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The chemotherapy treatments administered by petitioner, including
the chemotherapy drugs, are considered part of the medical
service under Medicare and are within the scope of Medicare's
coverage. Congress explicitly provided that charging for the
drugs on the bill does not change the nature of the transaction
from the provision of a covered "service" to the sale of
noncovered prescription drugs. See 42 U.S.C. sec. 1395x(s)
(1994); see also 42 C.F.R. secs. 410.10, 410.26, 410.27 (1998).
Respondent is also unduly impressed by the fact that
petitioner's physicians do not administer the treatments and are
generally not present when treatments are administered by
oncology nurses. This is irrelevant to the inquiry of whether
petitioner is selling a service or a service and merchandise, and
we place no significance on it. We disagree with respondent's
likening the facts herein to "prescription drugs in a drug store
-- drugs which are clearly merchandise requiring the use of
inventories." When a drug store sells drugs, there is little if
any specialized and personalized service element attendant to the
sale. Respondent's analogy is flawed.
Respondent argues the chemotherapy drugs comprised 26
percent of petitioner's gross receipts, that the drugs are billed
to responsible parties at 1.5 times the AWP, and that the cost of
the chemotherapy drugs was dramatically higher than the cost of
other supplies. These factors go to whether the sale of the
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