Earlier this year, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) conducted a mandatory review of average sales prices (ASPs) compared to average manufacturer prices (AMPs) for the fourth quarter of 2021. When Congress established the ASP as the basis for Medicare Part B drug reimbursement, it also provided a way to monitor market prices and limit potentially excessive payment amounts. If HHS OIG finds that the ASP exceeds the AMP by 5%, the HHS Secretary is to substitute the ASP-based payment amount with a lower calculated rate (the lesser of the widely available market price of 103% of the AMP) when setting the reimbursement amount.
CMS makes the substitution only if a drug’s ASP exceeded the AMP by 5% in either the two previous quarters or three of the fourth previous quarters. Additionally, CMS lowers the reimbursement amount only if the ASP and AMP comparisons are based on the same set of drug products/based on complete AMP data.
Price substitutions are not implemented, however, on drugs that the United States Food and Drug Administration (FDA) has identified as being in short supply, or if the substituted amount would exceed the ASP-based payment amount for the quarter in which the price substitution would take effect.
The Review
In conducting the review, HHS OIG obtained the Q4 2021 ASP and AMP data for Medicare Part B drugs from the Centers for Medicare and Medicaid Services (CMS). The agency then calculated the volume-weighted AMP for each drug using a methodology consistent with CMS for calculating volume-weighted ASPs.
HHS OIG compared the volume-weighted ASPs and AMPs and identified the drugs with complete data where the ASP exceeded the AMP by at least 5%. HHS OIG also identified drugs that met CMS’ duration criteria for price substitution (i.e., they exceeded the threshold in the two previous quarters or three of the four previous quarters).
Agency Findings and CMS Action
The agency found that for Q4 2021, there were eight drug codes that met CMS’ price substitution criteria by exceeding the 5% threshold for either two consecutive quarters or three of the four previous quarters. HHS OIG found eight additional drug codes that exceeded the 5% threshold. However, at the time of analysis, FDA had identified those eight drugs as being in short supply. Finally, there were four drug codes with ASPs that exceeded AMPs by at least 5% in Q4 2021 but did not meet other CMS price-substitution criteria.
HHS OIG provided the eight relevant drug codes to CMS for review. CMS will need to review the information to determine whether to pursue price substitutions that would limit excessive payments for Part B drugs.