Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements

KEY RESULTS

• The Centers for Medicare & Medicaid Services (CMS) calculated average sales price (ASP)-based payment amounts for 38 of the 68 skin substitutes included in our review.
• CMS was unable to calculate ASP-based payment amounts for the remaining 30 skin substitutes because manufacturers did not report the required ASP data.
• These 30 skin substitutes represent a disproportionate share of Part B spending.
• Transitioning skin substitutes to ASP-based payments has the potential to substantially reduce Part B expenditures.
• CMS faces hurdles in setting ASP-based payments for skin substitutes.

WHY WE DID THIS STUDY

Ensuring the appropriate reporting of ASPs is vital because CMS uses them to directly calculate payments under Medicare Part B. Federal law requires manufacturers to provide CMS with the ASP for each of their Part B drugs and biologicals on a quarterly basis. Prior to 2022, ASP reporting requirements did not generally apply to manufacturers of certain Part B drugs and biologicals, including skin substitutes, although some manufacturers voluntarily reported these data. Congress addressed the reporting gap through the Consolidation Appropriations Act, 2021 (CAA), which required manufacturers of skin substitutes (and the other Part B-covered products referenced above) to begin reporting ASPs to CMS for the first quarter of 2022.

WHAT WE FOUND

Despite the new legislative requirements, CMS was unable to calculate ASP-based payment amounts in the first quarter of 2023 for 30 of 68 skin substitute billing codes because their manufacturers did not report the required ASP data. According to our analysis, Part B payment amounts would be reduced substantially if ASPs were consistently reported and used, potentially leading to tens of millions of dollars in savings each quarter. However, CMS faces several unique hurdles in implementing ASP-based reimbursement for skin substitutes. For example, because skin substitutes are not actually prescription drugs, CMS cannot employ its usual methods and data sources to corroborate manufacturer-reported data on pricing and packaging. CMS is actively considering changes to the payment methodology for skin substitutes and, in January 2023, conducted a skin substitutes Town Hall to address stakeholder concerns and discuss potential payment approaches.

WHAT WE CONCLUDE

OIG appreciates that CMS is carefully considering its options regarding the potential impacts of different payment approaches for skin substitutes. Further, we also recognize that CMS's current processes for collecting and validating ASP data are less effective for these products. However, every quarter in which wholesale acquisition costs/invoices are used as the payment basis for some skin substitutes potentially leads to tens of millions of dollars in higher payments for Medicare and its enrollees. Therefore, we encourage CMS to quickly address the issues identified in this report. This might include establishing interim approaches while working on a more systemic solution.

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