PROPOSED CHANGES IN INHALATION DRUG DISPENSING FEE IN 2006 MEDICARE PHYSICIAN FEE SCHEDULE
Overview: Medicare Part B currently pays for inhalation drugs administered via a nebulizer. In the proposed rule, CMS asks for comments on an appropriate dispensing fee payment rate for nebulized drugs for 2006. Medicare also seeks comments on how to support the most effective access to inhalation drugs in light of the start of the Medicare Part D prescription drug benefit, which will cover metered-dose inhalers (MDIs) that dispense inhalation drugs.
Background: Medicare payment for inhalation drugs has changed significantly in the last few years. Prior to 2004, Medicare paid for inhalation drugs based on 95 percent of the average wholesale price (AWP). Numerous studies by the OIG and GAO indicated that 95 percent of AWP vastly exceeded inhalation drug suppliers’ costs. As a result, both the Medicare program and the Medicare beneficiary‑who was liable for a 20 percent coinsurance‑ were paying more than they should for these drugs.
As part of Congress’s effort to get accurate payments in the Medicare program, the MMA changed the Medicare payment methodology for many Part B covered drugs, including inhalation drugs. As an interim step, in 2004, Medicare paid a reduced percentage of AWP. Beginning with 2005, Medicare has paid for inhalation drugs at 106 percent of the average sales price (ASP). The ASP reflects the actual average price at which manufacturers sell inhalation drugs.
In addition to paying for the cost of the drug itself, Medicare has paid a dispensing fee for inhalation drugs. Prior to 2005, Medicare paid a monthly $5 dispensing fee for each covered inhalation drug or combination of drugs used. In light of the substantial changes with the new ASP system, CMS viewed 2005 as a transitional year and established an interim dispensing fee of $57 for a 30-day supply of inhalation drugs and $80 for a 90-day supply. These fee amounts were consistent with industry data that included services that may be outside the scope of services generally covered by a dispensing fee. CMS also expressed concern about the extremely wide range in the costs of furnishing inhalation drugs found by the Government Accountability Office (GAO) in their report to Congress. With wide variation in costs across suppliers, the 2005 dispensing fee substantially exceeded some providers’ costs as reflected in a few comments on last year’s proposed rule and the GAO study. CMS indicated that it would consider these issues further to establish an appropriate fee amount for 2006.
In last year’s regulations, CMS revised several policies to help suppliers reduce costs, particularly those for shipping. CMS allowed 90-day supplies to reduce unit shipping costs and also more flexible refill shipments that will eliminate the need for overnight delivery. Several other measures were taken to reduce paperwork and compliance costs. CMS also clarified that original signed orders are not required before a prescription is dispensed, and revised the proof of delivery requirements. CMS also clarified that Medicare makes separate payment to physicians for training beneficiaries in the use of the equipment that administers inhalation drugs, so that these services need not be included in the dispensing fee.
The new Part D coverage of MDIs represents an important expansion in the options available to beneficiaries for inhalation drug coverage under Medicare. This coverage will begin in January, at the same time as the 2006 dispensing fee would take effect, and CMS expects that both nebulizers and metered-dose inhalers will now play an important role in the Medicare program.
Treatment Of The Dispensing Fee In The Proposed Rule: CMS intends to establish a dispensing fee amount for 2006 that is adequate to cover the costs of those services that appropriately fall within the scope of a dispensing fee. It is likely that this fee amount will be lower than the current $57 per month transitional fee in 2005. In 2005, the Medicare payment for inhalation drugs was reduced under the ASP system while the 2005 dispensing fee was set at a much higher level than previous years based on the limited information available and taking into account the transition. CMS is also considering the effect of the upcoming expansion of inhalation drug coverage to include MDIs.
In this proposed rule, CMS is seeking comments and information on a number of issues such as:
- What services appropriately fall within the scope of a dispensing fee, the cost of providing those services, and whether any of the services being provided by inhalation drug suppliers may be covered through another part of the Medicare program, such as the physician fee schedule or the DME benefit.
- An appropriate dispensing fee level for 2006.
- Data and evidence on the various services inhalation drug suppliers are currently providing to Medicare beneficiaries and the associated costs.
- The extent to which inhalation drug suppliers have utilized the newly available 90-day scripts to lower unit shipping costs, and how revised guidelines regarding the time frame for delivery of refills have affected the need for overnight delivery services, including information on the extent to which providers have shifted their shipping to ground services.
Data and information on any efforts by inhalation drug suppliers or others to measure the quality of inhalation services or patient outcomes, including evidence on the impact of higher fees on quality and outcomes, as well as information about what are typical dispensing costs for an efficient, high-quality supplier.
- Comment on the potential impact on beneficiaries and providers of the new drug benefit on inhalation drug access.