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Medicare: Appropriate Dispensing Fee Needed for Suppliers of Inhalation Therapy Drugs

GAO-05-72 Published: Oct 12, 2004. Publicly Released: Oct 12, 2004.
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Highlights

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) revised the payment formula for most of the outpatient drugs, including inhalation therapy drugs, covered under Medicare part B. Under the revised formula, effective 2005, Medicare's payment is intended to be closer to acquisition costs. The Centers for Medicare & Medicaid Services (CMS), the agency that administers Medicare, also pays suppliers of inhalation therapy drugs a $5 per patient per month dispensing fee. Suppliers have raised concerns that once drug payments are closer to acquisition costs, they will no longer be able to use overpayments on drugs to subsidize dispensing costs, which they state are higher than $5. As directed by MMA, GAO (1) examined suppliers' acquisition costs of inhalation therapy drugs and (2) identified costs to suppliers of dispensing inhalation therapy drugs to Medicare beneficiaries.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services The Administrator of CMS should evaluate the costs of dispensing inhalation therapy drugs and modify the dispensing fee, if warranted, to ensure that the fee appropriately accounts for the costs necessary to dispense the drugs.
Closed – Implemented
CMS implemented an appropriate dispensing fee for inhalation drugs effective January 1, 2005. CMS will review the amount each year based on the latest data to keep the amount appropriately tied to supplier's costs.

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Administrative costsCost analysisDrugsHealth care costsHealth care programsHealth insurance cost controlMedical services ratesMedicareOverpaymentsPaymentsPharmaceutical industryProcurement practices