CMS to Cut Payments for Compounded Drugs

WASHINGTON–CMS plans to cut payments for compounded inhalation
drugs in an effort to discourage pharmacies from “inappropriate”
compounding.

CMS’ plans were divulged last week in a letter from CMS
Administrator Mark McClellan to Sen. Charles Grassley, R-Iowa, who
had previously expressed concerns about the payment system.

Traditional pharmacy compounding involves preparing drugs that
are not commercially available, but many pharmacies are
mass-producing copies of brand-name drugs already on the market.
According to Grassley, safety and sterility rules are stricter for
drugs produced by manufacturers than those for drugs made in
pharmacies.

Currently, Medicare reimburses most drugs, whether they are
compounded or purchased from a manufacturer, at the same rates. But
according to the letter, CMS plans to create separate HCPCS codes
for compounded drugs and set lower rates for compounded products
that are commercially available.

According to the letter, McClellan said the new codes will
“remove any inappropriately large financial incentives that may be
leading to substitution of compounded forms of inhalation drugs
from non-compounded forms of the same drug in instances where such
a substitution may not be justified by the issues of medical
appropriateness.”

In a statement issued Thursday, Grassley said, “Tightening up
the payment system will help program administrators get a handle on
the magnitude of compounding when it comes to inhalation drugs.
That information will help make it clearer what policy changes need
to be made to better ensure that we pay for drugs that are safe and
meet legitimate medical needs.” Last month, the Senate Finance
Committee chairman sent a letter to McClellan expressing concerns
about “inappropriate pharmacy compounding.”

Earlier this month, the FDA warned Rotech, along with CCS
Medical and Reliant Pharmacy Services (owned by Lincare Holdings),
both of Clearwater, Fla., to stop what it says is the manufacturing
and distributing of unapproved compounded inhalation drugs (see
HomeCare, Aug. 14).

Although Rotech said it disagrees with the FDA’s assessment, the
provider said its PulmoDose pharmacy will no longer accept new
prescriptions for compounded products and will switch its 30,000
patients currently taking them to commercially available drugs
where clinically appropriate. The process will take several months
to complete, the company said.

The company is preparing a formal response to the warning letter
and is “committed to working with the FDA to resolve this matter,”
Rotech President and CEO Philip L. Carter said.

Neither Lincare nor CCS Medical returned calls for
comment.