Baltimore 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
by Brook Raflo


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

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

“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

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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