Medicare to reduce payments to pharmacies making their own medications

Beginning in January 2007, CMS will make "significantly lower" Medicare payments to pharmacies that make compounded inhalation drugs for patients with respiratory needs, according to a letter sent on Tuesday from CMS Administrator Mark McClellan to Sen. Chuck Grassley (R-Iowa), USA Today reports.

Grassley has maintained that drugs compounded in pharmacies are made under less stringent safety and sterility rules than the government sets for manufacturers.

In the letter, McClellan said reducing the payments will dispose "any inappropriately large financial incentives" that encourage pharmacies to make the drugs even when there is no medical reason to switch patients from brand-name products.

Medicare will begin to use special payment codes for the pharmacy-compounded drugs, allowing CMS to pay less for those products than for brand-name formulations.

Medicare will adjust the payment codes for drugs that are made for nebulizers and inhaled by individuals with respiratory illnesses such as asthma.

The letter comes after FDA earlier this month warned three large pharmacies that they were violating federal law by mass producing "thousands of doses" of the unapproved respiratory drugs.

Grassley called CMS' action a "very positive response" (Appleby, USA Today, 8/24).