Mail-order market for diabetes on precipice of disaster

As Arriva prepares to close, stakeholders expect increased pressure on an already shaky infrastructure
Friday, November 10, 2017

CORAL SPRINGS, Fla. – With Arriva Medical, the largest mail-order supplier of diabetes testing supplies, closing its doors at the end of the year, industry stakeholders predict chaos.

Arriva serviced 450,000 Medicare beneficiaries in 2016, according to the latest information in the HME Databank.

“This is a disaster,” said Tom Milam, an industry consultant. “I think CMS has to find a way to react to this, but there’s no other firm out there that has the infrastructure or capacity to service but a small fraction of these beneficiaries.”

Earlier this year, Arriva Medical lost an appeal seeking to reinstate its Medicare billing privileges. CMS revoked those privileges in 2016, alleging the provider submitted 211 claims for deceased patients between April 15, 2016, and April 25, 2016.

Also closing, according to an article in the Sun Sentinel, is Boca Raton-based American Medical Supplies, which serviced 33,000 beneficiaries in 2016, according to the HME Databank. Both companies are owned by Alere, which was recently acquired by Abbott Laboratories.

That leaves just nine mail-order companies to serve all Medicare beneficiaries, say stakeholders.

“There were a lot of concerns in that sector to begin with,” said Tom Ryan, president and CEO of AAHomecare. “The infrastructure of the traditional DMEPOS suppliers is crumbling before us and all these closures put a strain on the infrastructure. It all comes back to access, access, access.”

Fueling those access problems: low reimbursement rates, which have been reduced 71% to a low of $8.32 for a box of test strips since the mail-order program first kicked off in 2011.

“I have spoken to some of the skeletons of providers who have been excluded from the program and they have said at the current reimbursement there’s no way they’d do it,” said Milam.

While CMS has long touted the program’s savings, others, including the American Association of Diabetes Educators, the American Association of Clinical Endocrinologists and the Diabetes Access to Care Coalition, say the low reimbursement rates have meant beneficiaries can’t access their preferred brands and must use inferior brands—all of which can lead to poor health outcomes and an increase in death and hospitalizations.

“All the patient groups have asked for the program to be suspended,” said Nancy Johnson, a former U.S. Congresswoman and retired policy analyst with deep knowledge of the competitive bidding program. “The bidding process was clearly deficient: when you reduce payments by 71%, it’s probably overkill.”


In response to your article: For years, I have heard about the unfairness in the branded versus generic diabetes strip market. The Major Pharma brands have brought this on themselves by inflating prices on test strip boxes and creating various sales channels to support the massive rebates paid back to the PBMs in retail Pharma channels. Is it fair that a retail pharmacy should pay $85.00 for a box of 50 count retail strips and the pbm pay $88.00 leaving a $3.00 margin. Where does that spread flow back to?. As such it made it difficult for Branded Mfr to compete at the Medicare rates because of the massive inflation needed to sustain PBM rebates. Had test strips been subject to net pricing rebates it would have made it easier to reduce prices so that all providers could acquire those test strips even at Medicare rates. The cost to manufacture and import those boxes at either a generic or branded level is not much different. But the key difference is generic manufacturers don’t have road warriors pushing their products to every Endo office Nationwide, this carrying a much more substantial Market overhead.. Also any manufacturers who signed one sided agreements with single diabetes mail providers made it even more difficult since One Touch Ultra was only available throug Alere owned companies. Additionally, saying that generic brands are inferior is like telling the public that generic oral medication is inferior to branded medication, yet both are FDA approved to the same standards. Both “generic” and “brand” test strips and glucose meters are subjected to the same FDA Gluco Analyzer tests and all must fall within a range to consider them a 510K approved device. While the program has driven patients into brands they may not be accustomed to, the fact is they are able to accurately check their blood sugar and that is the requirement under the program. While I do agree the rates are below what I would consider fair market value it is not impossible for the likes of 9 companies to service the needs of Arrivas customer base. Companies who advance their enrollment, reorder and fulfillment systems with strong technologies can easily accommodate the additional influx of patient need. Some companies have built very sophisticated platforms couple with automation to enable almost hands off patient enrollment, and reorder management, thereby reducing their activity based costs of patient management.

I wonder if there has been any studies done on how many days per year a Medicare diabetic patient does not have their supplies to check their Blood Glucose.  This number could be broken down by Insulin dependent and non- insulin dependent diabetics. Especially in th case of Insulin dependent diabetics there is a direct cost for each day they are unable to monitor their Blood Glucose.