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Pharmacy Groups Express Concern About Medicare Payment Rate Rule

ASHP and six other organizations sent a letter to Department of Health and Human Services Secretary Tommy G. Thompson on January 21 conveying concerns about the new payment rates for some pharmacy-provided Medicare Part B drugs. The pharmacy groups also expressed displeasure that an interim final rule published in the January 7 Federal Register lacks the establishment of a supplying fee that is required under the new Medicare Prescription Drug, Improvement, and Modernization Act.


January 21, 2004

The Honorable Tommy Thompson
Secretary, U.S. Department of Health and Human Services
Hubert H. Humphrey Building
200 Independence Street, SW
Washington, DC 20201

Subject: Medicare Beneficiary Access to Part B Drugs Provided Through Pharmacies

Dear Secretary Thompson:

The undersigned pharmacy and pharmacist organizations, representing all segments of the practice of pharmacy, are writing to object to several provisions of the interim final rule published January 7, 2004 that make changes to Medicare Part B payment for drugs. These changes were made pursuant to the Medicare Prescription Drug, Improvement and Modernization Act (DIMA).

The overall context of Section 303 of DIMA was to establish new payment rates for covered Medicare Part B drugs to more closely approximate a provider's acquisition costs for these drugs. In return, the law also recognized that administration fees for many of the covered drugs, including pharmacy supplying fees, were inadequate to cover the true costs of providing these drugs, and were being subsidized by the drug payment rates.

For example, the previous payment rate of AWP minus 5 percent was the total payment received by the pharmacy for acquiring and supplying Part B drugs. Prior to DIMA, pharmacy suppliers billing Medicare received a dispensing fee for inhalation therapy drugs only. There were no similar payments for other DME-administered or other oral drugs. Because the law reduced payment rates for drugs, Section 303(e)(2) of DIMA provides that the Secretary shall pay a pharmacy supplying fee for immunosuppressive drugs, oral anti-cancer agents and oral anti-emetics used as part of an anticancer chemotherapeutic regimen.

However, there are several problems with the interim final rule as they relate to pharmacy. First, the 2004 Medicare payment rates for some very expensive pharmacy-provided drug products are well below a pharmacy's cost to purchase these drugs. In addition, the specific payment rates established for many other drugs, combined with a failure to establish a specific supplier fee for providing these drugs, means the payment is well below a pharmacy's total cost to acquire and supply the drug product to the Medicare beneficiary.

We are particularly concerned that the interim final rule fails to provide for a pharmacy supplying fee for certain Part B covered drugs which is required under the statute. In its interim final rule, CMS indicates that it will not pay a separate Medicare Part B pharmacy supplying fee for 2004, but will rather bundle that payment with payment for the drug.

We believe that this effectively ignores the statutory requirement to establish a pharmacy supplying fee. Establishing a pharmacy supplying fee was consistent with the entire approach taken by this program reform, which was to more accurately pay for the cost of acquiring drug products, but also more accurately reflect the cost of safely delivering the product to patients. We believe that the pharmacy supplying fee fits within this logic.

Moreover, the interim final rule indicates that CMS does not have data indicating that the 85 percent figure is insufficient to cover the cost of supplying these drugs. However, CMS makes this assertion without any evidence to support this conclusion. Given the specific requirement in the law that a supplying fee be established, we believe that the burden falls on CMS to demonstrate through economic analysis that a supplying fee does not have to be paid.

Moreover, we believe that CMS is in direct violation of the law by not paying a supplying fee required by statute. Finally, CMS' statement that no funds are available to pay such fee is inconsistent with the fact that CBO included this provision in the final $394 billion dollar overall cost estimate for the bill.

Taken together, all of these payment issues seriously threaten the ability of pharmacy providers to be able to continue to safely provide these important medications to Medicare beneficiaries. We urge you to use your administrative authority to address these payment inadequacies immediately in order to assure continued beneficiary access to oral immunosuppressive, oral cancer and oral antiemetic drugs, among others. These drugs are used in critical life saving medical conditions, and beneficiary access to these pharmaceuticals has to be guaranteed. We appreciate your consideration of this request.


American College of Clinical Pharmacy (ACCP)
American Pharmacists Association (APhA)
American Society of Consultant Pharmacists (ASCP)
American Society of Health-System Pharmacists (ASHP)
National Association of Chain Drug Stores (NACDS)
National Council of State Pharmacy Association Executives (NCSPAE)
National Grocers Association

The Honorable Charles Grassley
The Honorable Max Baucus
The Honorable Bill Thomas
The Honorable W.J. Billy Tauzin
The Honorable Charles Rangel
The Honorable John Dingell