Mail Order Waste Confirmed in Medicare Competitive Bidding Program

By John Coster, RPh., Ph.D.

Medicare is touting a new report on the first year of its durable medical equipment (DME) competitive bidding program. While portions of the report raise questions about what’s behind the program’s “savings,” it also appears to affirm community pharmacists’ concerns about waste in mail order health care.

The Centers for Medicare & Medicaid Services (CMS) announcement claims $202 million in savings during 2011, the program’s first year, and $51 million of that total is related to diabetic testing supplies. The CMS competitive bidding program is in a “Round 1” pilot phase in nine metropolitan areas.

Regarding the CMS report, one might assume that the savings stem solely or primarily from lower prices for the supplies. But the savings appear due at least as much to patients obtaining fewer diabetes testing supplies from mail order.

Why would Medicare seniors obtain fewer diabetes testing supplies via mail order, even as both the incidence of the disease and the number of program beneficiaries are increasing?

One prime reason could be that these patients already had more supplies than they could possibly use in the near-term because of waste and autoshipping by mail order vendors. Follow up calls by CMS to beneficiaries revealed that in virtually every case, the beneficiary reported having more than enough supplies on hand, often multiple months’ worth, and therefore did not need to obtain additional supplies when the program began. The competitive bidding program may have curbed inappropriate distribution of these supplies that was occurring previously. In this sense, mail order could be the problem, rather than the solution.

As CMS put it in the report, “This would suggest that beneficiaries received excessive replacement supplies before they became medically necessary. CMS concludes that the competitive bidding program may have curbed inappropriate distribution of these supplies that was occurring prior to implementation.”

(For more on mail order waste, see NCPA’s “Waste Not, Want Not” report)

Another reason for lower mail order utilization could be patients’ preference for face-to-face counseling at a community pharmacy or other local provider. A recently released Walgreens survey affirms a four-to-one preference among patients for community pharmacies over mail order. During Round 1 of CMS’ program, patients were allowed to switch to retail suppliers outside of mail order, if they chose to do so, which would have contributed to lower mail utilization and program costs.

Separately, CMS’ report included few complaints with competitively bid mail order providers. But that may be inaccurate because CMS’ complaint process is burdensome, long and automated. Beneficiaries are more likely to complain to their local pharmacist or supplier. These complaints don’t get captured by CMS.

While the report also claimed no harmful health implications from the program, negative health outcomes resulting from competitive bidding may not appear immediately. It may take more than one year for the program to start demonstrating negative health outcomes.

Next year competitive bidding is scheduled to be greatly expanded, along with the implementation of a national mail order diabetes supplies competitive bidding program. In future years it would be expanded nationwide.

Applying the competitive bidding price structure to community pharmacies would likely force most local pharmacies to stop offering diabetes testing supplies and other DME. That could create access problems for patients trying to effectively manage diabetes or other serious health problems. (For more, see NCPA’s 2011 survey of 800 community pharmacists.)

NCPA is making these and other points to lawmakers and staff on Capitol Hill. We continue to advocate for passage of H.R. 1936, the Medicare Access to Diabetes Supplies Act, bipartisan legislation which would preserve patients’ access to diabetes testing supplies at small pharmacies. That way, patients could continue to receive the face-to-face counseling on the proper use of these products to manage their health and avoid more costly medical complications—without the wastage associated with mail order.

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