Irwindale Lens Producer Sues Federal Agency

An Irwindale-based manufacturer of high-technology artificial lenses that replace natural lenses following cataract surgery on Tuesday sued the federal government to overturn the Medicare reimbursement rate for the lenses.

In a complaint filed in U.S. District Court in Los Angeles, Ioptex Research Inc. alleged that the Department of Health and Human Services’ Health Care Financing Administration violated federal law when it set a flat $200 reimbursement rate to ambulatory surgical centers for all intraocular lenses they use.

Executives of Southern California companies, which represent 75% of the nation’s intraocular lens industry, have been trying since 1988 to prevent implementation of the rate. They contend that the rate, which became effective on March 12, is too low.

Since most cataract surgery is performed on elderly people eligible for Medicare benefits, the Medicare reimbursement rate is critical to the success of the industry.

Ioptex’s court complaint said HCFA relied on an “outdated and scientifically flawed” report to establish the payment rates for intraocular lenses.

Ioptex President Joseph Mandato said in an interview that the federal agency audited 28 of some 500 ambulatory surgical centers and chose to set the rate based on prices for lenses paid by the 11 centers with the lowest-cost lenses. It did not take into account the cost of making different types of lenses, he said.

Mandato said the industry is very competitive and the centers paying the lower prices were getting generic, out-of-style lenses. Ioptex, a subsidiary of Britain’s Smith+Nephew PLC, with revenues of $57 million a year, sells standard intraocular lenses. But 60% of its lenses are high-technology lenses, he said.

The $200 uniform rate “unreasonably depresses the reimbursement rate for high-technology lenses,” thereby making it impractical for ambulatory surgical centers to buy them, the complaint said. It added that Ioptex will be harmed unless Medicare sets a rate that is “accurately based on the reasonable cost” of the class of lenses sold by Ioptex and other manufacturers.

The suit asks for an injunction barring the new rate and a directive for Medicare to establish a rate for different classes of lenses. Additionally, it seeks retroactive reimbursement to surgical centers for the “reasonable” cost of lenses they purchased after March 12.