Performance Improvement 2008. Do Average Sales Prices for Specific Prescription Drugs Exceed Average Manufacturer Prices?

01/01/2008

This study examined whether the average sales prices (ASP) for individual Medicare Part B prescription drugs exceeded the average manufacturer prices (AMP) by at least five percent during the third quarter of 2006 and determined the impact of lowering reimbursement amounts for drugs that exceeded the five-percent threshold. Since January 2005, Medicare Part B has been paying for most covered drugs using a reimbursement methodology based on average sales prices. The Social Security Act defines an average sales price as a manufacturer's sales of a drug to all purchasers in the United States, divided by the total number of units of the drug sold by the manufacturer. The Act mandates that the Inspector General compare the two prices. The law states that if the Inspector General finds that the ASP for a drug exceeds the AMP by five percent, the Department of Health and Human Services may disregard the average sales price when setting the reimbursement rate the government will pay for the drug. Researchers obtained the Centers for Medicare and Medicaid Services´ (CMS') ASP data, which were used to establish volume-weighted ASPs and reimbursement amounts for the first quarter of 2007. Researchers also obtained CMS's AMP data and used it to calculate volume-weighted AMPs using the same method that CMS uses to calculate volume-weighted ASPs. Ultimately, researchers compared volume-weighted ASPs to volume-weighted AMPs for 326 Healthcare Common Procedure Coding System (HCPCS) codes and identified codes for which ASPs exceeded AMPs by at least five percent.

Six percent of a sample (39 of 326) of the HCPCS codes reviewed had volume-weighted average sales prices for individual Medicare Part B prescription drugs that exceeded the volume-weighted average manufacture prices by at least five percent.

Report Title: Comparison of Third-Quarter 2006 Average Sales Prices to Average Manufacturer Prices: Impact on Medicare Reimbursement for First Quarter 2007, http://oig.hhs.gov/oei/reports/oei-03-07-00140.pdf
Agency Sponsor:
OS-OIG, Office of Inspector General
Federal Contact: Claire Barnard, 202-205-9523
Performer: Office of Inspector General
PIC ID: 8789

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