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OIG Online Portfolio: Drug Pricing and Reimbursement

This online portfolio pulls together the Office of Inspector General's (OIG) body of work since 2010 plus several older relevant items that relate to drug pricing and reimbursement in HHS programs. The portfolio features planned work, completed reports, industry guidance, and enforcement actions. This portfolio does not cover OIG's body of work focused on questionable or fraudulent billing for prescription drugs. This portfolio on drug pricing and reimbursement will be updated periodically.

Impact

Through audits, investigations, evaluations, and enforcement actions related to drug pricing and reimbursement, OIG carries out its mission of protecting HHS programs and the beneficiaries they serve. OIG also supports this mission by providing compliance program guidance to the health care industry.

OIG audit and evaluation reports aim to provide timely, useful, and reliable information and recommendations to decisionmakers and the public. Our recommendations provide ways to improve the economy, efficiency, and effectiveness of HHS programs.

OIG's recommendations in the area of drug pricing and reimbursement have informed significant legislative and programmatic changes in drug reimbursement methodologies across HHS programs. Our work on drug reimbursement policies-work that seeks to ensure that the Federal Government and States are appropriately reimbursing for prescription drugs-has resulted in billions in savings for Medicare and Medicaid.

Below, we highlight some significant OIG recommendations related to drug pricing and reimbursement that have been implemented by HHS or are being implemented. For unimplemented recommendations related to drug pricing and reimbursement, please see the Recommendations tab. For enforcement actions and industry guidance on this topic, please see the Enforcement and Industry Guidance tabs.

Implemented Recommendations

Impact Report Vehicle Of Implementation Area of Work
CMS should seek a legislative change requiring DME infusion drugs to be paid using the ASP methodology. Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 21st Century Cures Act, Section 5004, signed into law on December 13, 2016. Reimbursement Policy
CMS should require States to bring Medicaid reimbursement for brand-name drugs more in line with the actual acquisition cost of brand-name drugs paid by pharmacies in their States. Medicaid Pharmacy - Actual Acquisition Cost of Brand Name Prescription Drug Products (A-06-00-00023) Medicaid Covered Outpatient Drugs Final Rule (42 CFR 447.502), published on February 1, 2016. Reimbursement Policy
CMS should finalize implementation of Federal upper limit (FUL) amounts that are based on average manufacturer prices. Replacing Average Wholesale Price: Medicaid Drug Payment Policy (OEI-03-11-00060) Medicaid Covered Outpatient Drugs Final Rule (42 CFR 447.514), published on February 1, 2016. Reimbursement Policy
CMS should seek legislative authority to extend the additional rebate provisions for brand-name drugs to generic drugs. Average Manufacturer Prices Increased Faster Than Inflation for Many Generic Drugs (A-06-15-00030) (Previous Review: Review of Generic Price Increases (A-06-07-00042)) Bipartisan Budget Act of 2015, Section 602, signed into law on November 2, 2015. Reimbursement Policy
CMS should lower Medicare reimbursement amounts for drugs with ASPs that meet the 5-percent threshold specified in section 1847A(d)(3) of the Act. Comparisons of ASPs to AMPs: An Overview of 2007 (OEI-03-08-00450) CMS implemented an AMP-based price substitution policy for certain drugs that exceeded the 5-percent threshold beginning in April 2013. Pricing Data Integrity
CMS should develop a national benchmark that accurately estimates acquisition cost and encourage States to use it in determining Medicaid reimbursement for prescription drugs. Replacing Average Wholesale Price: Medicaid Drug Payment Policy (OEI-03-11-00060) CMS developed the National Average Drug Acquisition Cost (NADAC) as an alternative pricing benchmark for States in 2013. Reimbursement Policy
CMS should seek legislative authority to modify the rebate formula calculation to ensure that manufacturers cannot circumvent additional rebates by bringing new versions of existing brand-name drugs to market.  Review of Additional Rebates for Brand-Name Drugs with Multiple Versions (A-06-09-00033) Patient Protection and Affordable Care Act, Section 2501(d), as amended by the Health Care and Education Reconciliation Act of 2010, Section 1206(a), signed into law on March 23, 2010. Reimbursement Policy
CMS should change its calculation of volume-weighted ASP. OIG suggested that CMS adopt an alternate equation proposed by OIG, which produces a volume-weighted ASP that is both mathematically correct and consistent with the results of the calculation set forth in section 1847A(b)(3) of the Act. Calculation of Volume-Weighted Average Sales Prices for Medicare Part B Drugs (OEI-03-05-00310) Medicare, Medicaid, and SCHIP Extension Act of 2007, Section 112, signed into law on December 29, 2007. Pricing Data Integrity
CMS should continue to encourage all States to collect rebates on physician-administered drugs, especially single-source drugs. Medicaid Rebates for Physician-Administered Drugs (OEI-03-02-00660) Deficit Reduction Act of 2005, Section 6002, signed into law on February 8, 2006. Program Compliance
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