Community pharmacies can expect a two-step cut in Medicare reimbursement for diabetes testing supplies (DTS). CMS is decreasing the fee schedule amounts for retail DTS to the current mail-service fee schedule amounts on April 1, 2013, and then further reducing reimbursement to the national mail-service program single payment amounts on July 1, 2013. Together, the two imminent cuts add up to 72%, according to CMS’s fact sheet and news release issued on January 30.

The reduction in reimbursement is part of the latest expansion of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program. “This program has already saved millions for taxpayers and beneficiaries while maintaining access to care,” CMS Acting Administrator Marilyn Tavenner, RN, MHA, said in the agency’s news release.

But the reality faced by community pharmacists is that the announced new reimbursement amount—$22.47 for 100 lancets and test strips, starting July 1—doesn’t cover costs related to DTS. “It’s going to be less than we are actually paying for the supplies,” Lynn Connelly, BSPharm, owner of Medicine Mart Pharmacy in West Columbia, SC, told pharmacist.com.

“The implication is pharmacies have got to decide: Do I continue to participate in Medicare, or do I not?” said John Coster, BSPharm, PhD, National Community Pharmacists Association (NCPA) Senior Vice President of Government Affairs. “And if I do, can I try to work with my patients to get them on strips to test that make sense for them and make sense for me? And I think that’s a lot of what’s going on right now.”

Competitive bidding

The DMEPOS competitive bidding program was established by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, the federal law that created Medicare Part D. Under MMA, this program was implemented in certain areas of the country. Congress wanted to expand it for diabetes supplies nationally, but there was an exemption for community pharmacies until 2016. Then the “fiscal cliff” budget agreement—signed into law January 2, 2013—took out that extension and instead applied mail-service pricing to all community pharmacy sales beginning July 1.

What’s more, in a provision of competitive bidding policy for DTS that also takes effect July 1, many community pharmacies will be banned from delivering to Medicare patients who are homebound or residing in assisted living facilities, according to recent NCPA news releases. Instead, the only entities able to provide home delivery will be entities that have a contract with CMS to provide mail service, Coster told pharmacist.com. “That’s going to cause disruption for a lot of homebound seniors and pharmacies that serve assisted living.”

On top of the 72% cut, the 2% sequester cuts to Medicare providers take effect April 1, according to NCPA.

Impact on patients

“CMS is going to push all diabetic test strip business to mail order,” said Matt Osterhaus, BSPharm, FASCP, FAPhA, APhA President-elect and co-owner of Osterhaus Pharmacy in Maquoketa, IA. “We’re there to counsel [our patients with diabetes], we’re there to help them understand why they’re testing, … and to work with their physician to make it make sense. And they’re taking that whole piece away. … They’ll be able to buy the test strips cheaper, but the results—the outcomes with the patients—are just going to go down the tube. It’s penny wise, pound foolish.”

On February 27, 2013, Reps. Diana DeGette (D-CO) and Ed Whitfield (R-KY) sent a bipartisan letter to the Government Accountability Office asking it to conduct a study to measure patient access to DTS after the 72% cut.

What’s next?

Pharmacies have until April 15, 2013, to become nonparticipating DMEPOS suppliers, Coster explained. That would allow the pharmacy to charge cash for DTS to Medicare patients, and then the pharmacy could submit the claim. The patient would get paid at 80% of the Medicare-approved amount because there’s 20% cost sharing. “It gives the pharmacy a chance to say, ‘We’ll give you your supplies, but we’re going to have to charge you what our costs are.’”

Bob Sack, BSPharm, owner of Widner Drug Store in Manchester, IA, said that the speculation from his industry sources is that “this whole thing is going to get squashed. There’ll be an exception. We shouldn’t panic yet.” Sack said that a smaller store for which DTS was its only connection to Medicare Part B might leave the DMEPOS program, but that his pharmacy—the largest independent in the state—“can’t afford to jump out.”

“Now we hear [CMS is] having a hard time getting enough contract suppliers to supply the strips at the price that [the agency has] established as the single payment amount,” said Coster. “So we’ll see how this all plays out.”