Comparison of Average Sales Prices and Average Manufacturer Prices: An Overview of 2011

WHY WE DID THIS STUDY

When Congress established average sales prices (ASP) as the primary basis for Medicare Part B drug reimbursement, it also mandated that OIG compare ASPs with average manufacturer prices (AMP) and directed CMS to lower reimbursement for drugs with ASPs that exceed AMPs by a threshold of 5 percent. This is OIG's 29th report comparing ASPs to AMPs since the ASP reimbursement methodology was implemented in January 2005. CMS has yet to make any changes to Part B drug reimbursement as a result of OIG's studies. However, the agency published a final rule in November 2012 that specifies the circumstances under which AMP-based price substitutions will occur beginning in 2013.

HOW WE DID THIS STUDY

We identified drug codes that exceeded the 5-percent threshold in one or more quarters of 2011 and estimated the financial impact of lowering reimbursement amounts for those drugs. We also identified drug codes that were removed from our pricing comparison in one or more quarters of 2011 because they did not have AMP data.

WHAT WE FOUND

In 2011, 58 drug codes exceeded the 5-percent threshold in 1 or more quarters when complete AMP data were used. If reimbursement amounts for these 58 codes had been lowered to 103 percent of the AMPs during the applicable quarter(s), Medicare expenditures would have been reduced by an estimated $14.4 million over 1 year. Under CMS's proposed price substitution policy, reimbursement amounts for over 40 percent of these codes would have been reduced, saving an estimated $7 million over 1 year. An additional 24 drug codes met the 5-percent threshold when partial AMP data were used. Furthermore, at least 9 percent of drug codes were excluded from OIG's pricing comparisons in each quarter of 2011 because none of the associated drug products had AMP data.

WHAT WE RECOMMEND

To ensure the appropriateness of Medicare Part B payments, we recommend that CMS (1) finalize the price substitution policy in the proposed rule and lower Medicare reimbursement amounts for drugs that exceed the 5-percent threshold, (2) consider expanding the price substitution policy to include all Healthcare Common Procedure Coding System (HCPCS) codes with complete AMP data, (3) consider expanding the price substitution policy to include certain HCPCS codes with partial AMP data, and (4) consider seeking a legislative change to require manufacturers of Part B-covered drugs to submit both ASPs and AMPs. CMS concurred with our first recommendation and did not concur with the remaining three.