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Medicare Part B Prescription Drug Dispensing and Supplying Fee Payment Rates

John Fitzsimmons, a senior auditor for the Office of Audit Services in Oklahoma City, is interviewed by Warren Lundy, an audit manager for Audit Services.


[Warren Lundy] I'm Warren Lundy, an audit manager in Oklahoma City, speaking with John Fitzsimmons, a senior auditor in our Oklahoma City office. John, your team conducted a review of Medicare Part B prescription drug dispensing fee payments. What spurred this review?

[John Fitzsimmons] We've done a lot of audit work related to prescription drugs, and we noticed that there were large differences between the dispensing fees. Medicare Part B dispensing fees were substantially higher than the dispensing fees paid by Medicare Part D and State Medicaid programs for immunosuppressive drugs. We decided to research all Part B dispensing fee payments and found that in 2011 Part B paid nearly $133 million dollars in dispensing fees for outpatient prescription drugs.

[Warren Lundy] Before we talk about the review, can you tell us a little bit more about Medicare Part B drug coverage?

[John Fitzsimmons] Sure, Part B covers limited types of outpatient prescription drugs. This includes inhalation drugs used with nebulizers, immunosuppressive drugs that prevent a patient's body from rejecting a transplanted organ, chemotherapy drugs, and oral antiemetic drugs that help reduce nausea during chemotherapy treatment.

[Warren Lundy] And how does Part B pay for those drugs?

[John Fitzsimmons] There are two main components of the Medicare Part B drug payment: a payment amount for the drug, sometimes called the ingredient cost, and a payment amount for the pharmacy's work in dispensing the medication to the patient, called the dispensing fee. It's that second drug cost component we are discussing here.

[Warren Lundy] Who decides what those dispensing fees will cost?

[John Fitzsimmons] CMS sets the dollar amounts for Part B dispensing fees are in Federal regulation.

[Warren Lundy] Are beneficiaries responsible for any of those fees?

[John Fitzsimmons] Yes. Those fees are subject to the standard 80/20 split in Medicare Part B. That means that, once the beneficiary has satisfied the annual deductible, the government pays 80 percent of the set amount and the beneficiary pays the remaining 20 percent. That 20 percent is called the beneficiary copayment.

[Warren Lundy] So how high are those dispensing fees that the Part B program pays pharmacies?

[John Fitzsimmons] The payment amounts vary, depending on the drug, the number of days a prescription covers, and the timing of the prescriptions. The published report has two sections - one for inhalation drugs and one for the immunosuppressive, chemotherapy, and antiemetic drugs. Rather than talk about all of these fees, I will just talk about the inhalation drug fees. Part B pays a dispensing fee of nearly $46 dollars for a beneficiary's first inhalation drug prescription. For each prescription after that, Part B pays pharmacies dispensing fees of about $26 dollars for a 30-day prescription and almost $53 dollars for a 90-day prescription.

[Warren Lundy] So how does that compare with how much Medicare Part D and State Medicaid pay pharmacies for dispensing the same drugs?

[John Fitzsimmons] During 2011, Part D and State Medicaid programs paid pharmacies, on average, around $4.50 to dispense the same inhalation drugs.

[Warren Lundy] $26 dollars from Part B compared to under $5 dollars from Part D and State Medicaid programs to dispense the same drug? That's a huge difference in payment for dispensing one drug to one patient. What were the total differences for the Part B program?

[John Fitzsimmons] We estimated that if Part B paid dispensing fees similar to Part D, it would have saved nearly $111 million dollars. And if it paid dispensing fees similar to State Medicaid programs, Part B would save over $106 million dollars. Reducing Part B fees would also help beneficiaries save money because their copayments would be lower.

[Warren Lundy] Do you know of any reasons that would warrant Part B paying such higher dispensing fees than these other programs?

[John Fitzsimmons] No, pharmacists did not identify any special challenges in dispensing drugs to Medicare Part B beneficiaries as opposed to other patients that would justify Part B's substantially higher payment rates.

[Warren Lundy] What actions should CMS take to address the results of this review?

[John Fitzsimmons] We recommended that CMS amend current regulations to decrease the Part B dispensing fees to amounts that are similar to what is paid by other payers, such as Part D and State Medicaid programs.

[Warren Lundy] Thanks, John, for sharing this work and your results with us today.