NCPA, NACDS and FMI urge CMS to change final DMEPOS rules requiring surety bonds for pharmacies

ALEXANDRIA, Va. The National Community Pharmacists Association, National Association of Chain Drug Stores and Food Marketing Institute on Wednesday released a letter addressed to Acting Administrator of the Centers for Medicare and Medicaid Services Charlene Frizzera, urging CMS to make a change to the final Durable Medical Equipment, Prosthetics, Orthotics and Supplies rules requiring surety bonds for state-licensed pharmacy suppliers.

At issue is a current requirement that each pharmacy providing DMEPOS services, including diabetes equipment, carry a $50,000 surety bond per outlet. Annual administrative costs associated with those surety bonds have been estimated to be as high as $2,000. For a national chain like CVS or Walgreens, this would necessitate $300 million in surety bonds.

“Requiring suppliers with multiple locations to obtain multiple bonds in the amount of $50,000 will cause many of them to reach their risk ratings for surety bonds,” the associations stated. “The DMEPOS surety bond would essentially exhaust the company’s bonding ability,” the associations added, making it more difficult to secure bonds for other aspects of the pharmacy business, such as performance bonds to streamline and secure new store construction or bonds needed to make other infrastructure or operational expansions. “Moreover, it is unclear whether enough capacity exists in the surety bond market to implement a $50,000 per location bond as required by the final rule,” the associations concluded.

“This rule was issued to address fraud and abuse in the Medicare DMEPOS program and to create a pool of funds for recovery of erroneous payments,” the pharmacy associates wrote. “While we agree with the need to combat fraud in the Medicare program, this rule raises serious policy and administrative concerns that must be addressed by the new CMS leadership before the rule becomes effective. … For example, if pharmacies are unable to afford the cost of the surety bonds and participate in the Medicare program, diabetic patients are likely to face difficulties in obtaining their blood glucose testing supplies and pharmacists’ counseling to control their disease. … Imposing a surety bond will lead to fewer DMEPOS diabetic supplies providers, especially in rural areas. This decreased access to supplies and services, especially when combined with recent DMEPOS programs, such as competitive bidding and accreditation, will lead to additional costs to the system.”

If a pharmacy opted out of participating in Medicare because of the surety bond requirement, it also may preclude that pharmacy from serving Medicaid patients. Several state Medicaid programs require DMEPOS suppliers to be enrolled in Medicare in order to provide DMEPOS to Medicaid patients.

“Congress intended surety bonds to be targeted toward suppliers that pose serious risk to the Medicare program, and not legitimate healthcare providers,” the associations argued. “Unlike unscrupulous suppliers for whom this rule was intended, pharmacies are state licensed healthcare providers who are subject to disciplinary actions from their state boards of pharmacy for engaging in fraudulent behavior, in addition to prosecutions by state and federal authorities. In this regard, pharmacies are no different than physicians, non-physician practitioners and others who received an exemption in the final rule.”