In response to criticism from major drug distributors and lackluster response to a request for bids, the Centers for Medicare and Medicaid Services (CMS) is delaying implementation of the Competitive Acquisition Program (CAP) for physician-administered drugs paid under Medicare Part B. Originally scheduled to launch January 2006, CAP will now start July 2006 ” provided CMS modifies the proposed requirements to make the program workable and sufficiently profitable for distributors.

Part of the series of reforms enacted by Congress in the Medicare Modernization Act (MMA) of 2003, the Competitive Acquisition Program is designed to help Medicare leverage its market share to reduce prices for injectable drugs and save money for taxpayers and beneficiaries. However, both CMS and the major drug distributors face huge, albeit different learning curves.

The feds are learning the complex, less than transparent ways and means of the pharmaceutical supply chain ‘ all while also trying to implement the massive new Medicare Part D outpatient drug benefit. Moreover, given the politics of Medicare, historically it has been tough for CMS to introduce competition to the program.

Meanwhile, the prospective players in CAP ‘ likely including the four big drug distributors ‘ are learning about their own complex new world ‘ the often-inscrutable, always Byzantine domain of Medicare, CMS, federal rulemaking, and government procurements.

And physicians ‘ who will need to decide whether to participate in CAP and select among wholesalers under contract with CMS ‘ are none too happy these days. Earlier, MMA reduced what Medicare reimburses docs for Part B drugs. While the new pricing is defensible and more in line with the market, it reduced physician office revenues, particularly for oncologists. In addition, unless Congress acts this fall, physicians face unsupportable fee cuts of 5 percent a year for several years.

The Part B Competitive Acquisition Program is a major change to Medicare and the multi-billion dollar market for physician-administered, injectable drugs. It’ll be interesting to watch if Medicare can make it work.