Imagine the upheaval in our economy -- on manufacturers, on jobs, on wages, on the availability of consumable goods -- if, with the stroke of a pen, the cost of cars, computers, homes, land, clothing or food were reduced by 72 percent. Effective July 1, 2013 the Centers for Medicare & Medicaid Services (CMS) will assert its authority to set prices by cutting reimbursements by 72 percent for diabetes blood glucose meters and supplies -- often described as self-monitoring blood glucose (SMBG) systems. Over the next 10 years, they estimate, this policy change will reduce beneficiary co-payments by $17.2 billion, and save Medicare up to $25.8 billion.
If you are challenged with managing diabetes, you may applaud this new payment policy as an all-too rare, but welcome, pro-patient decision. If you or your loved ones don't have diabetes, you may be inclined to overlook this announcement as benign, and not particularly relevant to your health and family economics.
In either instance, you would be mistaken. Our collective interest is tied up in reversing the shortsightedness that this form of market contraction represents.
Granted, diabetes monitoring devices and supplies are little more than a rounding error on the national balance sheet -- but the analogy is apt. Medicare reimburses for the care over 8 million fee-for-service beneficiaries with diabetes--almost a third of all diagnosed diabetics in the United States. As a consequence, the new CMS pricing model for blood glucose supplies will restructure the existing market.
Price setting is always a complex affair. It manipulates consumer demand, the cost of production, competition, product quality, and innovation. The theory is that businesses operating in a competitive environment will adapt their prices, products and services to attract the greatest number of customers. Price setting adds another set of dimension to this process. Whether monopolistic behavior by corporations or price setting by government, artificial constraints on both price and demand have far-reaching implications of which the health care consumer must be made aware.
The new CMS pricing model for diabetes supplies will trigger a cascade with multi-dimensional sequelae. It will give a competitive advantage to low-cost imports, even though the Food and Drug Administration (FDA) has publicly expressed concerns about the accuracy of many of these SMBG systems. According to reporting from a public meeting of the Diabetes Technology Society, which was convened in Arlington, Va. in May 2012:
"Katherine Serrano, diabetes branch chief in the FDA division of chemistry and toxicology devices, said the federal government is aware of accuracy problems with meters on the market. But she said that the FDA is limited in its response because some manufacturers are in Asia, and the agency must rely on the manufacturers' own studies related to accuracy. 'There have been a lot of advances in the technology of the meters but we have not seen great strides in accuracy,' Serrano said. Serrano noted that manufacturers don't have much incentive to improve accuracy because federal law requires only that they prove they are 'substantially equivalent' to another meter already on the market. The FDA relies on the manufacturer's own studies to analyze accuracy and does not require any independent testing, she said."
In addition to concerns about the accuracy of the technology, because it favors mail-order services, the new CMS pricing model will cause a significant loss in revenue for retail pharmacies by forcing the patient into a mail-order purchasing model. This will further challenge the viability of many retail pharmacies, compromising the ability of consumers to access the full range of pharmacy services in one location, including the professional support of pharmacists.
As is their wont, commercial insurers will benchmark their reimbursements for SMBG systems to the Medicare standard, rapidly amplifying the effect of this seemingly narrow decision. It can realistically be anticipated that, in short order, Americans with diabetes will witness the disappearance of many familiar domestic meter brands.
We are moving inexorably into the world of digital medicine where devices in the home or on our person will be able to continuously monitor our health -- including bio-metrics such as blood pressure, cholesterol, blood glucose -- and transmit those readings to electronic health records that are globally accessible by your and the health care providers you designate. Indeed, we are on the brink of a revolution in non-invasive blood glucose monitoring. Manufacturers of "traditional" blood glucose meters are rushing to release products that will be broadcasting findings into the cloud, rising to meet the competition. Microsoft and its partners are far enough along in development to announce their research on contact eye lenses that monitor blood glucose and have the ability to transmit those results to personal health records. Intel Corp's new CEO Brian Krzanich recently announced Intel's intention to speed up the rollout of chips for smartphones, tablets and wearable devices as consumers move away from personal computers.
There will be many variations on this basic technology as research and manufacturing companies link new knowledge of genetics, biochemistry and molecular biology to innovative technology to improve the quality of care that is available and to compete to meet the needs of consumers. The efficiencies and outcomes from such a system will encourage its propagation. These new tools will allow for earlier, more effective care, more efficient use of medical personnel, and reductions in avoidable inpatient stays and emergency room visits.
The challenge is to assure that the pricing policies of the largest single purchaser of health care services advance our society, rather than leading the charge backwards.
Our federal government needs to protect consumers against business excesses that can harm competition, defraud consumers, violate privacy rights, or threaten individual health. Yes, government also has a vital role to manage the economy in a broad context; but it oversteps when it risks disrupting America's progress towards higher quality medicine and the improved health of the American people.
Congress needs to immediately revisit the authority it gave CMS to establish the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program authorized by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.