Recently, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released two reports regarding Average Sales Price (ASP) calculations, regarding the need for guidance and increased oversight in ASP reporting.
Is Additional Guidance Needed?
The first report, Manufacturers May Need Additional Guidance to Ensure Consistent Average Sales Price Calculations, noted that there are inconsistencies in the way ASPs are calculated for Medicare Part B drugs. It also covered nine areas in which manufacturers believe that guidance from the Centers for Medicare and Medicaid Services (CMS) may be helpful for more accurate and consistent ASP calculations.
HHS OIG conducted this review as directed by the Consolidated Appropriations Act of 2021. In conducting the review, HHS OIG compared ASPs for the 30 highest-expenditure drugs in Medicare Part B to different prescription drug benchmark prices in Q2 of 2021. Then, HHS OIG surveyed the 20 manufacturers of the 30 days to understand what factors are taken into consideration when calculating the ASPs.
The comparison of ASPs to other benchmark prices did not provide much insight into any inaccuracies. However, the manufacturer surveys did shed light on some inconsistencies in the ASP calculations, such as the way TRICARE-related drug sales were treated and whether fees paid to third parties actually met the criteria for “bona fide service fee” to be excluded from ASP.
The manufacturer surveys also uncovered some concerns on their part that CMS has not published many regulations or guidance regarding the ASP calculation for Medicare, especially when compared to the number of regulations and guidance available for ASP calculations for Medicaid. This often forces manufacturers to use reasonable assumptions.
HHS OIG Recommendations
HHS OIG recommended that CMS review the current guidance related to this report and decide whether additional guidance would result in more accurate and consistent ASP calculations. Specifically, HHS OIG identified the following nine areas that manufacturers believe, if guidance were available, it would help to ensure consistency across the industry:
- How to treat sales to TRICARE retail pharmacy programs when calculating ASPs
- Whether the ASP calculations should include sales to the United States territories
- How to treat value-based and outcomes-based purchasing arrangements in calculating ASP
- The appropriate methodology for allocating bundled sales in ASP – with additional specific questions
- The methodology that should be used to assess fair market value and the time period after which manufacturers should reassess the FMV of fees
- Whether rebates related to discarded drugs from single-use vials should be included in ASP calculations
- The circumstances under which manufacturers should (or must) refile ASP data or the historical period for which such refiling should be considered
- The reporting of potential negative ASPs and how it would be used in Medicare reimbursement rate calculations
- Whether or how to use information in the NDC-HCPCS Crosswalk to identify the insulin products for which they should report ASPs.
While HHS OIG recommended that CMS review all nine areas, they suggested that CMS first prioritize issues that might have a greater impact on pricing and payments, such as value-based arrangements.
CMS concurred with HHS OIG recommendations. The agency plans to review current guidance and that if additional guidance is necessary, some may be sub-regulatory while others may require rulemaking.
Is Additional Oversight Needed?
The second report, CMS Should Bolster Its Oversight of Manufacturer-Submitted Average Sales Price Data to Ensure Accurate Part B Drug Payments, focused on gaps in CMS’ oversight of manufacturer-reported ASP data and how those gaps may limit the agency’s ability to ensure accuracy of ASP data and Part B drug payment amounts.
Similar to the other report, this study was directed by the Consolidated Appropriations Act of 2021. In conducting this study, HHS OIG collected and reviewed the CMS standard operating procedures for the oversight of ASP data and interviewed CMS staff regarding the oversight processes, including discussing challenges to conducting effective oversight. HHS OIG reviewed five years of Medicare Part B ASP and drug payment data from Q1 2016 through Q4 of 2020.
HHS OIG found that CMS was unable to calculate an ASP-based payment amount for 8% of drug codes at least once between 2016 and 2020 due to invalid or missing ASP data. Additionally, there were situations where CMS was unable to calculate an ASP-based payment amount due to a negative sales or ASP value reported by the manufacturer or no sales to report for a quarter. When CMS used the alternative payment methodology for missing or invalid ASP data, it often resulted in higher drug payment amounts for Part B drugs.
Additionally, HHS OIG noted that CMS has not leveraged its online ASP data collections that would help with oversight. CMS is able to request custom reports from the ASP system, but the agency does not “regularly generate reports that could help it conduct more targeted oversight.”
In total, HHS OIG found that nearly one-quarter (24%) of drug codes were missing ASP data for one or more drugs within that code in at least one quarter from 2016 to 2020.
HHS OIG found that while CMS does have oversight procedures in place to review ASP data, gaps do exist that allow inaccurate data to impact Medicare Part B payment amounts. Additionally, HHS OIG found, CMS does not leverage its ASP data collection system to produce analytical reports that could monitor the ASP data quality and maximize its oversight capabilities.
As far as challenges that impact CMS’ ability to conduct oversight of ASP data, CMS noted that late ASP data submissions “substantially hindered” the agency’s ability to conduct effective oversight and the “lack of authority” to force manufacturers to respond to questions about inaccurate data is difficult.
HHS OIG Recommendations
HHS OIG recommended that CMS create a strategy to strengthen its internal controls to ensure the accuracy of Part B drug payments. Specifically, HHS OIG recommends that CMS implement additions to its oversight procedures to reduce the likelihood of errors in collecting the data and subsequently calculating Medicare payment amounts. Some of the additions HHS OIG recommended were: including new (or more enhanced) quality checks of manual data processes; running new reports from the ASP system that may better target manufacturers that may be submitting inaccurate ASPs; and creating processes for correcting potential errors in data files.
CMS concurred with the recommendation and agreed to find ways to strengthen its internal controls and enhance the current ASP system.
American Hospital Association Case
On a related note, we recently covered the American Hospital Association (AHA) case where the AHA contested cuts that were made to the Medicare rate for 340B discount drugs in Policy & Medicine Compliance Update.
ASP was at the center of that case, as CMS reduced the Medicare reimbursement rate to DSH hospitals purchasing 340B outpatient drugs from the ASP plus 6% to ASP minus 22.5%. This meant that DSH hospitals would receive 28.5% less than previously expected (and received). Therefore, the way ASP is calculated was critical to the amount that a hospital could be reimbursed and given the rate cut, it is possible that hospitals calculated their ASP differently than they otherwise had previously in an attempt to make up some of the rate cut.
Ultimately, in the AHA case, the “Court found that CMS may only vary Part B reimbursement by hospital group if it conducted a statistically valid survey, which it had not done.” Therefore, “CMS and the hospital industry must now determine the size of back payments owed and the procedure for repaying DSH hospitals for the lower payments previously issued.”