Industry Hopeful After CMS Endorses Inhalation Drug Fees

Washington

A government report suggesting that CMS ensure a dispensing fee for inhalation therapy drugs has given home respiratory providers at least a temporary sigh of relief.

Attached to an October Government Accountability Office report detailing a survey of dispensing fees for inhalation therapy is a letter from CMS Administrator Dr. Mark McClellan stating: “After reviewing the comments and the information from the GAO survey and other public sources, we believe that $55.00 to $64.00 per month is a reasonable range for a 2005 fee.”

Per the Medicare Modernization Act, inhalation drugs will be reimbursed next year using an Average Sales Price (ASP) plus-6-percent formula. In a Notice of Proposed Rule Making released in August, CMS announced reimbursement amounts for two staple inhalation drugs — albuterol sulfate and ipratropium bromide — at rates 89 percent below current reimbursement levels. The agency said it would also consider an “appropriate” dispensing fee for the drugs.

McClellan’s letter suggested what that fee could be, and the market reacted, shooting respiratory giant Lincare’s stock price up 18 percent last month. The Clearwater, Fla.-based company, along with Lake Forest, Calif.-based Apria Healthcare and others have threatened to exit the respiratory drug business if the government does not add a service-cost component to the new payment formula.

“We are optimistic that the service-fee endorsement by CMS today ensures that Medicare beneficiaries will continue to have access to care and these drugs in 2005,” said Apria CEO Lawrence Higby in an Oct. 13 statement. “We look forward to working with CMS leaders as they finalize the regulations, and are encouraged by the new spirit of open communication and data exchange demonstrated by health care policymakers during this process.”

Shortly after Medicare reform was signed into law in December 2003, the American Association for Homecare began meeting with the GAO and CMS on the inhalation drug pricing issue. “We have been extremely impressed by [CMS and the GAO’s] willingness to review this issue to ensure continued access by Medicare patients to these critical inhalation therapies,” said association President and CEO Kay Cox.

In August, AAHomecare released a Muse and Associates survey of 109 pharmacies that identified a $68 gap, per monthly supply, between proposed Medicare reimbursement and the cost of delivering inhalation therapies to patients. The study also pointed out only small cost differences in delivering the care for both large and small providers, Cox said.

Although the GAO report did recommend that CMS consider an appropriate drug dispensing fee, it also found a wide range of acquisition and drug-dispensing costs. Surveying 12 suppliers, the GAO found that dispensing fees for a month’s supply of inhalation drugs varied in 2003 from $7 to $204 — and that costs were not always lower for larger suppliers. “Some of the variation may be due to the range of services offered by suppliers,” the report stated, “which raises questions about the services necessary to dispense inhalation therapy drugs.”

Although McClellan’s statement does suggest a range for a drug-dispensing fee, the fee range alone “does not overcome completely the dramatic cuts Medicare is making in reimbursement for the drugs themselves,” according to a Prudential Equity Group report. “While this may stabilize the situation for suppliers for now, we believe Medicare wants to move as many of the patients as possible onto less expensive therapy — the use of metered dose inhalers — which will come under Medicare coverage starting in 2006,” the report said.

As of press time, the final rule was scheduled to be released Nov. 1.