Home Health & Hospice Week

Never one to mind beating a dead horse, the HHS Office of Inspector General blasts Medicare reimbursement rates for two respiratory medications in new reports.

Thanks in part to previous OIG reports on the subject, the Medicare law enacted in December reduced the payment rate for albuterol and ipratropium bromide from 95 percent of average wholesale price to 80 percent of AWP Jan. 1. And in 2005, Medicare will switch to a new payment system based on average sales price (ASP) rather than AWP (see Eli's HCW, Vol. XIII, No. 1, p. 4).

"Once we move to ASP these reports are moot - for a time anyway," says Jacki McClure, director of the National Respiratory Network and government relations for The MED Group.

But the reports can still do damage to respiratory pharmacies down the line, worries consultant Patrick Dunne with Healthcare Productions in Fullerton, CA. If after the move to ASP, Medicare is still the highest payor, lawmakers and regulators will be looking for ways to make even more cuts and taking suggestions from the OIG, Dunne warns.

One way will be to compare Medicare prices to Veterans Administration prices, as the OIG does in its latest reports. The OIG does admit the comparison isn't exactly fair. "We recognize that the VA acts as a purchaser of drugs while Medicare reimburses pharmacies for the product," it says in the reports. And "pharmacies obviously need to make a profit from the products they supply," the OIG adds. But the spread is "disconcerting" even considering those factors, the OIG concludes.

OIG Ignores Medicare Costs 

What the OIG fails to take into account are all the costs above the baseline price of obtaining the drug, Dunne insists. "They must acquire and store product [and] provide compounding, packaging, distribution and tracking of the prescribed product, all the time staying compliant with myriad federal and state pharmaceutical rules, regulations and licensing requirements," he points out. "In a word, Medicare payments are 'bundled.'"

And specifically when making VA comparisons, a host of questions come into play, Dunne insists. Purchasing in bulk, taking a discount on a generic drug (such as albuterol) in exchange for higher prices for brand name drugs, and not furnishing certain services can all affect the VA pricing, he stresses.

The price at which albuterol was available to the supplier community decreased from 2001 ($0.08 per mg) to 2003 ($0.06 per mg), even though Medicare rates for the drug stayed the same, the OIG says in its new report on the item (OEI-03-03-00510). And the price for ipratropium bromide also decreased, from $0.82 in 2001 to $0.57 per mg in 2003 for wholesalers/distributors and $0.62 per mg for group purchasing organizations, the OIG says in its report (OEI-03-03-00520).

If Medicare paid for the drugs at Medicaid levels, providers would have received $263 million less from the program and beneficiaries in 2002 for albuterol and $386 million less for ipratropium bromide, the OIG claims.