Reports point to mounting evidence of brand shakeup for diabetes supplies

WASHINGTON - Medicare's mail-order program for diabetes supplies has had a dramatic impact on the market, as evidenced by a pair of recent reports from the Office of Inspector General (OIG).

“This is a rough look at what's available in the marketplace and it doesn't represent what was available in the marketplace prior to bidding,” said Andrea Bergman, a vice president with McDermott+Consulting, the lobbying subsidiary of a law firm that represents the Diabetes Access to Care Coalition.

The reports looked at Medicare mail-order market shares of test strips in the three months before and after the July 1, 2013, implementation of the national mail-order program. Before the program, two types of strips accounted for 34% of the mail-order market share; after, two types of strips accounted for 45% of the market share.

The top strip in both cases: Prodigy's AutoCode, which accounted for 23.9% of the market share. By contrast, for the three months ended December 2009, Prodigy's AutoCode comprised 2.3% of the market, according a similar OIG report in 2010.

Such a spike in market share could be evidence of providers switching beneficiaries to lower-priced products, say stakeholders.

“You would never see a bunch of beneficiaries just one day say, 'You know what, let's all shift tenfold to this new available product,'” said Bergman. “You end up with a market where the suppliers are controlling the usage—not the beneficiaries, not the physicians.”

What's more: the Medicare Improvements for Patients and Providers Act (MIPPA) requires suppliers to demonstrate that their bid covers at least 50%, by volume, of all types of test strips. The dramatic shift in market share could point to continued decreased access to major brands in any future rounds of the program, say stakeholders.

“The goal of the provision is to ensure that patients have access to the products they are currently using,” said healthcare attorney Seth Lundy, a partner with King & Spalding. “The OIG study shows almost no (major) branded products. That would potentially affect how suppliers can have successful bids without any branded products in their bids whatsoever.”

That, in turn, could drive the single payment amounts—currently at $10.41 per box of 50 strips—and the number of suppliers even lower, says Lundy.

“A lot of those contract suppliers are struggling to be able to stay in business at the bid rates and there do not seem to be a lot of suppliers looking to get into the market at the bid rates,” he said. “That's a real issue in terms of whether there's going to be a sufficient amount of bidders in Round 3.”