DME competitive bidding issues: When is enough enough?

Pharmaceutical CommercePharmaceutical Commerce - November/December 2013

Retailers, distributors and manufacturers are being affected by federal rules on durable medical equipment (DME)

I continue to hear my supply chain colleagues cite increasing concerns about the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program overseen by the Centers for Medicare and Medicaid Services (CMS). The program, which covers wide ranging items such as wheelchairs, enteral nutrients, respiratory assist devices and diabetic testing supplies was created to implement Medicare cost containment, reduce fraud and provide beneficiary access to quality care providers. While the program’s intent is understandable, it has created several negative unintended consequences for the supply chain.

One consequence is the unintended strain on local economies. The program’s bid process is designed to force the price of medical equipment as low as possible. By market place nature smaller providers are unable to be as price competitive on many items as larger ones. Since CMS designed the program to where only a handful of suppliers are able to serve a bid area, the local economy will suffer as many smaller providers will either have to lay off workers due to low reimbursement or be forced to close.

Another problem is bid winner credentialing. Concerns have ranged from whether bid winners were properly licensed to whether they have the financial ability to comply with the contract. Complaints have been so loud that the US Department of Health and Human Services Office of Inspector General (OIG) has announced an investigation to determine whether CMS complied with federal guidelines when it awarded the contracts.

Regarding diabetic testing supplies, the program has had negative ripple effects on the supply chain. Low reimbursement and increased generic utilization has caused many brand manufacturers to rethink their strategies while simultaneously slowing their innovation for improved diabetic outcomes. Pharmacies are no longer able to serve patients due to the program’s mail order mandate and are suffering further revenue declines. The continuity of care for patients is also being interrupted as patients can no longer ask their pharmacists questions but must now rely on counsel from a distant entity who is not likely familiar with their medical history.

I have advocated to CMS on behalf of community pharmacy and home medical-equipment vendors against continuing competitive bidding until a more transparent and less confusing process is created. CMS has told me that until they hear from patients the program will continue.

One has to ask whether it is realistic that enough patients will voice their concerns against the program to have a significant impact on CMS’ decision to go forward. This begs the question, what next? My first instinct is to suggest litigation. There is litigation pending nationwide advancing equal protection and due process arguments, but the outcome of these cases is uncertain. The only other hope may be a legislative solution.

Congress has several bills pending against the program. H.R. 27 titled the Small Supplier Fairness in Bidding Competition Act of 2013 sponsored by Congresswoman Nydia Velazquez (D-NY) among other issues proposes to repeal the program. S. 1265 sponsored by Lamar Alexander (R-TN) seeks to delay implementation of Round 2 of the program for competitive acquisition areas in Tennessee. Lastly, H.R. 1717 titled the Medicare DMEPOS Market Pricing Program Act of 2013 seeks to replace the program with a Market Pricing Program that uses an auction system to establish market-based prices nationwide in order to create a more fair program based on competition and market prices. Sponsored by Tom Price (R-GA), this bill currently has 156 cosponsors.

The challenges to overcome the obstacles created by the program are many. It’s unclear why CMS continues to advocate for something so many are against. Studies and testimony against the program continue to be released but to no avail. Congress’ tough political climate certainly doesn’t help. However, the minute we all stop trying to advocate a more fair approach that ensures patient access we all lose.


Ron Lanton III is the owner and chief strategist at True North Political Solutions LLC based in Manchester, NH. True North Political Solutions is a regional, boutique government-affairs firm consulting healthcare supply chain entities. Formerly he was government affairs counsel at H.D. Smith. Mr. Lanton has 20 combined years of legal and government affairs experience. He has a JD from The Ohio State University and a BA from Miami University. He also is a member of the District of Columbia Bar Assn.

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