Manufacturers May Need Additional Guidance To Ensure Consistent Average Sales Price Calculations

01-03-2023 | OEI-BL-21-00330 | Complete Report

KEY TAKEAWAY(S)

The Office of Inspector General (OIG) identified a small number of inconsistencies in how average sales prices (ASPs) for Medicare Part B drugs are calculated and nine specific areas for which manufacturers believe additional Centers for Medicare & Medicaid Services (CMS) guidance may be needed to ensure more accurate and consistent ASP calculations across the industry.

WHY WE DID THIS STUDY

To address concerns about the accuracy of ASPs, Congress included a provision in the Consolidated Appropriations Act, 2021, that directs OIG to review the accuracy of manufacturer-reported ASP data. Ensuring the accuracy of ASPs is vital because CMS uses these prices to directly calculate payment amounts under Medicare Part B.

HOW WE DID THIS STUDY

OIG has previously conducted several resource-intensive audits of manufacturer-reported pricing data that resulted in limited findings. In general, OIG's ability to identify noncompliance in price reporting is limited because of broad regulations that allow manufacturers to make reasonable assumptions in the absence of specific guidance. For this reason, OIG decided to try a different approach to assess the accuracy of ASPs. For this evaluation, we compared ASPs for the 30 highest-expenditure drugs in Medicare Part B to different prescription drug benchmark prices in the second quarter of 2021. We then surveyed the 20 manufacturers of these 30 drugs to determine what factors they take into consideration when calculating their ASPs.

The 30 drugs in our review accounted for nearly 64 percent of Medicare Part B drug spending in 2020. The entire body of drugs marketed by the 20 manufacturers included in our survey accounted for almost 80 percent of Part B drug spending.

WHAT WE FOUND

Comparisons of ASPs to other benchmark prices provided little insight into potential inaccuracies. However, through manufacturer surveys, OIG was able to identify a small number of inconsistencies in manufacturer ASP calculations, such as in the treatment of TRICARE-related drug sales for military members or whether certain fees paid to third parties meet the criteria for being considered a "bona fide service fee" to be excluded from ASP. We also noted several areas where manufacturers would like additional CMS guidance, including the treatment of sales and rebates offered through value-based purchasing arrangements.

The manufacturers we surveyed also expressed concerns that CMS has published comparatively fewer regulations and less overall guidance regarding the calculation of the ASPs used in Medicare compared to the average manufacturer prices and best prices used in Medicaid. As a result, manufacturers say they must rely on reasonable assumptions to a much greater extent when calculating ASP than they do with these other payment benchmarks.

WHAT WE RECOMMEND

We recommend that CMS actively review current guidance related to the areas identified in this report and determine whether additional guidance would ensure more accurate and consistent ASP calculations. Specifically, OIG noted nine areas for which manufacturers believe additional guidance may be needed to reduce distortions among reported ASPs and ensure consistency across the industry. We suggest that CMS prioritize issues that may have greater effect on pricing and payments (e.g., value-based purchasing arrangements). CMS should also give particular consideration to guidance surrounding TRICARE-related sales and determinations of bona fide service fees—two areas where insufficient guidance may be leading to inconsistencies in manufacturer ASP calculations.