Performance Improvement 2009. Do Average Sales Prices Exceed Average Manufacturer Prices for Specific Prescription Drugs?

01/01/2009

Pursuant to Federal statute, the Office of Inspector General must notify the Secretary of the Department of Health and Human Services (the Secretary) if the average sales price (ASP) for a drug exceeds the drug’s average manufacturer price (AMP) by a threshold of 5 percent. If that threshold is met, the statute grants the Secretary authority to disregard the ASP for that drug and substitute the payment amount for the drug code with the lesser of the market price for the drug (if any) or 103 percent of the AMP.

For the second quarter of 2007, reviewers identified 22 of 292 drug codes with ASPs that exceeded AMPs by at least 5 percent. If reimbursement amounts for all 22 codes were based on 103 percent of AMP, reviewers estimated that Medicare expenditures would have been reduced by $8 million during the fourth quarter of 2007.

For the third quarter of 2007, using the current ASP payment methodology, reviewers identified 41 of 369 drug codes with ASPs that exceeded AMPs by at least 5 percent. If reimbursement amounts for all 41 codes were based on 103 percent of AMP, reviewers is estimated that Medicare expenditures would have been reduced by $16 million during the first quarter of 2008. Under the revised payment methodology, ASPs for 35 of 369 drug codes would have exceeded at least 5 percent. Of these 35 codes, 32 met the 5-percent threshold under the Centers for Medicare & Medicaid Services’ current method for volume-weighting data. An additional three codes would have met the 5-percent threshold using the revised ASP payment methodology but not the current methodology.

Report Title: Comparison of Second-Quarter 2007 Average Sales Prices to Average Manufacturer Prices: Impact on Medicare Reimbursement for Fourth Quarter 2007 http://oig.hhs.gov/oei/reports/oei-03-08-00010.pdf
Report Title: Comparison of Third-Quarter 2007 Average Sales Prices to Average Manufacturer Prices: Impact on Medicare Reimbursement for First-Quarter 2008 http://oig.hhs.gov/oei/reports/oei-03-08-00130.pdf

Agency Sponsor: OS-OIG, Office of Inspector General
Federal Contact: Erin Lemire, 202-205-9523
Performer: Staff; Office of Inspector General
PIC ID: 8989 and 8990

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