WASHINGTON--CMS plans to cut payments for compounded inhalation drugs in an effort to discourage pharmacies from "inappropriate" compounding.

CMS' plans were divulged last week in a letter from CMS Administrator Mark McClellan to Sen. Charles Grassley, R-Iowa, who had previously expressed concerns about the payment system.

Traditional pharmacy compounding involves preparing drugs that are not commercially available, but many pharmacies are mass-producing copies of brand-name drugs already on the market. According to Grassley, safety and sterility rules are stricter for drugs produced by manufacturers than those for drugs made in pharmacies.

Currently, Medicare reimburses most drugs, whether they are compounded or purchased from a manufacturer, at the same rates. But according to the letter, CMS plans to create separate HCPCS codes for compounded drugs and set lower rates for compounded products that are commercially available.

According to the letter, McClellan said the new codes will "remove any inappropriately large financial incentives that may be leading to substitution of compounded forms of inhalation drugs from non-compounded forms of the same drug in instances where such a substitution may not be justified by the issues of medical appropriateness."

In a statement issued Thursday, Grassley said, "Tightening up the payment system will help program administrators get a handle on the magnitude of compounding when it comes to inhalation drugs. That information will help make it clearer what policy changes need to be made to better ensure that we pay for drugs that are safe and meet legitimate medical needs." Last month, the Senate Finance Committee chairman sent a letter to McClellan expressing concerns about "inappropriate pharmacy compounding."

Earlier this month, the FDA warned Rotech, along with CCS Medical and Reliant Pharmacy Services (owned by Lincare Holdings), both of Clearwater, Fla., to stop what it says is the manufacturing and distributing of unapproved compounded inhalation drugs (see HomeCare, Aug. 14).

Although Rotech said it disagrees with the FDA's assessment, the provider said its PulmoDose pharmacy will no longer accept new prescriptions for compounded products and will switch its 30,000 patients currently taking them to commercially available drugs where clinically appropriate. The process will take several months to complete, the company said.

The company is preparing a formal response to the warning letter and is "committed to working with the FDA to resolve this matter," Rotech President and CEO Philip L. Carter said.

Neither Lincare nor CCS Medical returned calls for comment.

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