Bustin' a CAP: The Competative Acquisition Program - Pharmaceutical Executive


Bustin' a CAP: The Competative Acquisition Program

Pharmaceutical Executive

Dispute Resolution: Worse Than Conflict

Conflict with a doctor is bad for the vendor, since doctors may choose another vendor every year. But dispute resolution may be worse. If a vendor loses a dispute with the doctor, the doctor is likely to choose another vendor. If the vendor "wins," the doctor may be censured or suspended from CAP. So in all likelihood, the customer is lost either way. Any dispute resolution is likely to take a long time. A CAP vendor's first step in dispute resolution is to ask the regional CMS administrator to counsel the responsible CAP physician. If the problem is not resolved, the administrator will investigate and make a recommendation to CMS. CMS will then review the recommendation, investigate further, and may ultimately suspend the physician from CAP for up to 15 months.

In either case, doctors and vendors are at one another's throats. And patients are caught in the middle. The supply of drugs that may keep them alive is threatened. And CMS, which is in the business of providing benefits for the nation's seniors, is instead enlisted to adjudicate claims.

What could push the system this far? Perhaps the market forces that were enlisted to save it. In a system of competitive pricing and tight margin control, the market may not move business forward smoothly. When things go wrong, all parties who could solve a dispute may dig in to preserve their own economic self-interest. The market, intended to streamline and stabilize the delivery of Part B drugs, may instead be the force that brings the giant Rube Goldberg machine to a standstill. CAP would be wonderful if it worked, but like any system of complex interlocking mechanisms, it may prove easier to knock it off kilter than to keep it running smoothly.

Are CAP Vendors Distributors or Pharmacies?

Should CAP vendors be licensed as pharmacies, with the incumbent restrictions on labeling, handling, and reusability of prescribed drugs? Or should they be licensed as distributors, with fewer regulations and greater flexibility in shipping, receiving, and reallocating orders?

Distributors and pharmacies have very different professional responsibilities when it comes to handling drugs. If CAP vendors' activities involve receiving and dispensing prescriptions, these fall under different regulations that govern everything from labeling and handling to the pharmacist's responsibility to actively participate in patient care, as well as their legal liability for dispensed products.

What will work best for the CAP program as a whole? A dispensed prescription cannot be returned to pharmacy stock and dispensed to another patient. But an unused, intact prescription drug supplied to a physician office may be taken back and reissued to another buyer, if it has not yet expired.

Some CAP-vendor drugs are highly toxic agents that, in many cases, must be supplied in quantities greater than will be administered, due to a requirement in the interim final rule (IFR) that only unopened product be supplied to physicians. If the vendors are pharmacists, they and their employers may be party to cases of accidental drug overdose, and thus face significant professional liability.

CMS has not resolved these questions: "We believe that vendors must operate as distributors in order to participate in the CAP," the agency states in the IFR. "And we recognize that a natural outgrowth of participating in this program may be that those distributors also will need to be licensed as a pharmacy." This statement shows a fundamental misunderstanding in that a distributor cannot act as a pharmacy.

The Long and Winding Claim

It is a long road from drug delivery to payment.

  • The CAP vendor submits a claim to its regional CMS administrator, often called a local carrier, with the prescription number assigned to that shipment. The carrier will pass the claim to CMS' central claims-processing system.
  • The CAP physician files a claim for the drug and for the physician's professional service with the local carrier, using the prescription number provided by the CAP vendor. This must happen within 14 days after the doctor administers the drug to the patient.
  • The physician's local carrier will review the CAP physician claim for correctness, and check it against coverage and payment policies.
  • The local carrier will pass the claim to CMS' central claims processing system, with a notation that it did or did not pass all local-carrier policies.
  • Using the prescription number, CMS will check the local carrier claim and then approve or deny payment.
  • The CAP vendor may not bill the patient for the co-pay until CMS has paid its share of the drug claim. If CMS approves a lesser amount than claimed, the vendor may bill only a proportionately lesser co-pay than it otherwise would have. In the event of a denial, the vendor may not bill the co-pay at all. Vendor bad debt may not be added to the CAP vendor's pricing offer to CMS.

Elan Rubinstein (
) is partner of EB Rubinstein Associates, and David Galardi (
) is senior vice president of marketing and development for Physicians Oncology Network.


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