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Comparing Average Sales Prices and Average Manufacturer Prices for Medicare Part B Drugs: An Overview of 2013


When Congress established average sales prices (ASPs) as the primary basis for Medicare Part B drug reimbursement, it also mandated that OIG compare ASPs with average manufacturer prices (AMPs) and directed CMS to substitute payment amounts for drugs with ASPs that exceed AMPs by a threshold of 5 percent. To comply with its statutory mandate, OIG has completed over 30 quarterly pricing comparisons. In April 2013, CMS began substituting payment amounts in accordance with its published price substitution policy, which currently applies to only certain drug codes with complete AMP data that exceed the 5-percent threshold in two consecutive quarters or three of the previous four quarters.


We identified drug codes that had price substitutions on the basis of data from 2013, as well as codes that exceeded the 5-percent threshold but were not eligible for price substitution under CMS's current criteria. We also estimated the financial impact of reducing reimbursement for each of the drug codes that exceeded the 5-percent threshold.


Under CMS's price substitution policy, 15 drug codes were subject to reimbursement reductions on the basis of data from 2013, saving Medicare and its beneficiaries an estimated $13 million from the fourth quarter of 2013 through the third quarter of 2014. We estimate that if CMS had expanded its price substitution criteria to include drug codes with complete AMP data in a single quarter or certain codes with partial AMP data, the agency could have generated almost $6 million in additional savings.


CMS has maintained a cautious approach to price substitutions and has expressed concern that expanding the criteria for price substitution may impede physician and beneficiary access to drugs. OIG agrees that CMS should always be mindful of access to prescription drugs; however, we continue to believe that CMS can achieve a better balance between safeguarding access to drugs and ensuring that Medicare and its beneficiaries do not overpay for drugs with ASPs that exceed the AMPs by the threshold percentage. Therefore, we recommend that CMS consider pursuing rulemaking to expand the price substitution policy to include at least some additional drug codes. CMS responded that more experience with the policy is needed before it is expanded.

Drug Pricing and Payment Portfolio

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