Originally Published MX September/October 2004
GOVERNMENTAL & LEGAL AFFAIRS
How Competitive Bidding Might Affect Manufacturers' Sales|
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Suppliers—not manufacturers—will be the bidders under the forthcoming competitive bidding system, just as Medicare reimburses suppliers and not manufacturers. Nonetheless, changes in the program of supplier reimbursement could profoundly affect sales by manufacturers of durable medical equipment, including related consumables.
How Medicare decides to group products into product categories for competitive bidding purposes may influence the market in a number of ways. For example, lumping less-expensive low-tech products with more-expensive high-tech versions in a single category could squeeze out sales of the higher-cost items. Also, a revision of current product groupings might eliminate some of the biggest spreads between the Medicare reimbursement for a product and the cost to a supplier of acquiring it, making the item less attractive for suppliers to purchase.
On the other hand, a product regrouping could very well increase the spread for some items. Sales may benefit in those cases, as affected items would become more attractive for profit-minded suppliers to purchase.
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