Comparison of Average Sales Prices and Average Manufacturer Prices: An Overview of 2009

In 2009, average sales prices (ASP) for 34 Healthcare Common Procedure Coding System (HCPCS) codes with complete average manufacturer price (AMP) data exceeded AMPs by at least 5 percent in one or more quarters. If reimbursement amounts for these 34 codes had been lowered to 103 percent of the AMPs during the applicable quarter(s), Medicare expenditures would have been reduced by an estimated $4.4 million from the third quarter of 2009 through the second quarter of 2010.

By law, OIG must notify the Secretary of Health & Human Services (the Secretary) if the ASP for a particular drug exceeds the drug's AMP by a threshold of 5 percent. If that threshold is met, the Secretary may disregard the ASP for the drug when setting reimbursement and shall substitute the payment amount with the lesser of either the widely available market price or 103 percent of the AMP. This report, which summarizes data across all four quarters of 2009, is OIG's 20th comparing ASPs and AMPs. To date, CMS has made no price adjustments as a result of OIG's findings. In July 2010, CMS published a proposed rule announcing its intent to lower reimbursement amounts for HCPCS codes with complete AMP data that exceed the 5-percent threshold in two consecutive or three of four quarters. However, the agency opted not to finalize the proposed price substitution policy, thereby suspending any plans to lower reimbursement amounts based on the results of OIG's pricing comparisons.

If CMS's price substitution policy had been in effect during 2009, reimbursement amounts for 11 of the 34 HCPCS codes with complete AMP data would have been lowered to 103 percent of the AMPs, thereby saving Medicare and its beneficiaries an estimated $1.9 million. An additional 34 HCPCS codes met the 5-percent threshold using partial AMP data. Although CMS's proposed price substitution policy would not have applied to HCPCS codes with partial AMP data, we found that price substitutions for certain of these codes may be warranted. Furthermore, 10 to 12 percent of HCPCS codes were excluded from OIG's pricing comparisons in each quarter of 2009 because AMPs were missing or unavailable for all of the associated drug products. In fact, 33 HCPCS codes were never subject to our 2009 pricing comparisons because they were associated exclusively with products for which manufacturers were not required to report AMP data.

To ensure the appropriateness of Medicare Part B payments, we recommend that CMS (1) finalize the proposed price substitution policy and lower Medicare reimbursement amounts for drugs that exceed the 5-percent threshold; (2) consider expanding the price substitution policy to include certain HCPCS codes with partial AMP data; (3) consider seeking a legislative change to directly require all manufacturers of Part B-covered drugs to submit both ASPs and AMPs; and (4) continue to evaluate and pursue appropriate actions against manufacturers that fail to comply with price reporting requirements, including referring to OIG manufacturers that fail to submit timely ASP data. Of these four recommendations, CMS concurred only with the recommendation intended to ensure timely reporting of pricing data.