Comparing Average Sales Prices and Average Manufacturer Prices for Medicare Part B Drugs: An Overview of 2012

WHY WE DID THIS STUDY

When Congress established average sales prices (ASPs) as the primary basis for Medicare Part B drug reimbursement, it also mandated that OIG compare ASPs with average manufacturer prices (AMPs) and directed CMS to substitute payment amounts for drugs with ASPs that exceed AMPs by a threshold of 5 percent. To comply with its statutory mandate, OIG has completed 29 quarterly pricing comparisons since the ASP reimbursement methodology for Part B drugs was implemented in January 2005. CMS began substituting payment amounts in April 2013 in accordance with its published price substitution policy, which currently applies to only certain codes with complete AMP data.

HOW WE DID THIS STUDY

We identified (1) drug codes that would have been eligible for price substitution on the basis of data from one or more quarters of 2012, (2) the codes for which CMS actually substituted prices, and (3) the codes that would not have been eligible for price substitution because they did not meet one or more of CMS's substitution criteria. We also estimated savings for each of the drug codes that exceeded the 5-percent threshold in a given quarter of 2012.

WHAT WE FOUND

Under CMS's price substitution policy, 14 drug codes would have been subject to reimbursement reductions on the basis of data from 2012, saving Medicare and its beneficiaries an estimated $1.8 million between the fourth quarter of 2012 and the third quarter of 2013. However, because CMS did not begin substituting prices until the second quarter of 2013, only eight drug codes were actually subject to reductions, generating an estimated $819,000 in savings. If CMS had expanded its price substitution criteria, the agency could have generated a quarter of a million dollars in additional savings.

WHAT WE RECOMMEND

CMS has already generated savings by implementing its current price substitution criteria and could achieve even greater savings by expanding those criteria. Therefore, we recommend that CMS (1) expand the price substitution policy to include drug codes with complete AMP data in a single quarter and (2) expand the price substitution policy to include drug codes with partial AMP data. CMS did not concur with either of our recommendations.