ATLANTA — While reimbursements across all product
categories in the Round 1 rebid averaged a 32
percent drop
, diabetic supplies were the hardest hit at a
whopping 56 percent cut.

Still reeling from CMS' July 1 announcement of the competitive bidding rates, HME
providers working in the category predicted that many businesses
could eventually collapse under the unsustainable weight of the
drastic reduction.

"I guess the government will have more unemployment and we will
be in further economic downfall," said Joann Morse, office manager
of Diabetic Supplies of America, Lake Park, Fla. "There is no way
to run a company and service Medicare beneficiaries [under such

The new rates are "absolutely ludicrous," Morse continued.
"We're surprised that people bid that low. I don't think they
realized the impact that will have on their company."

Tim Binkley, president of Valentine's Diabetic Supply in
Roswell, Ga., described the situation in similar terms.

"The competitive bidding prices are shocking, outrageous,
unbelievable and ridiculous," said Binkley. "Based on what we know
— and we have been buying this stuff for quite a while
— I don't think you could find a manufacturer to sell a
product at a low enough price that you could accept a 56 percent
cut in reimbursement.

"We thought it might be 30 to 35 percent, but nobody expected 56
percent because it is so unrealistic," he said.

Paula Hardison, manager for Carolina Diabetic Supply Group in
New Bern, N.C., said with some irony that her company had feared a
30 percent cut. In the initial Round 1 (2008),
mail-order diabetic supplies averaged a 43 percent decrease, which
outraged the sector. Since the industry took a 9.5 percent cut on
bid categories to pay for delay of the bidding program, no one
expected such a sharp drop in the new reimbursement.

"This is a nightmare," Hardison said. "There is only one brand
of strips that we would be able to deliver to our patients. We pay
approximately $10 for that strip, and we wouldn't be able to
deliver it to the beneficiaries," she said, noting that most strips
range from $16.88 to $24.25 per box. "Right now, we are reimbursed
$30.06 and they only pay 80 percent of that. So now we're looking
at $14.50. That's impossible to work with. The shipping alone costs
$4 to $5 a box."

Hardison said Carolina Diabetic services some beneficiaries in
the Charlotte CBA, and the company did bid. But it has not received
a contract offer, she said.

"We know our bid was not that low. We couldn't even have
considered going that low," Hardison said. "We will never be able
to provide service to our patients at this price."

Come Round 2, the situation will become dire, she said. "When it
comes to Raleigh [in the second round], it will affect us and we
won't be able to stay in business."

Hardison worried that Medicare patients could be in jeopardy if
companies attempt to provide the products at the new rate.

The problem is not "just getting the supply out there, but
helping people on the phone, helping them to change their
batteries, testing their meters," she said. "Right now, we ship
products today and they have them usually the next day. How long
will beneficiaries have to wait for these supplies? If they are
out, what are these patients going to do? If we do have to go with
that one brand of strips, they don't always work with the pumps.
What are patients on pumps going to do?"

Added Binkley, "At 56 percent, we don't see how anybody can
provide [the supplies] at that price and provide the kind of
service that is required."

"Frankly, the ones who are going to be hurt are the Medicare
beneficiaries," agreed Morse. "No one is going to provide a
OneTouch Ultra strip for $14 dollars that costs us $25."

The National Community Pharmacists Association urged caution as
CMS proceeds with the diabetic supplies bidding rollout. If the
rates result in independents leaving the Medicare program or going
out of business altogether, numerous problems could arise, the
group said in a target="_blank">July 2 statement.

On June 30, CMS issued a proposed regulation that called for the
exemption of community pharmacies from the upcoming bid process for
diabetes testing supplies (and from accreditation requirements).
Currently, however, "It's common for mail-order customers to end up
in independent pharmacies seeking instruction on how to use the
testing supplies — care for which the local pharmacists are
not compensated," the NCPA said. "Plus, many supplies are changing,
so the way seniors use them needs to change.

"Local pharmacists help ensure patients get accurate blood
glucose readings — not a false sense of security or an
unnecessary state of panic," the group said.

That could be lost in the wake of the 56 percent cut.

"I don't know how that bid was considered," said Hardison,
adding that she would like to see the financial documentation
backing up the lowball bids.

"I'm just shocked that we may have underestimated how low these
manufacturers might sell the product," said Binkley. "Either that
or they are crazy in Washington."

View more competitive bidding