WHY WE DID THIS STUDY
When Congress established average sales price (ASP) as the basis for Medicare Part B drug reimbursement, it also provided a mechanism for monitoring market prices and limiting potentially excessive payment amounts. The Social Security Act (the Act) mandates that OIG compare ASPs with average manufacturer prices (AMPs). If OIG finds that the ASP for a drug exceeds the AMP by a certain percentage (currently 5 percent), the Act directs the Secretary of Health and Human Services to substitute the ASP-based payment amount with a lower calculated rate. Through regulation, CMS outlined that it would make this substitution only if the ASP for a drug exceeded the AMP by 5 percent in the two previous quarters or three of the previous four quarters.
HOW WE DID THIS STUDY
We obtained third-quarter 2019 ASP and AMP data for Part B drugs from CMS. We calculated the volume-weighted AMP for each drug consistent with CMS’s methodology for calculating volume-weighted ASPs. We then compared the volume-weighted ASPs and AMPs and identified all drugs with complete data for which the ASPs exceeded the AMPs by at least 5 percent. We also identified drugs that met CMS’s duration criteria for price substitution, i.e., they exceeded the threshold in the 2 previous quarters or 3 of the previous 4 quarters.
WHAT WE FOUND
In the third quarter of 2019, 11 drug codes met CMS’s price substitution criteria by exceeding the 5 percent threshold for 2 consecutive quarters or 3 of the previous 4 quarters.
MANDATORY ACTION
OIG is providing the 11 drug codes to CMS for its review. CMS should review this information to determine whether to pursue price substitutions that would limit excessive payments for Part B drugs.
