Mail order contracts: Expect big to get bigger
From: HME News
by: Theresa Flaherty
BALTIMORE – CMS released a list of 18 contract suppliers for the national mail-order program for diabetes supplies April 9, but it’s a list that could look different when July 1 rolls around, say industry sources.
“Several of the companies have been put up for sale, and we know of one or two that have already been sold,” said Tom Milam, an industry consultant and former provider.
Right now, at one end of the spectrum are large and well-known companies like CCS Medical, which received more than $45 million in Medicare payments for test strips in 2011, according to the HME Databank; Arriva Medical ($18.7 million); and United States Medical Supply ($25.7 million). Expect to see a few more familiar names among the contract suppliers, suppliers say, with two or three other large companies that didn’t get contracts looking to buy back into the market.
At the other end of the spectrum are companies like Kohll’s Pharmacy ($51,000). David Kohll has received several offers from buyers, but he’s not selling.
“The amount I am getting offered is probably more than I would make by doing it myself,” said Kohll, owner of the Omaha, Neb.-based pharmacy. “But, I am a pharmacist and I have been doing this for decades. I don’t want my patients to be forced to go somewhere else.”
Big or small, contract suppliers say they are ready.
“We knew it was going to be a stretch, but a lot of the costs companies incur are in operations, so if you streamline, you have a chance,” said Erin Anthony, director of specialty services operations for CCS Medical. “We also took a close look at our formulary and made sure we were partnered with the right manufacturing partners.”
For Round 2, CMS required bidders to include brands that have at least 50% market share and prohibits them from encouraging beneficiaries to switch brands.CCS, for its part, plans to offer popular products from Bayer, Roche and Lifescan, and all of the contract suppliers list at least one major brand.
Still, with reimbursement at $10.41 for 50 test strips, some sources expect an aggressive push toward lower-priced products.
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