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May 17, 2010

All non-accredited pharmacies have until December 31, 2010 to apply for the Pharmacy Exemption.


Centers for Medicare and Medicaid Services (CMS) have been releasing information concerning the pharmacy exemption requirements. The 5% Pharmacy Exemption Rule has been widely advertised as a relief for independent pharmacies. However, it is not as simple as the press releases have made it sound. Please remember, if you are accredited, no actions or decisions are needed, your accreditation is for three full years.

If the pharmacy is accredited, the pharmacy exemption requirements do NOT apply to you. You have met the highest standard.

The pharmacy does not qualify for the Pharmacy Exemption if:

• The pharmacy’s EIN is less than 5 years old

• DME sales are greater than 5% of the gross pharmacy sales

• The pharmacy is submitting or preparing to submit a bid for competitive bidding


To qualify for the exemption, the pharmacy must complete the following items annually

• DME sales must be less than 5% of gross pharmacy sales

o The pharmacy must prepare detailed financial statements proving the DME sales are less than 5% of gross sales

o The financial statements are submitted to CMS annually

o Pharmacy computer systems do not segregate DME and pharmacy sales, unless the pharmacy operates separate systems

o CPA costs can be significant to prepare the properly formatted reports

• The pharmacy must still meet all the requirements of the Medicare Standards of Services for Suppliers and the Medicare Quality Standards

o This includes all policies and procedures, forms and patient files that must be maintained

• The exemption only excludes the actual accreditation survey


Additional items to be prepared for:

• Medicare Advantage programs will be eliminated. Proposed date is January 1, 2011

o Medicare Advantage patients will move to standard Medicare

o This move will increase the Medicare DME sales which will move many facilities over the 5% rule

• Medicaid roles will increase substantially because the Medicaid enrollment eligibility is being raised to $29,327.00. This portion will become effective on January 1, 2014

• Most state Medicaid programs have instituted some form of requirement to have a Medicare Part B number and/or accreditation to have a Medicare number

• Each month the number of insurance companies requiring part or all of accreditation requirements increases


R. Jeffrey Hedges


R.J. Hedges & Associates

P.O. Box H

New Florence, PA  15944

Office:  724-357-8380  Ext. 381  

Fax:      814-446-6336

Cell:      814-659-9989