Comparison of Average Sales Prices and Average Manufacturer Prices: An Overview of 2010

In 2010, average sales prices (ASP) for 32 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 32 codes had been lowered to 103 percent of the AMPs during the applicable quarter(s), Medicare expenditures would have been reduced by an estimated $13.2 million from the third quarter of 2010 through the second quarter of 2011.

By law, OIG must notify the Secretary of Health and 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 2010, is OIG's 24th comparing ASPs and AMPs. OIG has consistently recommended that CMS develop a price substitution policy and subsequently lower reimbursement for drugs that exceed the 5-percent threshold. Although CMS has yet to make any changes to Part B drug reimbursement as a result of these studies, the agency published a proposed rule in July 2011 that, among other things, specifies the circumstances under which AMP-based price substitutions would occur. CMS plans to implement its price substitution policy beginning in the first quarter of 2012.

If CMS's price substitution policy had been in effect during 2010, reimbursement amounts for 10 of the 32 HCPCS codes with complete AMP data would have been lowered to 103 percent of the AMPs, thereby saving Medicare and its beneficiaries an estimated $2.3 million. An additional 41 HCPCS codes met the 5-percent threshold using partial AMP data. Although CMS's proposed price substitution policy would not apply to HCPCS codes with partial AMP data, we found that price substitutions for certain of these codes may be warranted. Furthermore, at least 9 percent of HCPCS codes were excluded from OIG's pricing comparisons in each quarter of 2010 because AMPs were missing or unavailable for all of the associated drug products. In fact, 34 HCPCS codes were never subject to our 2010 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) consider expanding the price substitution policy to include certain HCPCS codes with partial AMP data and (2) consider seeking a legislative change to directly require all manufacturers of Part B-covered drugs to submit both ASPs and AMPs. CMS did not specify whether it concurred with our first recommendation; it did not concur with our second recommendation.