The Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program was mandated by Congress through the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. The program is designed to improve the accuracy of Medicare DMEPOS payments and ensure that beneficiaries get quality items and services at fair prices. The competitive process only works, however, when bidders set their bid prices independently. When competitors collude, prices are inflated and honest bidders, Medicare beneficiaries, and the American public are cheated.
Antitrust laws protect competition and prohibit collusion. Price fixing, bid rigging, agreements to allocate customers or divide markets, and other forms of collusion are illegal.1 A collusive agreement is illegal even if the agreed-upon prices were reasonable, the agreement was "necessary" to prevent price cutting, or the competitors were simply trying to ensure that each got a fair share of Medicare business. These types of agreements need not be formal or in writing to be unlawful. When competitors share sensitive pricing information (e.g., the price or level at which they intend to bid for a particular contract), it can lead to express or unspoken agreements on prices or bids that violate antitrust laws. Price fixing, bid rigging, and customer or market allocation agreements are subject to criminal prosecution by the Antitrust Division of the United States Department of Justice. These offenses are punishable by a fine of up to $100 million for corporations and a fine of up to $1 million or 10 years imprisonment (or both) for individuals. Under some circumstances the maximum potential fine may be increased.
To minimize the likelihood of antitrust problems, suppliers that bid or intend to bid in the DMEPOS Competitive Bidding Program should determine whether to bid and submit their bid amounts independently of any competitors. Specifically, a bidder should avoid:
- any agreement or understanding with competitors on the bid amounts or components of the bid amounts (e.g. costs, discounts, or profit margins);
- any agreement or understanding with competitors not to bid on a particular product category/competitive bidding area or to withdraw a previously submitted bid so that a competitor’s bid will be accepted;
- any agreement or understanding with competitors to submit a bid that likely is too high to win;
- any agreement or understanding with competitors to rotate or allocate being the lowest bidder(s);
- any agreement or understanding with competitors not to bid, to submit a losing bid, or to withdraw a bid in exchange for subcontracts or other payments from the winning bidders;
- any agreement or understanding with competitors to allocate or divide markets among themselves, including specific customers or types of customers, products or territories; and
- sharing competitively sensitive pricing or bidding data with any competitors, including through a third party (for example, a consultant), with the intent to facilitate any agreement or understanding as described in 1 – 6 above.
The Centers for Medicare & Medicaid Services (CMS) has a zero-tolerance policy regarding violations of antitrust laws. We will monitor bidders, including bidders that choose to use consultants, for potential antitrust violations. Bidders that choose to use consultants should be aware that the use of a consultant does not protect them from the need to comply with antitrust requirements. CMS will work with the Office of Inspector General and other appropriate law enforcement partners on any suspected violations, including referring such matters to the Department of Justice.
1This guidance does not apply to participation in networks (as defined by CMS for the purpose of DMEPOS Competitive Bidding Program) and other legitimate joint ventures