Medicare Proposes Four Ways to Cut AWP

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It is no longer a matter of if, but when and how, the average wholesale price system for reimbursing Medicare Part B drugs will change. The controversial system, under which Medicare pays 95 percent of AWP for drugs that patients cannot administer to themselves, is on the chopping block at both the Capitol and the White House. Now, the question is who will act first — the legislators or the regulators?

This spring, the Senate approved a Medicare-reform package that included a provision to cut reimbursement rates for Part B drugs from 95 percent to 85 percent of AWP. In August, the Centers for Medicare and Medicaid Services published a proposed rule in the Federal Register offering four options for reforming the AWP system.

Under the first option, Medicare would pay “the same amounts for covered drugs that private insurers pay,” CMS said. Although the agency did not explain how it would determine what private insurers pay, CMS would direct its contractors to determine what private insurers pay for Part B drugs in “comparable circumstances.”

The second option would follow the Senate’s lead, applying a discount of 10 percent to 20 percent to AWP in 2004, and establishing “more reasonable updates in future years,” CMS said.

The third option would change the definition of AWP, allowing Medicare to determine the true average wholesale price. In this case, Medicare would define AWP as “the widely available market price” and initially would base this price on recent reports from the U.S. General Accounting Office and the U.S. Office of Inspector General. Later, Medicare would “develop additional sources to monitor market changes over time, such as drug price catalogs,” CMS added.

The final option would establish a competitive bidding process for Part B drugs and would require drug companies to report their average sales prices.

Although the proposals mentioned the need to reimburse providers for the cost of administering service-intensive drugs, they did not include a provision for ensuring the reimbursement of service costs. The absence of such a provision prompted the American Association for Homecare to warn of a potential “access crisis.”

“Currently, DME providers that offer home infusion and inhalation therapies are reimbursed by Medicare for drugs and equipment only, without Medicare payment for the services necessary to administer the drugs,” said Kay Cox, AAHomecare’s president. If Medicare cuts drug reimbursements without considering the costs of service, some providers may no longer be able to administer service-intensive drugs, which would inhibit beneficiaries’ access to quality care, the association explained.

83% of respondents to a recent HomeCare Web poll said they consider retail pharmacies that sell durable medical equipment to be their competitors, not their partners.

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