered

It's like Round 1 all over again--only worse.

When the bid amounts for Round 1.2 of national competitive bidding were released in July, mail order diabetes supplies once again took the biggest hit--an average cut of 56% compared to an average cut, overall, of 32%.

"Heck no, we didn't win," said Tom Cronin, CEO of Woburn, Mass.-based Neighborhood Diabetes. "Our cost is a lot higher than the winning bid amounts. There's no way we can provide our mix of products at those levels."

The cut is far steeper than the average cut of 43% the category took in 2008.

Even though Medicare attempted to prevent low-ball bids by requiring product invoices to back up bid amounts, providers speculate that "panic" bidding by small providers drove the pricing down.

"I think the psychology was, 'I can't be frozen out,'" said Robert Weinroth, president of Boca Raton, Fla.-based ADS Medical Services. "There's a lot of mom-and-pops who figured they'd bid $5 so they'd be in the pack. You have enough people bid like that and you wind up with this."

While there are cheaper products on the market that can make reduced reimbursement more manageable, many providers fear they are subpar.

"Manufacturers have sent me a ton of meters we have looked at but that we would never sell," said Cronin. "I think those will be the bedrock of the new program."

Additionally, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required suppliers who bid on diabetic testing supplies to offer brands with at least 50% marketshare.

"Suppliers were supposed to offer branded products, which you can't do at that price," said Weinroth. "The bid price is below my contracted pricing (from manufacturers)."

Providers who did win bids say they will cut service to the bone in order to honor the contracts.

"Maybe we'll have a separate 1-800 number for beneficiaries," said Frank Suess, president of Wellington, Fla.-based Pharma Supply. "Press '1' if you want the shipment, '2' if you don't want the shipment. It will be a universal shipment shipped the cheapest way."

Suess, who won contracts in Cleveland and Miami, doesn't plan to go looking for new patients.

"There's not enough money in this to promote it," he said. "We'll have to depend on people in those areas to find us." hme